Saturday, 25 January 2014
Friday, 24 January 2014
Amazon Anticipatory Shipping, before you order...
Following their Christmas drone-delivery idea, Amazon gained a patent last month for what it calls "anticipatory shipping,'' the Wall Street Journal reports.
Amazon, the Journal reported, says it may box and ship products that it expects customers in a specific area will want, based on previous orders and other factors it gleans from its customers' shopping patterns, even before they place an online order.
Among those other factors: previous orders, product searches, wish lists, shopping cart contents, returns and other online shopping practices.
Once in transit, the packages would theoretically wait at the shippers' or Amazon's warehouse hubs or on trucks until (and if) an order arrives. In some cases, partial street addresses or zip codes will be filled out with the remaining pertinent details — name, rest of address — completed once the order arrives.
Amazon has worked to cut delivery times as a way of encouraging more orders and satisfying customers, such as by expanding its warehouse network and making some overnight and even same-day deliveries.
Amazon didn't estimate how much delivery time it expects to save, or whether it has already put its new system to work, but the initiative clearly provides a new hurdle for those who regard Amazon as competition – and anyone who thinks that they are in the game by simply setting up an online service…
Tuesday, 21 January 2014
Tesco eyes Mothercare, and more?
Tesco is eyeing up Mothercare after its shares took a tumble following a shock profits warning, according to City sources quoted in the Sunday Times. It claims that Tesco had already examined a bid six months ago.
Such a move would bolster Tesco’s plan to turn its out-of-town shops into destinations. This has seen the nation’s biggest grocer buy the Giraffe restaurant chain and take a major investment in the start-up Harris + Hoole coffee business.
The key issue for Tesco is to ensure that any such acquisition would help to optimise space in their large space formats, not only generating incremental traffic, but also equaling or exceeding their average selling intensity levels of £1,000/sq. ft. Apart from the incremental traffic/sales, by taking well known retail brands in store, Tesco will dilute the 'Tesco domination' effect, rather in the way Aldi makes itself look like a 'normal' retailer through the use of surrogate labels...
Making acquired categories work to these levels means reconfiguring the category's original offer to focus more precisely on consumer-shopper need, fully factor in online potential and piggyback on supply chain efficiencies... In doing so, Tesco will so enhance category performance that they will draw share from independent, specialist retailers...
Taking these possibilities into account, NAMs in all categories not currently optimised by Tesco now need to assess the potential for similar acquisitions, and the consequent impact on their retailer portfolio balance...
Also bearing in mind that Tesco is in no mood to take prisoners...
Such a move would bolster Tesco’s plan to turn its out-of-town shops into destinations. This has seen the nation’s biggest grocer buy the Giraffe restaurant chain and take a major investment in the start-up Harris + Hoole coffee business.
The key issue for Tesco is to ensure that any such acquisition would help to optimise space in their large space formats, not only generating incremental traffic, but also equaling or exceeding their average selling intensity levels of £1,000/sq. ft. Apart from the incremental traffic/sales, by taking well known retail brands in store, Tesco will dilute the 'Tesco domination' effect, rather in the way Aldi makes itself look like a 'normal' retailer through the use of surrogate labels...
Making acquired categories work to these levels means reconfiguring the category's original offer to focus more precisely on consumer-shopper need, fully factor in online potential and piggyback on supply chain efficiencies... In doing so, Tesco will so enhance category performance that they will draw share from independent, specialist retailers...
Taking these possibilities into account, NAMs in all categories not currently optimised by Tesco now need to assess the potential for similar acquisitions, and the consequent impact on their retailer portfolio balance...
Also bearing in mind that Tesco is in no mood to take prisoners...
Monday, 20 January 2014
Lidl switches from hard to soft discounting in France - an inevitable move in the UK?
With increases in outlet size from 6,000 to 12,000 sq. ft., Lidl is offering a new range of regional products and extending its offering to include many more national brands to attract a wealthier clientele.
