Thursday 13 November 2014

Retailers' share prices - a useful KPI for NAMs?

Tesco shares have collapsed by 43%, Morrisons is down 33% and Sainsbury’s share price has fallen by 30% during the past 12 months, as anyone that matters, knows...

Given that most key executives are remunerated in part with share options, it follows that optimising the share price has to be high on the agenda in the mults. This means that understanding share price drivers can add another dimension to a NAM's insight, and negotiating repertoire...

First, the professionals want to ensure that the value of all the cash, stock and property owned by the company is worth more than the current share price, i.e. Market capitalisation.

Second, they try to get an estimate of future earnings, in order to judge the likelihood of getting some part of what remains after the other creditors have been paid.

All of this can be driven by the retailer's ROCE, the ultimate measure of profitability, a KPI that can be directly driven by the NAM's bag of brands...

Still feeling that the share-dimension pits you against the experts overmuch?

If so, it should be kept in mind that most shareholders and their advisers study open domain data in arriving at their perception of what a share is worth. Their experience of retailers as businesses is usually confined to shopping in the aisle, whereas NAMs actually work in the engine room, negotiating with the guys that drive the business. This means that a stock market-literate NAM can possess a level of insight that far exceeds that of a NAM limited to ‘the five selling-points that make our brand unique’.

Incidentally, one way of adding some immediacy to a NAM’s share-price sensitivity is for a supplier to authorise the purchase of £100 of shares in the NAM’s retail account, on expenses. Nothing beats owning a piece of the customer to add focus…

However, the NAM should be forbidden from owning much more than £100 worth, to avoid any temptation to use Trade Investment or improved credit terms to add value to the share price (!)

Wednesday 12 November 2014

Sainsbury's results - welcome to the real world of UK retail

Today’s interims reveal no surprises, and together with the Tesco, Morrisons and Co-op revelations, and given the relative transparency of Asda’s results and dialogue with the stockmarket (via Walmart), it can be assumed that everything is now out in the open, with the major players acknowledging that 'The grocery sector is undergoing structural change as customers shop more frequently, using online, convenience and discount channels more’.

True, the Tesco SFO investigation may eventually yield some additional output, but in the main this will be limited to more precise definitions of the elements of Commercial Income along with some amendments to accounting process and a switch to results-based reward that major retailers will ignore at their peril.

The UK version of capitalism is generally very forgiving, provided stakeholders can rely on the truth of what they are shown, and there is no reason to second-guess via the share price. Therefore a line will be drawn and all will move forward.

In other words both Coupe and Lewis are openly clearing the decks and making ready to do battle with the discounters and other retailers, on the premise that in a flat-line market, any growth comes at the expense of the competition… 

Share prices will inevitably follow…

From suppliers’ points of view, we are into a new era of transparency and demonstrable value-for-money, real-time.

Retailers are now into cost-cutting mode with aggressive sell-off of non-productive assets (and suppliers?) a key feature of the programme.

In future, everything will be measured, with a heavy emphasis on assessment in terms of demonstrable impact upon ROCE - the driver of share price.

This means that NAMs will need to re-calculate the cost of every element of the trade offering, especially Trade Investment, and will be expected to demonstrate the benefits of compliance via the impact on a retailer’s P&L and Balance Sheet.

In turn, given the challenges faced by the multiples, and their overt need for help, suppliers are in a once-only position to demand fair-share dealings in return.

For those that hesitate to grasp this unprecedented opportunity, this could well be the last trick they will miss…

Tuesday 11 November 2014

The ultimate in H&B convenience, or another pharmacist missing an open goal…?

                                                                                                               pic: Streetoutpost.com

Think about the effort required to punch through an apathy-inducing media-flood, successfully engage with a consumer suffering from a minor ailment, unwilling to ‘trouble the doctor’, but still wanting medical advice, prepared to make a journey to a pharmacy, with little or no instore guidance on where to ask, suffer the potential embarrassment of describing symptoms to a ‘stranger’, and willing to accept advice that, in the circumstances, over-rides the normal price obstacle, and if successful, is more than likely to tell a friend….

In these unprecedented times, a consumer self-presenting in this manner at point-of-purchase and being ignored, eventually has to represent an opportunity for multiple retailers...

The resulting move from opportunity to threat is a real pity, especially when independent pharmacists have had at least thirty years to get it right… 

Friday 7 November 2014

Dark-net lessons for Light-net suppliers?

