...from a key stakeholder
Hat-tip to Mike Greene for pointer to pic
Friday 28 November 2014
Christmas & Thanksgiving: a contrarian view...
...from a key stakeholder
Hat-tip to Mike Greene for pointer to pic
Multi-Channel Retailing - a business consulting role for NAMs?
John Nevens’ article in yesterday’s NamNews revealed an unanticipated consequence of the development of Multi-Channel Retailing: the resulting need for NAMs to be experts in all routes to consumer.
This requirement, coupled with the need to place all initiatives within a continuous ‘time-framed’ strategy, can place an impossible burden on busy NAMs with barely manageable workloads.
But it can and should be done – the real issue is how?
Essentially, NAMs should see themselves as business consultants to the customer, providing a unique insight that answers the fundamental question in a buyer’s mind: How am I doing compared with the other guys? (They are looking for context)
A retailer/buyer is an in-depth but narrow expert in their own business, and a ‘permanent’ fire-fighting mode coupled with excessive buyer-churn can prevent them from taking a strategic view.
A NAM can provide solutions for these deficiencies in the buyer role, and transform relationships in the process.
As a business consultant that happens to carry a supplier’s bag, the NAM needs to be an expert in how the consumer can be helped to buy the category, however, whenever, and wherever they choose – a truly multi-channel approach to retailing…
However, it is not necessary to know as much as a dedicated expert in a particular channel. The NAM is meant to be a broad but, of necessity, a relatively shallow expert in how their category functions and can be optimised in each of the different routes to consumer.
In other words, a NAM needs to know enough about a channel to be able to place their brand and its category in that channel in a way that meets consumer need and does not compromise other routes to consumer, especially that of the buyer in question. The NAM also needs to think short, medium and long-term in order to be able anticipate and respond to opportunities down the line..
It is for other people in the NAM’s business to take an overall view of the different roles of all channels for the brand, and label the channels invest, maintain or divest, as appropriate. It would obviously be unwise of a company not to involve the NAMs in these deliberations….
(I personally believe that being able to translate everything into cost and value, within an ROCE and commercial context, can then help place the trade initiatives within a strategic context and makes the NAM job manageable)
So, applying the NAM role in terms of broad, but shallow multi-channel category expertise, and combining this insight with the narrow, but in-depth expertise of the buyer can help the NAM to meet the increasing demands to create and sustain strategic rather than purely transactional relationships with retailers.
A small step on the way to fulfilling the new requirements of the NAM role identified by John….
Wednesday 26 November 2014
Making a 'shelfie' pay, on your next OOS shopping trip
If we accept that a complaining customer is someone trying to give us a second chance, then why not help them over the final mile by using aisle-engagement to simplify shopper reporting of Out-Of-Stocks?
...and instead of an insincere apology, acknowledge their help via reward points, and better on-shelf availability...
US based Datacrowd* have launched an app that allows consumers to take a ‘shelfie’ of an empty facing and shelf price-tag, and email it to Datacrowd with the GPS location.
This entitles them to reward points that can be redeemed in-store, whilst Datacrowd passes the information to the supermarket, hopefully resulting in remedial action.
Datacrowd have obviously taken the logical step of going directly to the retailer, but NAMs will appreciate that passing the information to appropriate suppliers would add considerable leverage to the process.
In other words, given that brand owners have both an interest in maintaining high levels of on-shelf availability, and ensuring that agreements with the buyer result in on-shelf execution, a shelfie becomes a very powerful enforcer of in-store compliance….
*Currently available in the US, but patently a no-brainer for the UK..
Tuesday 25 November 2014
What if Aldi UK keeps going?
Given its UK 2013 sales of £5,275m and growing at 25%, Aldi could reach £16bn by 2018.
In a flat-line market, this would make it twice the size the Co-op Foods business and say 50% of a major multiple, given zero to very low growth of its competitors in the meantime.
Apart from a ‘handful’ of brands, this means that most of its business would be in surrogate brands, at the expense of national brands, effectively taking demand from the branded market.
This suggests that brand-suppliers have to find a way of dealing with Aldi, either via 1-off discontinuous promoting, or through supply of surrogate labels…
And with Lidl showing similar signs, they should be added to a new trade strategy
Perhaps yesterday’s news of changes at the top of Aldi UK - our biggest story of the day - provides NAMs with an excuse to help your company revisit corporate policy re the discounters?
In a flat-line market, this would make it twice the size the Co-op Foods business and say 50% of a major multiple, given zero to very low growth of its competitors in the meantime.
Apart from a ‘handful’ of brands, this means that most of its business would be in surrogate brands, at the expense of national brands, effectively taking demand from the branded market.