This is a real breakthrough for the French subsidiary of Lidl in its second largest market. According to Deloitte, it is the world's seventh largest distributor, with an estimated $87.8 billion in 2011 sales and 12,000 stores worldwide. In Germany, it has 3,300 stores and achieved a turnover estimated at €16.2 billion in 2012.
Lidl has operated their classic German model in France since 1988, and grown to 1,500 stores. It is the largest of the hard discounters (Netto, Leader Price, Aldi, Dia). But, like its competitors, it has stalled for four years in overall seventh place with a market share of 4.6%.
Whilst this Lidl move in France will provide useful insights on priority brands and eventual brand/surrogate-label balance, it gives time for UK suppliers to explore their options as Lidl UK, and possibly other discounters, embark on the next evolutionary stage in order to capitalise on the continuing flat-line conditions in retail.
Time for ALL NAMs – and retailers – to pop into a local Lidl, and reflect on where the offering – and their brands – could go, as they follow the French lead…?
Might also be worth dusting down your EU network and monitoring progress via your French colleagues....
(Thx Joe)
This is a real breakthrough for the French subsidiary of Lidl in its second largest market. According to Deloitte, it is the world's seventh largest distributor, with an estimated $87.8 billion in 2011 sales and 12,000 stores worldwide. In Germany, it has 3,300 stores and achieved a turnover estimated at €16.2 billion in 2012.
Lidl has operated their classic German model in France since 1988, and grown to 1,500 stores. It is the largest of the hard discounters (Netto, Leader Price, Aldi, Dia). But, like its competitors, it has stalled for four years in overall seventh place with a market share of 4.6%.
Whilst this Lidl move in France will provide useful insights on priority brands and eventual brand/surrogate-label balance, it gives time for UK suppliers to explore their options as Lidl UK, and possibly other discounters, embark on the next evolutionary stage in order to capitalise on the continuing flat-line conditions in retail.
Time for ALL NAMs – and retailers – to pop into a local Lidl, and reflect on where the offering – and their brands – could go, as they follow the French lead…?
Might also be worth dusting down your EU network and monitoring progress via your French colleagues....
(Thx Joe)
Thursday, 16 January 2014
Generic prescription medicine in Ireland - impact on all CPG brands?
The inevitability of the growth of generic medicines in Ireland moving from the current 5% to the UK 80% of prescriptions is being brought forward by market forces…
A Dublin pharmacy is to sell generic prescription drugs at Northern Ireland prices by introducing a radical business model likely to be closely watched by other pharmacies.
Healthwave, a recently opened Dundrum pharmacy, is promising to match cross-Border prices for generic medications. Under its scheme, people availing of the savings will have to join a subscription service with an upfront fee of €25 a year. The pharmacy will charge €4.95 for a 28-day supply of Atorvastatin, a generic cholesterol medication, which generally costs more than €10 in pharmacies in the Republic.
The scheme is aimed at the private market but could also save the State money. For instance, a customer with chronic obstructive pulmonary disease who pays €170 monthly for drugs currently has to pay the first €144, with the Government covering the rest. Under the new system the drugs would cost €100 per month, saving the patient €44 per month and the State €26.
With generics = 5% of the €1.85bn drug bill in Ireland vs. 80% in the UK (Dail Questions: Reilly, 25th Oct 2012), and generics prices in Ireland = 2% less than branded prices but 12 times UK generics prices, we would suggest that change is inevitable. See here
However, adding the fact that Hickey's pharmacy group latest results earlier this week warned of 'excessive' rent levels adding to the pressure on pharmacies in Ireland (some leases upward only, based on Tiger valuations) and possibly higher import prices on many CPG brands vs. UK trade prices, means that the Generics initiative will draw attention to net margins in Irish retail pharmacy and retailing generally.
Over time, media and consumer pressure, combined with the economic downturn we believe will eventually cause the government to legislate for increased use of generics.