According to a fascinating article in The Economist, business is thriving on the anonymous internet, despite the efforts of law enforcers.

In fact, following last year’s closing down of Silk Road, a drug-dealing site on the “dark net”, dozens of dark-net Amazons and eBays (also known as crypto-markets) have sprung up to fill the void. They are not only proving remarkably resilient but expanding their offerings and growing more sophisticated.

Major players include Agora (weed, powders, pills and guns), whilst Evolution sells stolen credit-card, debit-card and medical information, guns and fake IDs and university diplomas...

These players operate in a different league to ‘normal’ in-house scammers such as those rogue employees of legitimate online providers that substitute rocks for high-end products ordered online.

According to the article, the dark retailers are into consumer satisfaction and repeat-purchase, in that narcotics product quality is higher than street trades, largely thanks to an Amazon-like five-star customer-review system (!).  In a den of thieves, high ratings are sellers’ lifeblood. Reputation is crucial when clients know they cannot fall back on small-claims courts or arbitration….

According to James Martin, author of “Drugs on the Dark Net”, the big markets’ customer service and marketing strategies increasingly resemble those of legitimate retailers. They are quick to apologise for technical glitches. Two-for-one specials, loyalty discounts and promotional campaigns are common (on Smoke Weed Day, say). Other methods borrowed from the corporate world include mission statements, terms and conditions, and money-back guarantees..

The key issue for legitimate suppliers has to be the fact that when even the crooks are raising the standards in consumer-satisfaction, how vital it is that Light-net providers adopt a zero-tolerance approach to their own online offering… 

HT to Anette Rahbek for pointer to the Economist article   

Thursday 6 November 2014

Phone- box conversions to mini-shops and cafes

                                       

                                                          pics: Brian Moore, Brighton

A Brighton-based charitable trust, Thinking Outside the Box supports homeless projects by giving a percentage of its earnings from the retail uses of converted phone boxes, according to the Bradford Telegraph and Argus.

It has the support of Miles Broe Architecture: "The K2 and K6 red phone boxes are iconic pieces of both engineering and architecture. The aim of this proposal is to redefine their usage to suit modern day needs and requirements without compromising their external appearance on the street scene."

The application is part of a scheme to convert a number of disused BT kiosks into small retail outlets, selling products such as ice cream and coffee.

Mr Broe said: "The formula is simple and Miles Broe Architecture brings their planning experience to bear on rolling out these proposals nationwide.

"Working with the charity Thinking Outside the Box, British Telecom and registered charities to safeguard many dilapidated and misused listed phone kiosks, the charity will provide training for jobs within the programme."

Projects were granted planning permission by Brighton and Hove City Council in September last year (see pic) followed by Plymouth and Nottingham, with planning permission currently awaiting approval in Bradford..

A possible sponsorship opportunity for the mults?

Wednesday 5 November 2014

Your customer needs you, specifically...



Driven by the savvy consumer’s demand for personal attention, expressed in shopping behaviour, the retailer completes the consumer-shopper-retailer need-set in wanting 1:1 treatment.

Even if the retailer forgets, suppliers have to remember that their offer, tailored to the retailer’s business needs, has to have inbuilt characteristics designed specifically to meet shopping and consumption requirements.

A supplier cannot even get close, without starting with a deep understanding of what makes this, not any, consumer special.

In the ‘old days’ i.e. before 2008, we used to study the needs of the consumer with the aim of segregating ‘our’ consumer-base into six manageable consumer segments, in turn driving some token tailor-making of our consumer-offering. This we adapted to produce an acceptable bundle for ‘our’ retailer, leaving the retailer to look after the needs of ‘their shopper’, in the aisle, an area increasingly off-limits for suppliers.., often by a combination  of desire and design…

As you know, this has all changed… (if you don’t think so, give me a call…)

The savvy consumer now wants real-time, demonstrable value-for-money, and as a shopper in the aisle, uses mobile-access to comparisons at all levels in order to ensure they are not missing a better-tailored trick available elsewhere, and votes with their feet.

A successful retailer, despite unprecedented distractions, recognises this consumer-shopper as the real starting point for developing an offer-request that reflects the combined needs of consumer-shopper-retailer. Suppliers neglect this new appetite at their peril, obviously ensuring at the same time that this highly specific treatment of the retailer meets the financial needs of the supplier’s  business.

Thus the supplier has to tailor the offering on three levels, per consumer, and find ways of making it work financially.

