Tag Archives: Aldi

 

Christmas trading results confirmed the inexorable move to online plus another problem for struggling retailers – the gulf between ‘bricks ‘n mortar’ retailers who sell online and the ONLY online retailers like AO. Marc Bolland, boss of M&S did the decent thing and threw himself onto his sword when sales crashed 5.8% and the ‘Big Four’ supermarkets all warned of falling like-for-like sales despite improved online performance.

The big winners seem to be the ONLY Online retailers like AO who don’t have any Bricks ‘n Mortar presence

But card issuers like Visa and MasterCard confirmed turnover was UP by 2% – so the difference must have gone somewhere if not into the Big Four’s websites. The two usual suspects are German – Aldi and Lidl – but their sales turnover is still far too small to represent the difference. The big winners seem to be the ONLY Online retailers like AO who don’t have any bricks ‘n mortar presence. They reported a staggering 31% increase in sales – better even than Aldi could achieved. Admittedly much of this was in white goods rather than groceries but it still hurt the big boys efforts to diversify from groceries and household into durables. Changed shopping habits have now impacted on supermarkets just like they on markets when they introduced self-service.

The markets industry still remains predominantly cash-only and ignores the websites and plastic which fuelled the switch.

But if you’re a small retailer don’t take too much pleasure from watching ‘the biter bit’ until you’ve done your own reality check. The markets industry still remains predominantly cash-only and ignores the websites and plastic which fuelled the switch.

With over 80% of groceries and household goods sold by four companies the move online (and to those Germans) has left the big four with some very expensive property liabilities. They’ve been shelving projects and offloading poor performers sites as fast as possible but are left with the dilemma of who will buy them. The obvious purchasers are suffering as much as they are and anyway a vendor will inevitably slap a restrictive covenant on the title to prevent a competitor using it for retail. The clever money is now in redeveloping supermarket sites for housing – very much in line with government policy. The UK is OVER-provided with supermarkets but UNDER-provided with houses. Say Goodbye! to Asda and Hello! to Acacia Avenue.

Big retailers are seeking other ways to diversify and maintain profits whilst reducing their property costs

Small wonder then that big retailers are seeking other ways to diversify and maintain profits whilst reducing their property costs. Tesco tried with their new ‘Fresh ‘n Easy’ chain in the USA (which was a disaster) and still try to fill underused UK space with Harris & Hoole coffeeshops. Not that it’s had much effect – the H&H promos show suntanned South California beach babes with perfect teeth, not Tracey from the Mudford-on-Sea checkout.

Buying Argos and slotting their stores into Sainsbury units could save a lot of operational costs for both

One would-be diversifier is Mike Coupe, the dynamic new CEO of Sainsbury. He’s has been sniffing around the Home Retail Group, owners of Argos (and until recently Homebase DIY) to fill underused space in his stores. His rationale is that Argos has excellent home deliveries, a complementary offer and ‘mature’ property portfolio which would be cheap to offload. Buying Argos and slotting their stores into Sainsbury units could save a lot of operational costs for both and provide Argos ‘Click and Collect’ in Sainsbury convenience stores. Well that’s the theory anyway, but the secret is out. Home Retail shareholders are playing hard to get and have just sold off Homebase DIY to the Aussie retail group Wesfarmers to boost the share price. Mike will have to pay a lot more than he wants and seems to have cold feet. Watch this space.

After ‘Black Friday’ we had ‘Cyber-Saturday’ and now ‘Blue Monday’

And finally: the latest stupid-sounding name which no-one really understands. After ‘Black Friday’ we had ‘Cyber-Saturday’ and now ‘Blue Monday’ – the third Monday in January. This is – allegedly – the most depressing day of the year. Travel agents use it push February Citybreaks for WizzAir which sound like a steal with four romantic nights for two in Riga for £200 – flights, half-board and transfers included. Why Latvia in February? It’s perishing cold but their markets are housed in former Zeppelin airship hangars. It all seems slightly more funky than Mudford.

Unfortunately the name lives on but can be ignored by everyone in the Markets industry

‘Blue Monday’ was invented by the TV channel Sky Travel back in 2005 to drum up interest in their holiday offers but didn’t work too well. It’s owners, BSkyB closed them down after 5 years due to ‘intense internet competition’ which sounds familiar. Unfortunately the name lives on but can be ignored by everyone in the markets industry.