However, the real issue will be a renewed focus on the overall cost of trading in Ireland... In other words, an opportunity for all branded goods suppliers to examine potential or actual disparities in their pricing structures between the UK and Ireland, and take appropriate steps, now...
A Dublin pharmacy is to sell generic prescription drugs at Northern Ireland prices by introducing a radical business model likely to be closely watched by other pharmacies.
Healthwave, a recently opened Dundrum pharmacy, is promising to match cross-Border prices for generic medications. Under its scheme, people availing of the savings will have to join a subscription service with an upfront fee of €25 a year. The pharmacy will charge €4.95 for a 28-day supply of Atorvastatin, a generic cholesterol medication, which generally costs more than €10 in pharmacies in the Republic.
The scheme is aimed at the private market but could also save the State money. For instance, a customer with chronic obstructive pulmonary disease who pays €170 monthly for drugs currently has to pay the first €144, with the Government covering the rest. Under the new system the drugs would cost €100 per month, saving the patient €44 per month and the State €26.
With generics = 5% of the €1.85bn drug bill in Ireland vs. 80% in the UK (Dail Questions: Reilly, 25th Oct 2012), and generics prices in Ireland = 2% less than branded prices but 12 times UK generics prices, we would suggest that change is inevitable. See here
However, adding the fact that Hickey's pharmacy group latest results earlier this week warned of 'excessive' rent levels adding to the pressure on pharmacies in Ireland (some leases upward only, based on Tiger valuations) and possibly higher import prices on many CPG brands vs. UK trade prices, means that the Generics initiative will draw attention to net margins in Irish retail pharmacy and retailing generally.
Over time, media and consumer pressure, combined with the economic downturn we believe will eventually cause the government to legislate for increased use of generics.
However, the real issue will be a renewed focus on the overall cost of trading in Ireland... In other words, an opportunity for all branded goods suppliers to examine potential or actual disparities in their pricing structures between the UK and Ireland, and take appropriate steps, now...
Setting the correct objectives?
Two hunters in the jungle were spotted by a hungry leopard.
One hunter immediately sat down, took a pair of running shoes from his pack and began to put them on. His partner challenged the move saying no one could possibly outrun a leopard, and was answered with:
"I don't have to outrun the leopard. I simply have to run faster than you...."
One hunter immediately sat down, took a pair of running shoes from his pack and began to put them on. His partner challenged the move saying no one could possibly outrun a leopard, and was answered with:
"I don't have to outrun the leopard. I simply have to run faster than you...."
Tuesday, 14 January 2014
McKesson says Celesio takeover offer has failed
Last night’s news by McKesson that their 3 month offer to purchase Celesio had failed to secure the 75% of the shares they deemed necessary to complete the purchase raises several issues for suppliers, retailers and wholesalers…
Apart from the disruption and uncertainty of the past three months and its impact on staff, possibly resulting in some of the good guys leaving, and key suppliers reverting to short term strategic mode, Celesio’s profile as a takeover prospect has invariable attracted the attention of other players such as McKesson’s closest U.S. rivals AmerisourceBergen and Cardinal Health, which between them account for 95% of the U.S. market, are, like McKesson, all looking to grow abroad to gain purchasing power with drug makers.
At a market capitalisation of €4.11bn, Celesio is within the reach of each of the companies.
Celesio Chief Executive Marion Helmes has said that an alliance or tie-up with a U.S. partner could help win steeper discounts, mainly for the generic drugs it buys but also for non-prescription medication and skin care products.
Celesio, owner of Britain's Lloyds pharmacy chain, is suffering from a price war that has all but erased its profits from the crowded German drugs wholesale market. Healthcare budget cuts across Europe, its main market, add to its woes.
In response, CEO Helmes is centralising procurement to cut costs, as well as widening and standardising the offering of its pharmacies across Europe under the Lloyds brand.
