When less is not more: How small packs work out cheaper than bulk-buy deals

Product	Store	Big pack	Small pack
Cathedral City Cheddar	Asda	£6.98 (2x 350g)	£2.00 (350g)
PG Tips tea bags	Asda	£4.68 (160)	£2.00 (80)
Nescafe coffee	Asda	£11.50 (500g)	£5.00 (300g)
Clover spread	Asda	£3.70 (1kg)	£1.00 (500g)
Loyd Grossman Sauce	Tesco	£2.79 (660g)	£1.00 (350g)
Napolina Olive Oil	Tesco	£6.49 (1 ltr)	£3.00 (500ml)
Mild cheddar	Sainsbury’s	£3.10 (400g)	£2.05 (270g)
Filippo Berio Olive Oil	Waitrose	£7.59 (1 ltr)	£5.49 (750ml)
Absolut vodka	Waitrose	£19.60 (700ml)	£9.00 (350ml)
Scottish Still Water	Sainsbury's	79p (750ml)	45p (500ml)

                                                                                                         
Source: Daily Mail survey

The mismatch tends to happen when supermarkets cut the price of small packs for a temporary promotion – or to match reductions at a rival. Whilst the mix-ups are understandable, the real issues are the impact on the savvy consumer-shopper and probable distortion of demand.

However, apart from an inevitable spike in small-pack sales for the duration of the price-cut, retailers need to monitor the effect of the resulting suspicion and lack of trust in terms of impact on shopping behaviour for the remainder of the shopping trip.

For suppliers, the issue is more about the extent to which the shopper blames the brand, rather than the store...

…and since you are probably picking up the promotion-tab, perhaps it is time to add multi-size analysis of unit prices to your promotional checklist in assessing the ROI on the initiative…? 

Pop-up Britain - Piccadilly flagship for pop-up shops

Popup Britain, the retail arm of national enterprise campaign StartUp Britain, has opened a flagship store in Piccadilly to offer 30 retail start-ups a week-long opportunity to sell their products.

At No.231 Piccadilly, 20 paces from Piccadilly Circus, pop-up shops are given an opportunity to check out what difference a prime, albeit temporary location will make for their business idea...
Last week's pics express it well:

                                                                                                     pics: Brian Moore

A variety of retail ideas, but the prize for innovation has to go to the SWIG Hip-flask company, a space near the door, and a bespoke title to mark the occasion at Swigadilly Circus...

Worth a pop-in on your next West End store-check? 

OFT: Furniture stores used fake prices - the anti-marketing strategy?

As any supplier knows, the combination of efforts required to grab a consumers attention, in the most overloaded media environment ever, attempting to communicate with the most savvy consumer-shoppers on the planet, served by 24/7 access to price-comparison facilities, as short of time as they are of money, getting awareness of the fact that their needs for a solution - not a product - could be met by your offering, attracting them to the right store in terms of range and offering that is a better combination of Product, Price, Presentation, and Place than is available via comparable competition, persuading them that fulfilment will meet expectations, and getting the money represents a monumental achievement!

To then fritter away the achievement via a cheap intelligence-insulting price deception, is incomprehensible....

This has to mean that these retailers are bypassing the savvy consumer-shopper pool and are in fact aiming at the remainder, those folks that know no better, probably have less discretionary spending power, but do have the means and ability to complain to their friends, and even to the OFT...

At least it makes the rest of us look good.....!

Personal one-hour supermarket delivery service launches in London

Pocket Shop, a start-up website, has launched the ultimate in fast grocery deliveries – promising to have top-up bread, eggs and milk in the hands of London customers less than an hour after they click ‘send’.

Its Amazon-based system works by allocating online orders to one of Pocket Shop’s team of 20 trained buyers around the capital, using a GPS-based algorithm similar to those employed by taxi-ordering smartphone apps. Pocket Shop could scale the business by using crowdfunding techniques to recruit more part-time buyers.

A text message alerts the buyers, directing them to the nearest Tesco or Sainsbury’s supermarket. An app on the buyers phones then displays the customer’s shopping list with instructions on the optimum way to navigate the aisles. The company offers a ‘superstore’ range of 150,000 products at prices comparable to shopping in Local and Metro convenience stores. Waitrose and Marks & Spencer will be included soon, the company claims.

A key issue might be long term profitability in that the major mults claim that home delivery costs £20/delivery compared with a £5 charge… In other words, although Pocket Shop apply a product mark-up and a 1-hour delivery charge of £6.50, they presumably have to pay the buyer…

But if it works, and think saturation of Greater London for starters, then this represents the ultimate in personal convenience, for those willing and able to pay. Having reached critical mass the concept could morph into a personal pick-up service for dry-cleaning, prescriptions, and even pensions…

Then time for Amazon to move from back office to front of store?

Helping Amazon make a profit - what will make a difference?

Graham Ruddick writes in The Telegraph that Amazon is Britain's most influential retailer, and quotes predictions that the company will be the ninth-biggest retailer in the world by 2018, despite having no stores and little profit.

This very useful and detailed article points out that the mighty Tesco has been forced to admit its biggest hypermarkets are outdated and overhaul its non-food range, Comet and HMV have fallen into administration, newsagents have installed lockers where shoppers can collect Amazon orders, and people are now reading books on their Amazon-made Kindles.