We already know about the kipper season – which, of course is NOT a stupid name.

RigaMarket

 

Hope you had a good Christmas. Try not to think about the kipper season.

Preliminary sales results from the big boys have been poor at best. The ‘Big Four’ supermarkets have been fighting off the Germans – Aldi and Lidl – so margins remained wafer-thin. The high street fashion retailers were hammered by unseasonably warm weather and Black Friday never really took off. Biggies like H&M and Next started their sales early (which is a bit worrying given the low rate of inflation and rising disposable incomes). Drastic discounting did not draw in the crowds as expected so when the full Christmas sales results are announced it will be interesting to see the proportion which transferred to online or simply disappeared to online competition. Amazon and Google announced amazing turnover figures for Black Friday with durables, white goods and presents only a click away. Shoppers were still seen browsing High Street shops up to Christmas Eve but more for price-comparison with online and/or to sniff out last-minute bargains. Conversion to sales seems to have been poor with many shoppers preferring to sit in front of their PC with a pile of mince pies.

Lower High Street footfall means lower Market turnover

You might have hoped this would not affect your market but I’m sorry to say that doesn’t appear to be the case. Stallholders do not have the sky-high rents and rates of a ‘bricks ‘n mortar’ high street retailer so are still able to offer real bargains BUT they remain overwhelmingly reliant on footfall. Lower high street footfall means lower market turnover which seems to have affected seasonal Christmas markets as much as weekday general markets. Meat, poultry and fruit & veg. seems to have stood up reasonably well but European traders who came to the UK in search of a strong currency and better sales turnover went home disappointed. Sales turnover on Christmas markets seems to have fallen by at least a quarter.

Those with a decent online presence have definitely held their ground

So who were the real winners? Those with a decent online presence have definitely held their ground. Those selling craft and luxury goods only have done well. My friend trained as saddlemaker in Walsall but threw in that towel to make wallets, belts, dog collars and handbags and only sells online. His sales through Etsy, Ebay, Facebook and website are better then ever. He’s not cheap but works on the theory that no girl can ever be too thin or own too many handbags or pairs of shoes. He took a big gamble and doubled his stock from July but had a cracking good Christmas since. His secrets are low overheads, adding value by product skills and selling online 24/7.

Thank heavens the markets industry is so innovative and resilient

So where does this leave the markets industry? The impact of online retailing and home delivery by DHL is as profound as the introduction of self-service supermarkets was to the corner shop. Thank heavens the markets industry is so innovative and resilient. Sadly, the Chancelllor’s Autumn statement didn’t contain any real goodies for small businesses to reinvest in and develop themselves. But it did confirm your market authority’s worst fears – a further 29% in spending cuts over the next 5 years. The easy cuts have been made already so you can anticipate services like care for the elderly taking priority. Loss-making ‘discretionary’ services like markets are in line for disposal in line with the ‘Big Society’ agenda promoted by David Cameron.

It would be interesting to know how many stallholders have half-embraced online retailing

It would be interesting to know how many Stallholders have HALF-embraced online retailing, but not the right half. Be honest with yourself and admit whether you’ve gone online because you’re too busy selling and don’t have time to sit in the carpark queue at Bluewater (6 hours) or Silverburn (3 hours). Maybe next year you should plan ahead and go online then treat yourself with a post-Christmas weekend holiday in Eastern Europe. Many of their Christmas markets stay open until the Orthodox Christmas on 6th January.

A Christmas when you don’t have to work – whoopee!

Whistleblower

Some years ago a mate of mine was Sales director of an Engineering Company in the Midlands. The Company had grown off the back of supplying ‘gondola’ display racking to supermarkets. A big roll of galvanised steel went into one end of their factory and lots of uprights and shelves came out the other. Supermarkets were expanding like crazy and he’d shaved the margins when bidding for a mega-deal for 10 miles of racking for 40 new stores. He was understandably delighted to be invited to a contract-signing at a certain Supermarket’s head office but when shown into the boardroom found several competitors sitting at the table, all looking very hacked-off. Then in walked the Supermarket Head of Procurement who announced they would each be given an office, a telephone and one hour to reconsider their price. This was not a nice way to be treated. He lost the contract and his Company had too many eggs in one basket so went belly-up a couple of years later. Lesson learnt – the hard way.