The mooted offer would value Celesio including its debt at close to 9.9 times expected earnings before interest, taxes, depreciation and amortisation (EBITDA) for this year, roughly in line with the 9.8 multiple its U.S. suitor is trading at. That compares with a multiple of about 11 times EBIDTA that U.S. drugstore chain Walgreens paid for a stake in Alliance Boots last year.
And speaking of which, Celesio wholesaling would add to the combined muscle of Walgreen and Alliance Boots, thereby frustrating the obvious appeal to A.S. Watson in completing a global structure that might help it keep pace with Walgreen Boots globally…
Meanwhile, back to the short term initiatives for NAMs…
Apart from the disruption and uncertainty of the past three months and its impact on staff, possibly resulting in some of the good guys leaving, and key suppliers reverting to short term strategic mode, Celesio’s profile as a takeover prospect has invariable attracted the attention of other players such as McKesson’s closest U.S. rivals AmerisourceBergen and Cardinal Health, which between them account for 95% of the U.S. market, are, like McKesson, all looking to grow abroad to gain purchasing power with drug makers.
At a market capitalisation of €4.11bn, Celesio is within the reach of each of the companies.
Celesio Chief Executive Marion Helmes has said that an alliance or tie-up with a U.S. partner could help win steeper discounts, mainly for the generic drugs it buys but also for non-prescription medication and skin care products.
Celesio, owner of Britain's Lloyds pharmacy chain, is suffering from a price war that has all but erased its profits from the crowded German drugs wholesale market. Healthcare budget cuts across Europe, its main market, add to its woes.
In response, CEO Helmes is centralising procurement to cut costs, as well as widening and standardising the offering of its pharmacies across Europe under the Lloyds brand.
The mooted offer would value Celesio including its debt at close to 9.9 times expected earnings before interest, taxes, depreciation and amortisation (EBITDA) for this year, roughly in line with the 9.8 multiple its U.S. suitor is trading at. That compares with a multiple of about 11 times EBIDTA that U.S. drugstore chain Walgreens paid for a stake in Alliance Boots last year.
And speaking of which, Celesio wholesaling would add to the combined muscle of Walgreen and Alliance Boots, thereby frustrating the obvious appeal to A.S. Watson in completing a global structure that might help it keep pace with Walgreen Boots globally…
Meanwhile, back to the short term initiatives for NAMs…
Monday, 13 January 2014
Helping major retailers to help themselves cope with 2014
Given that the Christmas trading results were merely the latest in a succession of indicators that all is not well in retail land, it should come as no surprise that the major players are taking steps to keep the stock market happy.
In the absence of real sales growth, and apart from Debenhams’ request for more direct help via additional discounts, the key alternatives available to retailers are sale & leaseback, and taking longer to pay, in order to improve financial results.
Sale & leaseback:
As you know, this means selling their shops to a finance institution and leasing back the premises, which means there is technically no change from a trading point of view, except that significant quantities of cash are released from the assets. The only difference is the retailer is now paying rent, which comes off the bottom-line, and can hit their net margin.
This is why Morrisons still own 90% of their real estate in that Sir Ken was always unwilling to cede control to a landlord. However, most other retailers have gone halfway over the years, to say 50% on sale & leaseback, using the released funds to buy more property and finance takeovers. It can also be used to pay back to shareholders in order to ease pressure on the share price.
This is why over the weekend it emerged that Morrisons may sell & leaseback 10% of their estate for £800m, pay it back to shareholders to compensate for the recent fall in share price. This will still leave them owning 80% of their estate, conservative compared with their peers…
However, the real problem in UK retail is the redundancy in large space caused in part by the growth of online. This means that finance houses will want to reflect the resulting fall in value via a lower purchase price for the property.
