Thursday 26th November 2015
In case you missed them, a round-up of interesting retail related stories from the last week or so.
Our research confirms Asda’s decision is consistent with the position taken by most other retailers and I would be surprised if we don’t see a general downwards trend in Black Friday sales. Trading figures from previous years show that Black Friday does not necessarily increase overall spend in the pre-Christmas period. It creates a sharp spike in sales which in turn presents other challenges for retailers. Black Friday puts huge extra pressure on the sales floor and back office operations, not to mention the impact it has on trading before and after the one-day promotion. Argos and Homebase, for example, missed their Christmas forecasts last year despite strong Black Friday figures. For many it seems the net benefits of Black Friday simply do not justify the extra pressure on the business, which echoes the announcement made by Asda.
I have said before that online is the future of grocery retail. Following that theme, I have also suggested that because of the advent of online, the barriers to entry to the UK’s grocery retail market are falling away. Amazon is here and I suspect you will see foreign grocery retailers try and work their way into the UK grocery market in the next few years. Probably by using Ocado. Whilst I am predicting the future, my money is on Carrefour. But, what I have not said is that the growth of online grocery retail also provides the UK’s leading grocery retailers with an opportunity to branch out and look to new markets. Sainsburys is using Alibaba, others could follow suit.
So Project Reset was meant to take 90,000 Skus down to around 30,000. Dave Lewis has said that Tesco will also reduce the mechanisms it uses to obtain commercial revenue (i.e. revenue from its suppliers) from around 47 to 3, at least for own label. Ok, so 6,000 jobs will go at head office but you have to wonder what the buyers/trading team will do with their time if they are not squeezing money from suppliers. If front margin and simple supply agreements do truly form part of Project Reset and Tesco’s future, Tesco may actually be able to focus on what the customers want and not on the magic 5% margin is used to crave so badly. We’ll all have to wait to find out the answer, we have not yet seen a full trading year under Project Reset – this year being a transition.
Media outlets’ headline grabbing nature and consumers’ frequent willingness to assume the headlines are true and not look at the detail happens to frequently. Saying ‘processed meats’ cause cancer without explaining what ‘processing’ is, is unhelpful. As the sausages makers point out, not all sausages are ‘processed’ but a consumer’s impression of them is likely to be influenced by a headline which claims sausages can increase the risk of cancer by up to 18%. Health, the war on sugar and obesity all come down to the same issue facing the grocery/food industry – education. WHO’s intentions may be good, but the way it and our media seek to educate the world may need some fine tuning.
If online and convenience is the future, if not the present, then Morrisons’ is right not to turn its back on c-stores. The Motor Fuel Group (‘MFG’) may have a lot of sites for Morrisons to expand in to, but it also has ties to Costcutter so you have to query how many of MFG’s petrol stations are up for grabs. Perhaps David Potts is not thinking petrol stations are the future, but instead, he believes five sites offers a manageable investigation into how to successfully run c-stores.
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