This suggests that brand-suppliers have to find a way of dealing with Aldi, either via 1-off discontinuous promoting, or through supply of surrogate labels…
And with Lidl showing similar signs, they should be added to a new trade strategy
Perhaps yesterday’s news of changes at the top of Aldi UK - our biggest story of the day - provides NAMs with an excuse to help your company revisit corporate policy re the discounters?
Monday 24 November 2014
Royal Mail: the real threat of Amazon going it alone on parcel delivery
News in The Guardian that Royal Mail shares slumped by 8.4% on Wednesday after the newly privatised postal service warned that its profits would be hit by Amazon launching its own delivery service should have been a no-brainer....
Royal Mail said its parcel growth rate would decline from 4%-5% to 1%-2% for at least two years because of Amazon’s decision.
Amazon launched its first same-day delivery service in the UK last month. The new service, called Pass my Parcel, promises to deliver parcels on the same day ordered to hundreds of newsagents across the country.
However, anyone taking a cursory glance at Amazon’s history will realise that Royal Mail, by focusing on the fact that Amazon are simply taking over delivery of their own traffic, are missing the real agenda…
Those with long memories will recall how a series of postal strikes helped the growth of fax-machines... And once the public had become accustomed to the use of alternative written communication, the transition to emails became so inevitable...
Like home-location ‘tie’ of land-line was made redundant by mobile technology, so too the increasing complexity of sending parcels via traditional carriers will become a driver for the growth of a simpler model...
With so much practice, it is surprising that Royal Mail still sees the introduction of Amazon’s own parcel delivery service in terms of the loss of one of its major customers and the 6% hit to Royal Mail’s parcel volume sales.
Anyone who has tried to run the pricing/volume challenge of parcel despatch at the local post office and fared equally badly using alternative providers (see BBC for details of the 16-page Royal Mail guidelines) will realise that the increasing complexity has to present an open goal for Amazon to introduce the parcel-delivery equivalent of 1-click ordering and no-quibble returns when they decide to enter the market for domestic and corporate deliveries…
Apart from making some savings, Amazon have to be taking on their own-delivery to learn the process...
This has to be the ultimate agenda, and NAMs might usefully factor this inevitability of this threat to ALL parcel delivery into their online strategies…
Royal Mail said its parcel growth rate would decline from 4%-5% to 1%-2% for at least two years because of Amazon’s decision.
Amazon launched its first same-day delivery service in the UK last month. The new service, called Pass my Parcel, promises to deliver parcels on the same day ordered to hundreds of newsagents across the country.
However, anyone taking a cursory glance at Amazon’s history will realise that Royal Mail, by focusing on the fact that Amazon are simply taking over delivery of their own traffic, are missing the real agenda…
Those with long memories will recall how a series of postal strikes helped the growth of fax-machines... And once the public had become accustomed to the use of alternative written communication, the transition to emails became so inevitable...
Like home-location ‘tie’ of land-line was made redundant by mobile technology, so too the increasing complexity of sending parcels via traditional carriers will become a driver for the growth of a simpler model...
With so much practice, it is surprising that Royal Mail still sees the introduction of Amazon’s own parcel delivery service in terms of the loss of one of its major customers and the 6% hit to Royal Mail’s parcel volume sales.
Anyone who has tried to run the pricing/volume challenge of parcel despatch at the local post office and fared equally badly using alternative providers (see BBC for details of the 16-page Royal Mail guidelines) will realise that the increasing complexity has to present an open goal for Amazon to introduce the parcel-delivery equivalent of 1-click ordering and no-quibble returns when they decide to enter the market for domestic and corporate deliveries…
Apart from making some savings, Amazon have to be taking on their own-delivery to learn the process...
This has to be the ultimate agenda, and NAMs might usefully factor this inevitability of this threat to ALL parcel delivery into their online strategies…
Sunday 23 November 2014
Store closures of 20% en route to store-level assortment, and more?
The emerging sense that UK multiples are sitting on redundant space representing around 20% of their estates means that large store disposals will have to begin, in order to convince the City that the capital base is being brought in line with current market demand. This in turn will impact how suppliers manage their major customers, in terms of reward for risk and investment.
Moving to store-level profitability
Obviously, the multiples will reassess their estates via store-by-store re-evaluation to identify which of the larger outlets fail to produce an acceptable level of profit, ideally using ROCE, the driver of share price.
A starting point would be to highlight every store that is delivering less that the corporate average ROCE, and since the corporate ROCE is in fact an average of good and bad, eliminating the under-performers would automatically raise the corporate ROCE.
Selling off redundant space
Next step would be to attempt to sell the redundant stores. This will not be an easy task, given the rationale re viability of alternative use in our recent blog.
In extreme cases, this means lowering the price (thereby possibly challenging the book-value of the remaining stores in the estate) to a point where a sale is possible. Any such write-down below book-value then causes a hit on the P&L, thereby resulting in a reduction in profits.