Unfortunately, at the last count, statistics indicate the UK’s population currently stands at 63.7m people, your new KPI for tailor-making…


Tuesday 4 November 2014

Can hugging products make you feel like buying them?

As more of us shop online, new research by Saïd Business School, University of Oxford University, underlines the importance of physical interaction with products and shows how making an affectionate gesture towards a product can increase our attachment for it, and our propensity to purchase.

The authors suggest that the mere execution of an affectionate gesture towards an object can generate an emotional attachment. This attachment is most clearly seen for those products with humanlike characteristics and is strongest in those people who feel lonely....

Some product manufacturers and marketers are already putting some of these ideas into practice, to encourage a greater emotional and sensory connection with their products and services.  For example Nokia has developed technology in its mobile phones that allow users to squeeze the phone to send ‘virtual hugs’, increasing the user’s bond with the product each time they do this. Even those smart phones which encourage swiping rather than tapping are building valuable bonds between the consumer and product.

Application for enhancement of the buyer-seller relationship
For those NAMs that like to build on good marketing ideas, and given the humanlike characteristics of most buyers, we have researched how the same hug-approach might be applied to improving buyer-seller relationships.

A recent article in The Observer points out that the male-on-male embrace is becoming increasingly common among politicians, and men in general. But for many it’s tricky to get right. The article gives intimate detail ref political applications but we felt that this hugger’s list might best suit our readership:

A hugger’s guide for NAMs

1. The classic 
Clearly signposted, mutual, pleasant. The hug of a friend you’ve just winched from a crevasse, or someone you met six pints ago who has laughed at your jokes.

2. Touching distance
Half-consensual, the archetypal political clinch. It says: ‘I’m fine with this in principle, but let’s be clear that nothing surprising’s going to happen after pudding.’

3. Red-carpet bromance
‘Love does not consist in gazing at each other, but in looking outward in the same direction,’ according to Antoine de Saint-Exupéry.

4. ‘Wassup bro’
With legs well set you vertically clasp hands and lean in for a manly rub. Warmly informal without being too intimate, but not one for grandfathers.

5. ‘Oh, right’
Innocuous handshake develops into an unwonted yank ’n’ pat. The most likely to occur in a buyer-seller environment, yet also the most likely to turn into a kiss.

Given this last reference to kissing, and wishing to generalise this kamtip in terms of gender, our additional research revealed the hidden complexities involved in kissing the buyer

Kissing the buyer: X, XXX or XXXXX?
Given the increasingly cross-cultural mix, even in buying offices, it is obviously important to try to comply with local ‘norms’ when deciding to add ‘puckering-up’ to your selling repertoire.

A great article in the Economist gives the detail (and 91 hilarious comments). For instance, at this stage it might be wise to avoid all invitations to transfer to your French affiliate given that social kissing in France is a cultural labyrinth.

This map, created by Radical Cartography, on the Jaunted website, shows how many times French people in different regions typically kiss one another when they greet.


When it comes to buying and selling, offering a cheek can become most fraught with danger.
Some rules of engagement are obvious: one would never peck on first introduction, for example, no matter where in the world you were. But it is also best not to appear too stuffy or aloof. So with continental contacts, you can probably relax into the informal greeting pretty quickly. On the other hand, Americans, apparently, would much prefer to go unkissed. 

British buyers and sellers, as ever, straddle the awkward transatlantic space, probably only think of kissing once they had been to lunch a few times, and then only if they had managed to talk about something other than work…

All in all, the Americans probably have the right idea. Everyone knows where they stand with a firm handshake, or even a hug?

Hat-tip to Anette R. for the pointer to The Economist

Sunday 2 November 2014

Lidl’s giant step for UK discounting?

                                                                                                                              pic: Liverpool Echo

According to the Liverpool Echo, Lidl are to take over Liverpool's historic Lewis's Building, once one of the city’s landmark stores.

But having been empty for several years, it is now in line for a makeover by the chain. The ground floor will be taken up by Lidl, but much of the rest of it is still being developed as part of the Central Village apartments complex.

If Lidl are truly planning a move to large-space retailing, the issue will be whether a full-range offering, complete with overheads, will allow the discounter to operate the same low-cost business model, or will it have to compromise its pricing advantage over major mults?
(or is this the first move in opening a Kaufland Hypermarket in the UK by Lidl's sister company?) 

Watch this space, literally…