Half-year profit forecasts to investors were being overstated by some £250m.

Quite a lot of hard-done-by suppliers may be taking quiet pleasure from Tesco’s problems at the moment – well the ones who can find another customer anyway. Back in September a whistleblower in Tesco’s finance department thought the new Chief Executive, Dave Lewis should be told that half-year profit forecasts to investors were being overstated by some £250m. When this profit warning was announced the institutional shareholders reacted in horror and the share price plunged. If you can’t trust the published accounts of a FTSE 100 Company then who can you trust? An internal enquiry was launched, payments withheld to former executives and others politely asked to step aside. Tesco has now handed the results to the Financial Conduct Authority amidst allegations that a small group of people in Britain’s biggest retailer deliberately misled its auditors to boost the trading accounts.

Tesco also confirmed withholding pay-outs worth millions of pounds to former Chief Executive Philip Clarke and former chief financial officer Laurie Mcilwee. The Serious Fraud Office is taking a keen interest and Tesco could face ‘significant fines’ and claims from investors says Mr Lewis. He is also wondering why he answered that job advertisement.

Screwing your suppliers is standard practice for any supermarket but Tesco seems to have refined the art. The allegation is they credited ‘product supplier discounts’ to an earlier accounting period than when actually received. This is naughty and contrary to the Groceries Supply Code of Practice as well as proper accounting standards. You can get away with it if sales turnover is rising and increased revenue in the next period cloaks it – but not if sales turnover is falling which is what’s happening at Tesco. These ‘discounts’ are demanded by Supermarkets in return for the retailer placing the suppliers product on the best shelf. ‘Eye line is buy line’ and all that – a bit like paying key money to get the best pitch next to your Market entrance.

Tesco’s share of the UK groceries and household goods market share has fallen from over 30% to 28%.

This little accounting irregularity is the icing on the cake for Tesco. Sales have been falling for several quarters largely due to German discounters Aldi and Lidl. Tesco’s share of the UK groceries and household goods market share has fallen from over 30% to 28% and the share price was already on the slide before this announcement. Chiselling £250 million or so out of your suppliers every 3 months is no mean feat but it seems likely someone told the auditors the discounts were already in the bank, not an anticipated receipt. Tesco shares which were nudging £5 a couple of years ago now stand at under £2.

So it looks like our Dave may need to raise cash to pay a hefty fine and reimburse shareholders who bought-in on fraudulent figures. Someone may even do porridge. Dave has now penned a long apology to Tesco Suppliers which looked good in the press and stopped them looking round for other retail outlets. It also softened them up for the next round of supply negotiations which are bound to follow. He might have to sell-off of an asset or two such as Tesco Banking or a juicy overseas operation. Cost-cutting in the UK such as a halt on new store openings had already been implemented by his predecessor Philip Clarke who switched to store refitting with posh coffee shops, restaurants and digital businesses. And falling sales.

Dave Lewis says he is a fan of ‘brand archaeology’ i.e. returning Tesco to its original roots. That sounds like he’ll focus on becoming Britain’s cheapest retailer once more and taking-on Aldi and Lidl. It’s the suppliers I feel sorry for.

Meanwhile the 5-yearly commercial property revaluation used to calculate business rates has been postponed yet again.

The last revaluation was due in 2013 but HM Government postponed it until 2015 claiming it would cause ‘uncertainty for businesses’. It’s now been postponed yet again until 2017 i.e. after the next election and assessments continue to apply based on pre-2010 rental values. The total revenue ‘take’ collected by the Treasury is supposed to remain the same but because many High Street businesses have collapsed thanks to online shopping etc the burden is going to fall on those that remain. The British Retail Consortium has kicked-off big time about the effect on their Supermarket members and the PM has promised a long-overdue review of this archaic system. To do so he’ll have to fight his way past all the HMRC District Valuers. Good luck.

In the meantime as a ‘Small Business’ which occupies only one premises you’ll hopefully remain clear of liability thanks to the Small Business Rates Relief Scheme. But this is due to expire in March 2015. It will be interesting to see if Chancellor George Osborne extends that to 2017. He’s bound to – isn’t he?

Happy Christmas!