Staff wages - Aldi Ireland’s hidden extra in the battle for market share

Given Aldi’s natural reticence, a surprisingly detailed 2,000 word article in today’s Irish Times gives some useful insights into the Aldi business model, much of which can be applied to its UK operation.

The article describes Aldi as a logistical and ergonomic-driven machine, a finely-tuned operating model, where “everybody knows what they have to do, and how to do it”, which helps it keep costs to a minimum.

Moreover, its emphasis on exclusive surrogate labels means the packaging, the case it arrives in, the way it gets delivered and shipped to store in shelf-ready packaging, is all under Aldi’s control.

Also, just-in-case, mystery shoppers are employed at each store to ensure that theory is reflected in practice… 

However, the fact that staff are paid at, or above the living wage, and the discounter is known as the best paying retailer in the market, means if the same policy holds in the UK, Aldi will not have to absorb the additional wage cost increases that will put additional cost pressures on UK mults when they have to comply with minimum wage legislation.

Methinks the discounter's competitive edge may be sharper than we thought...?

Much more detail in the Irish Times Article

Amazon elevates delivery to a new level by leasing 20 Boeing cargo planes

News that its US Prime members will benefit in terms of delivery speed and availability from Amazon’s decision to in-source its bulk transportation came as little surprise to observers following its experiments with drone delivery and pre-assembly of anticipated orders.

This latest move reinforces Amazon’s determination to be a global source of anything that can be legally sold to anyone, anywhere, anytime, in any way required by the consumer.

In other words, plane-leasing should not be expected to remain a US initiative for long…

By taking more control of fulfillment, and removing middle men, the company is reducing costs from the supply chain, eliminating duplication-inefficiencies and offering virtually 100% availability via its infinite online shelving.

In the process they are setting industry standards in terms of 1-Click ordering, ever-shortening delivery times, and ‘no-quibble’ returns, in an industry that is stumbling along in their wake…

Moreover, Amazon have managed to persuade loyal users to pay for and become Prime Members, thus triggering another steady revenue stream…

When you think about it, leasing a few Boeing cargo planes is but another step on a very comprehensive journey by an ultimate practitioner of customer-centricity...

Can anyone really afford to be outside this unique business model…?

A space race, but not as we know it....online retailers could be hit by warehouse space shortage

According to a new report by property consultancy LSH in International Business Times, Amazon, Tesco, Argos and other online retailers could be hit by shrinking warehouse space. In fact, logistics space fell from a peak of 360 million sq. ft. in 2012 to 200 million sq. ft. in 2015 (Reuters).

Lambert Smith Hampton (LSH) predict that demand will exceed supply by 25 million sq. ft. by the end of the decade.

Given these retailers use a network of warehouses to ensure faster delivery of goods to customers, the shortage of storage space will affect their delivery capabilities.

Knowing that the retailers involved - and their online shoppers - don’t do waiting, it is unlikely that they will await the 1-year construction time of new-builds, and will instead race to buy available space.

Ironically, given the planning legislation, and different prices/rentals for retail vs. industrial usage, those B&M retailers with redundant large-space cannot simply switch some of their outlets over to online warehousing, although some may compromise, and ‘make do’ in the short term...

More likely we are probably going to see more consolidation/takeovers of any source of suitable warehousing, and even inter-retailer collaboration as stakeholders demonstrate their determination not to compromise the potential of the only growth-channel in town…

For suppliers, this means more complicated and rapid response logistics arrangements in a fast changing logistics landscape.

It is hopefully obvious that they will not be allowed to compromise online retailers’ ability to meet online-shopper need, as speed and availability become the only real differentiators in the online race… 

When you don't need the brand name...

HT to Phill Barnett for pointer

Supermarkets Fastest Growth In Five Months - Source & Impact?

Taking the latest results from Nielsen and Kantar, it is encouraging that some of the mults appear to be coming back (possibly at the expense of other multiples?)…no-one ever wanted these guys to fail, and besides so much of the supplier business model is built upon growth and the mults having a major slice of the action.

However, brand-owners might usefully think about the split between brand and private label of the market data. Add to this the high rate of discounter market share growth, again at the relative expense of brands’ demand and a different picture of recovery emerges..

All pointing to the fact that brand premia are being eroded, hopefully triggering a return to basics, real basics, by the realists… 

Tesco Ireland Fails To Convince Court That It Can’t Afford To Pay Staff Bonuses

News that The Labour Court in Ireland has recommended that Tesco’s Irish business pay staff their 2015 bonuses despite the retailer saying that it is not in a position to do so given its weak trading performance in the country, could have unintended consequences:

• If Tesco decide to fight this recommendation, in open court, they may be forced to divulge local profit margins…
• …with the inevitable knock-on impact in terms of putting other retailers' profitability in the spotlight
• …all in a local environment that is being increasingly subjected to corporate tax scrutiny by the US and EU…

On the bottom line, every little helps...

Muhammad Ali - an inspiration to Ovaltine and the team

News that an exhibition dedicated to the great man is opening today at the O2, calls to mind his first product-endorsement tour of the UK.

Back in 1971, Ali agreed to work for a week promoting Ovaltine via an extended train trip around the UK, stopping at every station that was near a supermarket, inviting the local managers on board to meet the champ and disembark at the next station, inspired for life, in many cases.

We even managed to secure an interview on the new Michael Parkinson TV chat show, an episode that has been repeated many times since.

To our surprise, we found Ali to be a modest, even shy man, with immense presence, whose can-do attitude proved to be an inspiration personally and to other members of the team.

As fans will know, because of illness, Muhammed Ali will not be able to attend the opening session, but he has sent a mock-epilogue to commemorate the event:

'I would like to be remembered as a man who won the heavyweight title three times.

Who was humorous and who treated everyone right.

As a man who never looked down on those who looked up to him.

And who helped as many people as he could.

As a man who stood up for his beliefs no matter what.

As a man who tried to unite all humankind through faith and love.

And if all that's too much then I guess I'd settle for being remembered only as a great boxer who became a leader and a champion of his people.

And I wouldn't even mind if folks forgot how pretty I was.

Be cool and look out for the ladies!'