More importantly, the simultaneous issue of ‘for sale’ notices by the multiples could depress all UK store values.
In fact, given most retailers’ gut-response to slowing sales, we might be on the verge of the first price war in retail property history, possibly opening the door to BOGOFs, multi-buys and even loyalty-points!
Moving to store-level autonomy
Seriously, this new focus on store profit margin and ROCE has to lead to the treatment of each outlet as an individual market. Specifically, a 70,000 sq. ft. store, with say 400 staff and an annual sales turnover of £100m, means that the store’s CEO is in fact in charge of a medium-sized UK business, and is likely to demand equivalent autonomies at operational level, complete with Balance Sheet and P&L. In practice, this means having the freedom to decide on an assortment that matches local need, rather than the blunt tailoring dictated by a head office 200 miles away.
What it means for suppliers
From a supplier point of view, this development spells the end of ‘national coverage and distribution’ and instead sees the introduction of ‘patchwork presence’ that matches real need for the brand at local level. This will in turn calls into doubt the cost-effectiveness of ‘national’ and even regional advertising compared with the 1:1 pinpointing of social marketing…
Impact on how we market brands
In terms of brands, our repeat-sale ‘relationship’ with the consumer becomes a series of SKU-by-SKU sales, available to buy wherever, whenever, however the savvy consumer chooses, with no channel off limits. In practice, this means regarding each successful 'sale' as a springboard to the next, with every tin they open containing more than they expect - not 25% empty to help disguise a price increase that fools no one - least of all a savvy consumer, already trained by the banks and politicians to trust no one, and helped by the most sophisticated price-comparison kits ever available, costing a fraction of the saving on the first purchase.
In effect, the consumer is giving us all a second and possibly final chance to get it right...
...and all because of a creeping realisation that the UK is over-shopped and currently unfit for purpose.
Moving to store-level profitability
Obviously, the multiples will reassess their estates via store-by-store re-evaluation to identify which of the larger outlets fail to produce an acceptable level of profit, ideally using ROCE, the driver of share price.
A starting point would be to highlight every store that is delivering less that the corporate average ROCE, and since the corporate ROCE is in fact an average of good and bad, eliminating the under-performers would automatically raise the corporate ROCE.
Selling off redundant space
Next step would be to attempt to sell the redundant stores. This will not be an easy task, given the rationale re viability of alternative use in our recent blog.
In extreme cases, this means lowering the price (thereby possibly challenging the book-value of the remaining stores in the estate) to a point where a sale is possible. Any such write-down below book-value then causes a hit on the P&L, thereby resulting in a reduction in profits.
More importantly, the simultaneous issue of ‘for sale’ notices by the multiples could depress all UK store values.
In fact, given most retailers’ gut-response to slowing sales, we might be on the verge of the first price war in retail property history, possibly opening the door to BOGOFs, multi-buys and even loyalty-points!
Moving to store-level autonomy
Seriously, this new focus on store profit margin and ROCE has to lead to the treatment of each outlet as an individual market. Specifically, a 70,000 sq. ft. store, with say 400 staff and an annual sales turnover of £100m, means that the store’s CEO is in fact in charge of a medium-sized UK business, and is likely to demand equivalent autonomies at operational level, complete with Balance Sheet and P&L. In practice, this means having the freedom to decide on an assortment that matches local need, rather than the blunt tailoring dictated by a head office 200 miles away.
What it means for suppliers
From a supplier point of view, this development spells the end of ‘national coverage and distribution’ and instead sees the introduction of ‘patchwork presence’ that matches real need for the brand at local level. This will in turn calls into doubt the cost-effectiveness of ‘national’ and even regional advertising compared with the 1:1 pinpointing of social marketing…
Impact on how we market brands
In terms of brands, our repeat-sale ‘relationship’ with the consumer becomes a series of SKU-by-SKU sales, available to buy wherever, whenever, however the savvy consumer chooses, with no channel off limits. In practice, this means regarding each successful 'sale' as a springboard to the next, with every tin they open containing more than they expect - not 25% empty to help disguise a price increase that fools no one - least of all a savvy consumer, already trained by the banks and politicians to trust no one, and helped by the most sophisticated price-comparison kits ever available, costing a fraction of the saving on the first purchase.
In effect, the consumer is giving us all a second and possibly final chance to get it right...
...and all because of a creeping realisation that the UK is over-shopped and currently unfit for purpose.
Monday 17 November 2014
Supermarkets facing big store closure - Why the big deal?
Mark Price's predictions of big store closures in The Sunday Telegraph should be no surprise to NAMs that know their ROCEs.
Essentially, retailer share prices are driven by the rewards they generate for risk. In other words, if a retail (or any other) business fails to generate an adequate pre-tax Net Profit on the Capital Employed in the business, then the ROCE will fall, and with it, the share price.
