Debenhams ‘little help’ from suppliers...

If you have received notice of an alleged discount  of 2.5% on invoices outstanding on 17th December, you will have already calculated the incremental sales you need via Debenhams to cover the cost…?

Workings: (simply substitute your figures below)

• Suppose Sales to the customer £2m/annum, average payment period 45 days, i.e. 365/45, i.e. 8 times /year
• Suppose your Net Profit, before tax on customer’s business is 5%
• Average amount outstanding is £250k i.e. £2m/8
• 2.5% of £250k  is £6.25k i.e. by allowing an additional 2.5% off invoice, you are giving £6.25k from your net profit, before tax, to the customer
• Therefore, £6.25k/5 x 100 = £125k = incremental sales you require to cover the cost of making an additional investment of £6.25k in the customer…

This raises several issues:

• Creation of a precedent in terms of similar retrospective demands from customers in the future – ‘remember that new store we opened in ’93?’
• One more step towards ‘common industry practice’ quotable by other retailers requiring similar help from suppliers
• A reminder that in  buying and selling, one is dealing with independent legal entities, making what should be legally enforceable agreements…
• A deal is a deal, or should be… i.e. a retrospective demand without consultation undermines an agreement, and should be a trigger for renegotiation, or walkaway…

Opportunity
Given these unprecedented times, this type of request should be an opportunity to check out the consequences of each customer wanting similar help i.e. if your total UK sales are £50m, a 2.5% ‘one-off’ discount on outstanding invoices would require incremental sales of £3,125k, in a flat-line environment…. However, if all suppliers stand firm on existing agreements, causing some customers to eventually go bust, then perhaps running a ‘what if’ calculation on the financial consequences of a customer going into liquidation should form part of a reassessment of your total relationship with major customers, on the way to fair share negotiation…

Eventually, all suppliers will have to face up to the reality of 'what business they are in', the reward-for-risk balance required to make it worthwhile, with the Debenhams Christmas initiative presenting an opportunity to scope out the options available, before the banks do it for you…

'For things to remain the same, everything must change..'. The Leopard

                                                                                                            A PennLive editorial cartoon 

Taking pleasure at Aldi & Lidl's Irish business model

A new Mickey MacConnell song going the pub-rounds explains the compulsive appeal of the German discounters...

For non-native speakers, the lyrics are given below, courtesy of Noreen @ Mudcat.  Following which the Youtube version below should present only opportunities...  (Thanks Martin)

THE BALLAD OF LIDL AND ALDI
(Mickey MacConnell)

Well the wife she broke her ankle when she tumbled off the bike
Leaving me to do the housework, a job I never liked
And doing the weekly shopping seemed a dreadful chore to me
'Til I discovered LidldiAldi, LidldiAldi LidldiAldi Lidldidee.
Now I just can't wait for Thursdays when the specials go on view
I'm the first man to the trolleys; I'm the first man in the queue
For now I know what women mean about retail therapy
It's LidldiAldi, LidldiAldi LidldiAldi Lidldidee.

Its angle grinders and black puddings and a pot of German jam
A lump of heavy bacon and a wet suit from Japan
And a pack of streaky rashers, a crate of Russian stout
And a portable generator just in case the lights go out
Alloy wheels and windscreen wipers and a bag of Rooster spuds
An inflatable rubber dinghy to help survive the floods
Spanners, sockets and fish fingers, they're so cheap they're damn near free
At LidldiAldi, LidldiAldi, LidldiAldi, Lidldidee.

Now there's welding rods and prime organic beef to make a hearty stew
A hiking staff and spiky boots for climbing Kathmandu
Big heads of curly cabbage to make you eat your fill
Sledgehammers and bananas and a lovely cordless drill
And there's hatchets and hamburgers and there's tins of beans and peas
And a petrol driven chainsaw for cutting bits off trees
Strimmers, sabres, saws and sausages, computers and TVs
At LidldiAldi, LidldiAldi LidldiAldi Lidldidee.

Now the wife has gone ballistic, marriage heading for the rocks
With her crutches and her shopping bag now she's hobbling round the shops
And she's cut up all me credit cards, I'm sad as sad can be
No more Aldi LidldiAldi, no more Lidldidee for me.
For the shed is full of plastic shit I didn't really want
And the gardens full of furniture and the house is full of plants
And I'm living in the doghouse; Rover, Fido, Shep and me
Because of Aldi LidldiAldi LidldiAldi Lidldidee.

So no more angle grinders nor black puddings, no more pots of German jam
No lumps of heavy bacon, no more wet suits from Japan
No packs of streaky rashers, and I'll have to do without
Another portable generator just in case the lights go out
No alloy wheels, no windscreen wipers, no bags of Rooster spuds
No inflatable rubber dinghies to help survive the floods
For I am living in the doghouse I'm as sad as sad can be,
No more Aldi LidldiAldi, no more Lidldidee for me!

Money-laundering Convenience on the High Street?

NAMs that may have noticed an increase in the numbers of High Street betting shops - those who have not, are probably working in the wrong areas - cannot miss the Fixed-Odds-Betting-Machines (FOBTs), often four per shop.

FOBTs can  be used for money laundering by paying cash into the terminal, making low-risk bets which involve a small relative loss, and withdrawing most of the proceeds as a voucher which are exchanged for cash at the shop counter.

Academically interested in how it works?
The most popular game is Roulette, which as you know pays out even money on Red and Black, and usually 35+ to 1 on the ‘Zero’ on the wheel.

