Monday 4th January 2016
In case you missed them, a round-up of interesting retail related stories from the last week or so.
Amazon keep coming which is worrying news for the grocery sector in general, not just the Big 4, M&S and Waitrose whose customers are more amenable to Amazon Prime and Amazon Pantry. Amazon Pantry on a national scale looks unavoidable and that, I suspect, means Amazon Fresh will follow. Competition in the grocery sector will continue to increase, the question therefore is what will persuade customers to use a particular grocer? Convenience, online SKUs, price, CSR? 2016 may hold the answer.
Tease of the year: Amazon Fresh (subscription needed)
My story of the year. But not just because Amazon, in all its omnipotence, is going to cause further disruption to the grocery market, but because Amazon’s entry into grocery highlights threats and opportunities. The barriers to entry for new grocery retailers should fall in this country and in the developed world as grocery moves increasingly online. I have said before there is nothing stopping say, Carrefour, striking a deal with Ocado and becoming a serious retailer in the UK. So, what is to stop the British retailers chasing a greater share of foreign markets? If Ocado and Amazon have shown us one thing, it is you do not need a store to sell groceries anymore or the costs that go along with bricks and mortar.
It was a sad start to the Christmas period for Morrisons because, on 21 December 2015, Morrisons became a FTSE 250 company, dropping out of the FTSE 100 after over 14 years at the top. But, I think there is a very good chance Morrisons’ slide is about to stop and we will see the business march back into the FTSE 100 within a year or so. Why? Well, Aldi’s and Lidl’s gains probably hit Morrisons the hardest because it is easiest for Aldi and Lidl to open stores in the north, Morrisons’ homeland. Property is cheaper up here after all. So Morrisons has probably seen the worst of the so called discounter effect. Then there is Morrisons’ relatively low debt, low leasehold position and the fact it is the second largest food manufacturer in the country. And, as the smallest of the ‘Big 4’ supermarkets, it has fewer stores, which is a great advantage now that property is increasingly becoming a burden for the retailers. Morrisons has therefore a great opportunity to take advantage of the growth in online and convert its manufacturing business into better margins (which I admit will be a challenge) and take advantage of consumer’s increasing interest in provenance, not just price. David Potts has the chance to be seen as a great FTSE 100, not a FTSE 250, CEO – if he can capitalise on these points.
‘Black Friday’ and ‘Cyber Monday’ offered no real surprises for me. An increase in sales, because consumers are more alive to retailers competing on price/offering discounts at this stage of the year, and an increase on online sales. Amazon sold around 5m more items on Black Friday than it did last year – wow! As the shift to online shopping grows you have to wonder which retailers will proposer in the mobile market. If China is anything to go by, and it should be as China’s ‘singles day’ is the biggest online shopping day in the world, online shopping will be increasingly done on your mobile phone – like most things these days. So, the retail winners will be the businesses are ready for the mobile revolution before it arrives and its coming down the track very quickly. I will look out for mobile figures next year.
So it does not look like we will see a ‘sugar tax’ in this country in the short term. A sugar tax is not a new idea, it exists, or has existed, in France, Mexico, America, Chile and Denmark. Although, how the tax was imposed in those countries lacks consistency and longevity which makes its success difficult to measure. What is interesting about the attack on sugar and the refusal by the government to introduce a sugar tax is what the alternatives are. Whilst the public is becoming more health conscious, there isn’t any evidence to demonstrate that childhood obesity and diet related illness are falling. If there is no prospect of a sugar tax, what will the government do to improve the national diet? From the looks of things, not much.
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