This means that in the case of large space outlets, say 100,000+ sq. ft., it is vital that sales/sq. ft. of at least £1,000 p.a. are generated, otherwise that outlet will dilute the group's performance.
As NamNews readers will know, the structural changes taking place in retail, such as consumers buying less and shopping more often means that the cost of driving out-of-town becomes an increasingly expensive issue, and not just for cash-strapped shoppers. Moreover, given the economic uncertainties, and the increasing ease of buying online, shoppers have become increasingly attracted to discounters and convenience stores, closer to home.
As you know, retail is meant to be flexible, capable of responding to any change in consumer demand.
Unfortunately, UK retailers made the mistake of building and holding large space retail units, where scale economies helped them to generate high net margins, as long as sales remained high. With the benefit of 20/20 hindsight, holding rather than selling and leasing back the store meant that it was put in the Balance Sheet as a capital item, part of the Capital Employed. This meant that high net margins were required in order to produce an adequate ROCE of 15% or more.
With falling sales in large outlets, resulting in the same overheads eating into the margin, the retailer is faced with the dilemma of finding alternative uses for some of the space - such as restaurants, entertainment, and leisure - the only proviso being that these alternative options generate at least £1,000+ per sq. ft. p/a.
Alternatively, suppliers can help by organising in-store theatre initiatives that drive sales to such an extent that the overall store's selling intensity is greater than £1,000 per sq.ft./annum.
Otherwise, the store closes, or is hopefully sold off to other businesses that can exceed the sales-to-space parameters of viable usage, in order that the remainder of the estate, with a smaller footprint, can generate a level of ROCE that the City rewards via share price increases.
Failing that, the retailer slowly goes out of business..., whilst suppliers become stronger...
Unfortunately, and fortunately, it is as simple as that.
Essentially, retailer share prices are driven by the rewards they generate for risk. In other words, if a retail (or any other) business fails to generate an adequate pre-tax Net Profit on the Capital Employed in the business, then the ROCE will fall, and with it, the share price.
This means that in the case of large space outlets, say 100,000+ sq. ft., it is vital that sales/sq. ft. of at least £1,000 p.a. are generated, otherwise that outlet will dilute the group's performance.
As NamNews readers will know, the structural changes taking place in retail, such as consumers buying less and shopping more often means that the cost of driving out-of-town becomes an increasingly expensive issue, and not just for cash-strapped shoppers. Moreover, given the economic uncertainties, and the increasing ease of buying online, shoppers have become increasingly attracted to discounters and convenience stores, closer to home.
As you know, retail is meant to be flexible, capable of responding to any change in consumer demand.
Unfortunately, UK retailers made the mistake of building and holding large space retail units, where scale economies helped them to generate high net margins, as long as sales remained high. With the benefit of 20/20 hindsight, holding rather than selling and leasing back the store meant that it was put in the Balance Sheet as a capital item, part of the Capital Employed. This meant that high net margins were required in order to produce an adequate ROCE of 15% or more.
With falling sales in large outlets, resulting in the same overheads eating into the margin, the retailer is faced with the dilemma of finding alternative uses for some of the space - such as restaurants, entertainment, and leisure - the only proviso being that these alternative options generate at least £1,000+ per sq. ft. p/a.
Alternatively, suppliers can help by organising in-store theatre initiatives that drive sales to such an extent that the overall store's selling intensity is greater than £1,000 per sq.ft./annum.
Otherwise, the store closes, or is hopefully sold off to other businesses that can exceed the sales-to-space parameters of viable usage, in order that the remainder of the estate, with a smaller footprint, can generate a level of ROCE that the City rewards via share price increases.
Failing that, the retailer slowly goes out of business..., whilst suppliers become stronger...
Unfortunately, and fortunately, it is as simple as that.
Friday 14 November 2014
When an unexpected listing may benefit from a Drone defibrillator...
Whilst many NAMs may be focused on Amazon’s latest trial of same-day drone drop-offs in Cambridge, a more useful application might be where speed of reaction can mean a difference between life and a death. Alec Momont at The Netherlands’ Delft University of Technology has unveiled an ambulance drone that can fly up to 100 km/hr to deliver a defibrillator to a patient in mere minutes…
The ambulance drone is a hexacopter painted in yellow. It can be dispatched to a location within 12 sq. km in about a minute. Upon landing, anyone able to help the victim will be talked through using the attached defibrillator by an operator. The drone has an on-board camera which allows the operator to talk to the victim and provide instructions to whomever is on the ground – essentially serving as a remote paramedic...
Given the $19k price-tag, and the stretched budgets of the emergency services, perhaps there is scope for some collaborative efforts by suppliers living within 12 sq. km of Cheshunt?
See a video that shows what the ambulance drone does - and how the project came to fruition - here
Hat-tip to Francisco and Rui for the pointer
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