NB. Thanks to Anonymous below, I have now made enquiries via 'trusted trade sources' and find that there is a £100 betting limit per game, so the amended illustration works out as follows:

A punter places £47.50 on Red, £47.50 on Black and £5 on Zero. A win on Red or Black pays £47.50 plus the original stake, and the £5 on Zero is lost.

The punter cashes in and walks out with £95, freshly laundered…  In other words, for a small charge i.e. the lost bets, most of the money is ‘cleansed’...

An FOBT allows players to bet on the outcome of various games and events with fixed odds, mainly roulette. The minimum amount wagered per spin is £1. The maximum bet cannot exceed a payout of £500 (i.e. putting £14.00 on a single number on roulette). The largest single payout cannot exceed £500.

The terminals arrived in Britain in 2001 and were lightly regulated from the outset. Punters in bookmakers found that they could bet £100 every 20 seconds on roulette. The temptation of high-speed, high-stake casino games in the high street proved irresistible: there are now 33,345 FOBTs in the UK.

Like all casino games, the "house" (i.e. the casino) has a built-in advantage, with current margins on roulette games being theoretically between 2.7% and 5%.

So it can be said there are still signs of life, and death, on the High Street… 

Return On CONVENIENCE Employed - the real reason for the Big 4 switch to convenience?

With small local stores offering higher Returns On Capital Employed - leasing rather than owning means less capital employed – allows major retailers to compensate for the diminishing ROCEs on their traditional estates. Following the global financial crisis Big 4 ROCEs have reached 10-12%, while Walmart still turn in 19%+ per annum…and as you know, ROCE drives share price performance…

Mintel forecasts Britain's convenience sector sales will grow 5 percent to £43.3bn in 2013 and jump to £54.1bn by 2018. Since the economic downturn, careful consumers now prefer to buy little and often and do so in the shop around the corner rather than out of town superstores, to save on the rising cost of petrol.

Recognising that small local convenience stores, along with the internet, will be the main driver of future sales growth, the Big 4 are all prioritising investment there.

Both convenience and online business require relatively little capital compared to developing large supermarket spaces. But crucially, while the profitability of online grocery is not yet proven, the returns from convenience stores can be, albeit without the benefits of scale economies in terms of running costs….

Apart from the obvious gains in terms of profitability and meeting more shopper-needs, this business shift, combined with supply chain efficiencies making two facings do the work of four in large space retail, has to mean increased space-redundancy in the Big 4’s larger outlets…

In practice, whilst the move to online and convenience will compensate in the short term, unless the major retailers find alternative uses for some larger outlets, overall ROCEs - and share prices - will continue to fall…

In the meantime, NAMs can help by emphasising ways in which their brands can be used to drive retail ROCEs in both formats, but this time with a ‘guarantee’ of a more attentive, share-owning buyer…

Belfast Tesco manager’s eye-watering engagement with shopper…

A fisherman grabbed a Tesco manager by the testicles and refused to let go after being stopped over an £800 shoplifting spree, a court has heard.

It was claimed he went into Tesco Newtownbreda Road on 5 December, took security tags off various goods and put them in bags.

Members of the public had to help release his grip as the victim suffered "extreme pain", prosecutors said....

Up to this point it was not clear if the initiative was opportunistic, or simply an extension of the Tesco £1bn ‘turnaround’ plan in terms of “grabbing management by the balls, and their hearts and minds will follow…”

Dying to live at home?

                                                                                                                                                     pic: BBC
The late Victorians and the Edwardians lived through a domestic revolution. Theirs was a bold and exciting age of innovation, groundbreaking discoveries and dramatic scientific changes, many of which altered life at home in profound ways - including some that were terrible and unforeseen, writes historian Dr Suzannah Lipscomb in BBC News.

1. Bread adulterated with alum
2. Boracic acid in milk
3. Exploding toilets
4. Killer staircases
5. Flammable parkesine (celluloid)
6. Carbolic acid poisoning
7. Radium (radiation poisoning)
8. The wonder material (asbestos)
9. Fridges design flaws
10. Electricity (quick & effective)

See original article for details & pics

Given our ‘progress’ in a hundred years, makes the horse-meat issue a bit passé?

Fancy a new iPad at 95% discount? - the QuiBids penny-auction model

QuiBids is the world’s largest retail website that operates as a bidding fee auction, also known as a penny auction. The price of auctioned products increase by one QuiBids penny with each bid, which are equal to $0.60, and bidding doesn't start until there is only 5 minutes left in the auction. The final price are typically much lower than other auctions, but all bidders pay $0.60 each time they bid. Losers of the auction have the option of paying the retail price, minus the cost of their bids.

Their product selection runs from the latest Apple products - iPads, iPods, and MacBooks - to high definition televisions, gift cards to top retailers, and much more. To name a few recent sale prices of items like this, a New Apple iPad recently sold for £33.77, a Kindle Fire sold for £15.83, and a HP Laptop sold for £20.83.

For an auction winner, the true cost of an item won at auction is a bit higher than the final auction price because of the amount the auction winner spent bidding to win. But it’s typically modest, and even after bids, most winners save at least 75% off retail.

The OFT have some issues with some versions of the model and offer some pitfalls and offer advice here

There are obviously issues ref. the model’s similarity to a lottery, but with care, the penny auction - via sales to losers - can represent another route to consumer, and further dilution of trade concentration…..