Hence the major retailers will need to try additional means of raising cash, the ‘simplest’ being taking longer to pay
Extended credit periods
In general, a decade ago the average credit period for retailers in the UK was approximately 30 days (compared with 45 in France, 95 in Italy and 150 in Greece). The UK period has now crept out to approximately 45 days, a 50% increase while few suppliers were ‘minding the store’, as least as far as creeping credit was concerned...
Given the ‘impossibility’ of achieving any real reduction in ‘normal retail practice’ all a supplier can do about this new ‘norm’ is refuse to allow any further increase for those customers at 45 days and checking which customers are paying faster, inadvertently…
It is therefore key that a NAM be able to calculate approximate time taken by a retailer to pay all suppliers, and then re-negotiate any difference on their part. Essentially, this means taking the end of year Trade Creditors from the customer’s balance sheet, and given that most retailers are getting average gross margins of 25%, divide the Trade Creditor figure by 75 and multiply it by 100 to get a sales equivalent of the amount outstanding. Dividing this like-with-like figure into the annual sales figure on the P&L will tell you how often the retailer pays their invoices per annum, and this figure divided into 365 will give the number of days the retailer takes to pay suppliers (check the logic with your finance department for reassurance).
If suppliers had monitored and resisted these retail moves over the years, the latest 45 day ‘norm’ might not have been as easily achieved….
Anyway, here and now it means that the NAM can be in a position to go for fair share, at least…
Welcome to the realities of 2014!
In the absence of real sales growth, and apart from Debenhams’ request for more direct help via additional discounts, the key alternatives available to retailers are sale & leaseback, and taking longer to pay, in order to improve financial results.
Sale & leaseback:
As you know, this means selling their shops to a finance institution and leasing back the premises, which means there is technically no change from a trading point of view, except that significant quantities of cash are released from the assets. The only difference is the retailer is now paying rent, which comes off the bottom-line, and can hit their net margin.
This is why Morrisons still own 90% of their real estate in that Sir Ken was always unwilling to cede control to a landlord. However, most other retailers have gone halfway over the years, to say 50% on sale & leaseback, using the released funds to buy more property and finance takeovers. It can also be used to pay back to shareholders in order to ease pressure on the share price.
This is why over the weekend it emerged that Morrisons may sell & leaseback 10% of their estate for £800m, pay it back to shareholders to compensate for the recent fall in share price. This will still leave them owning 80% of their estate, conservative compared with their peers…
However, the real problem in UK retail is the redundancy in large space caused in part by the growth of online. This means that finance houses will want to reflect the resulting fall in value via a lower purchase price for the property.
Hence the major retailers will need to try additional means of raising cash, the ‘simplest’ being taking longer to pay
Extended credit periods
In general, a decade ago the average credit period for retailers in the UK was approximately 30 days (compared with 45 in France, 95 in Italy and 150 in Greece). The UK period has now crept out to approximately 45 days, a 50% increase while few suppliers were ‘minding the store’, as least as far as creeping credit was concerned...
Given the ‘impossibility’ of achieving any real reduction in ‘normal retail practice’ all a supplier can do about this new ‘norm’ is refuse to allow any further increase for those customers at 45 days and checking which customers are paying faster, inadvertently…
It is therefore key that a NAM be able to calculate approximate time taken by a retailer to pay all suppliers, and then re-negotiate any difference on their part. Essentially, this means taking the end of year Trade Creditors from the customer’s balance sheet, and given that most retailers are getting average gross margins of 25%, divide the Trade Creditor figure by 75 and multiply it by 100 to get a sales equivalent of the amount outstanding. Dividing this like-with-like figure into the annual sales figure on the P&L will tell you how often the retailer pays their invoices per annum, and this figure divided into 365 will give the number of days the retailer takes to pay suppliers (check the logic with your finance department for reassurance).
If suppliers had monitored and resisted these retail moves over the years, the latest 45 day ‘norm’ might not have been as easily achieved….
Anyway, here and now it means that the NAM can be in a position to go for fair share, at least…
Welcome to the realities of 2014!
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