Even those retailers operating in sectors where Amazon has made little impact – such as food and fashion – are worried about what happens when it begins to take their categories seriously....

And yet, Amazon makes little or no profit, and will eventually run out of stockmarket patience… In other words, Amazon will have to meet City/Wall Street expectations in terms of ROCE, Net Margin, Stockturn and Gearing, in order to preserve its current share price.

Obviously from a NAM point-of-view, the key issues in terms of Amazon profitability are:
- Where are Amazon now?
- Where do they need to be?
- How soon?
- How can suppliers help?

Where are Amazon now?
Based on their latest accounts, Amazon key ratios are: ROCE: 4%, Net Margin: 0.9%, Stockturn: 8.6 times p.a. & Gearing: 65.4%

Where do they need to be?
Based on most other global retailers, they need: ROCE: 10%, Net Margin: 2.5%, Stockturn: 12 times p.a. & Gearing: 40%

How soon?
Whilst Amazon are obviously racing for scale and spread of categories, given global uncertainties, we would be surprised if the stockmarket did not ‘punish’ Amazon via the share price unless they show signs of delivering the above ratios in the next two years..
This means they are currently in the market for help from suppliers in driving ROCE. 

How can suppliers help?
See detailed approach here in Kamcity Library

NB. If Amazon really want to scale the dizzy heights, they need to aim at the Walmart ratios:
ROCE: 19.6%, Net Margin: 5.5%, Stockturn: 10.7 times p.a. & Gearing: 55.3%

NBNB. If you feel that these unprecedented times require a little more emphasis on demonstrating your financial impact on your major customer, why not email me on bmoore@namnews.com and find out how? 

A light-bulb idea that makes a real difference, free-of-charge...

Just when manufacturers were focused on LED light competition, and power suppliers were adjusting for lower consumption, Alfredo Moser, a Brazilian mechanic had a light-bulb moment and came up with a way of illuminating his house during the day without electricity - using nothing more than plastic bottles filled with water and a tiny bit of bleach to refract 40-60 watts of light into the room below, free….

First he makes a hole in a roof tile with a drill. Then, from the bottom upwards, he pushes a water-filled bottle into the newly-made hole. "You fix the bottle in with polyester resin. Even when it rains, the roof never leaks - not one drop."

In the Philippines, where a quarter of the population lives below the poverty line, and electricity is unusually expensive, the idea has really taken off, with Moser lamps now fitted in 140,000 homes. The idea has also caught on in about 15 other countries, from India and Bangladesh, to Tanzania, Argentina and Fiji.

Another case of consumers, strapped for cash, 'making  do' with cheaper alternatives...
Full light bulb details here 

'Ringing the Changes' scam

Given the low interest rates available on bank deposits, some consumers are resorting to the old 'Ringing the Changes' scam as a way of supplementing household budgets.

If there appears to be a little more shopper engagement than usual ahead of you in the checkout queue, the following may help to illustrate the process:

A fraudster buys a small value item and pays normally at the cash desk.  This is not part of the scam as such but makes what follows look more genuine.

The fraudster then asks the cashier if he can change 10 x £1 coins for a £10 note.

The fraudster hands over 8 x £1 coins and receives a ten pound note in exchange.

At this state the cashier realises that there is only 8 coins and informs the person he is 2 x £1 coins short.

The fraudster apologises and then suggests to the cashier he gives her £12  in exchange for a £20 note.

If the cashier agrees the fraudster hands the cashier back her £10 note along with 2 x £1 coins in exchange for a £20 note.  The fraudster then leaves the shop with the twenty pound note leaving the cashier ten pounds short.

The people carrying out the scam appear competent in distracting the cashier with chat and hand movements to temporarily distract and put them off their guard,

NB. Given recent escalation in the amounts involved and the resulting police involvement, we would caution NAMs to resist the temptation to practice their finance-based selling skills via a dummy-run. In fact, best stick to demonstrating the value of trade-funding… 

Superdrug/A.S. Watson to benefit from ParknShop sell-off in Hong Kong?

Hutchison Whampoa could get $4bn from the sale as Octogenarian Li Ka-shing, ranked by Forbes as Asia's richest man in 2012, plans to sell the business to focus on Hutchison's health and beauty retail operations, which have a bigger global footprint and offer higher margins compared with the supermarket business…

Your colleagues in China may be a little more interested in the Asian deal which would give a 30% market share of the Hong Kong market, attracting the attention of Japan's Aeon, China Resources Enterprise, Sun Art Retail, and Australian retailers Wesfarmers and Woolworths, among the eight parties invited to the process and weighing bids, with Walmart a possible late arrival. 

Walmart opened its first China store in 1996 and now operates over 380 stores spread across various formats, including Supercenters, Sam's Clubs and Neighborhood Markets.

KKR and TPG Capital have also been invited to bid and other buyout firms including Blackstone Group LP have held talks with banks about financing a possible bid.

In other words, by the bid deadline of the 16th August, that line up of talent will guarantee Li at least $4bn to enhance his global H&B offering… 

The real issue for global H&B suppliers is whether Li will now use the money in a final bid to catch up with Alliance Boots global ambitions via a bid for Celesio, a snip at €2.8bn....

This would provide A.S. Watson with a global wholesale arm, and in one move make it more of a match with Alliance Boots, as they each explore the world in search of H&B acquisitions....
Worth a thought?