Tag Archives: supermarkets

 

About ten years ago the BBC ran an excellent drama series about fictional east end villain Harry Starks. He specialised in defrauding suppliers by using a ‘Long Firm’ – a fraudulent variation on the ‘Baby shark’ system perfected by Leo Albrecht, founder of Aldi. Harry established a legitimate business, built up his credit then placed a large order with his suppliers before disappearing with the goods. Along the way the way he developed a nasty habit of using a red hot poker on his business rivals. It was great TV thanks to actor, Mark Strong.

It took the announcement of a £240 million ‘accounting discrepancy’ in Tesco’s accounts to open up this can of worms

Over the years a fair few contractors to Tesco have also been left feeling like Harry’s suppliers – are we going to get paid and when? They could see they were being turned-over but hardly any spoke out for fear of losing a supply contract to the UK’s biggest retailer. It took the announcement of a £240 million ‘accounting discrepancy’ in Tesco’s accounts to open up this can of worms twelve months or so ago. The government-appointed Groceries Code Adjudicator, Christine Tacon, has since published a damning sixty-page report cataloguing their treatment. It can be downloaded from www.gov.uk/government/publications/gca-investigation-into-tesco-plc

This rather basic breach of accounting standards was somehow overlooked by long-standing auditors PriceWaterhouseCoopers

The accounting scandal kicked-off when a whistleblower in Tesco finance revealed how their profits included so-called ‘commercial income’ from suppliers before it was received. This rather basic breach of accounting standards was somehow overlooked by long-standing auditors PriceWaterhouseCoopers and coincided with a crash in the share price and unexpected departure of Chief Executive Philip Clarke and Financial Director Laurie McIlwee. The Serious Fraud Office then opened an inquiry into what looked like share price manipulation and Christine started to ask what commercial income actually meant. Her report gives a startling insight into the terms imposed upon suppliers in return for putting their stock on Tesco shelves. They include:

  • CODBA: The ’Cost of Doing Business Allowance’ i.e. a contribution to building new or refitting stores
  • The ‘listing fee’ payable for establishing a new supplier account
  • • An ‘eye level fee’ for positioning products on the prime ‘eye level/buy level’ shelf
  • Discounts in return for paying the suppliers invoice on time
  • A ‘new store opening’ contribution towards new Tesco outlets.

Of course everyone in retailing has known for years

Of course everyone in retailing has known for years this goes on so the report came as no surprise. Unfortunately though the steely-eyed Christine can’t do anything but name and shame the company and put the frighteners on others – a bit like Harry Starks. Without the poker though. The breaches of the GCA code of practice took place before it was given the power to fine anyone. However the Serious Fraud Office investigation is another matter. Executives in public companies who do that sort of thing are very naughty and can go to prison. Remember Gerald Ronson and Ernest Saunders who did porridge for boosting the Guinness share price to support a takeover bid for Distillers?

Tesco is now being pursued with so-called ‘class actions’

If the SFO does successfully prosecute executives that is not the end of the matter. Tesco is now being pursued with so-called ‘class actions’ from institutional investors who bought shares when their value was soaring and have seen their investment halved in value, post-scandal.

‘There is mounting public evidence that Tesco’s management were aware that the financial statements were untrue or misleading.’

Litigation finance group, Bentham Europe, seem to think they had the wool pulled over their eyes and are looking for blood – preferably that of Clarke and McIlwee as between the pair of them they allegedly trousered £2 million in bonuses after being suspended. Benthams specialise in large scale actions to recover shareholder losses and point out: ‘Investors have recourse under the Financial Services and Markets Act…following its misreporting of commercial income in 2014. There is mounting public evidence that Tesco’s management were aware that the financial statements were untrue or misleading.’ Auditors, PWC are also doubtless looking over their corporate shoulder and having interesting discussions with their professional indemnity insurers. Lots of lawyers are going to make lots of money out of this one.

The GCA does now have some teeth

The GCA does now have some teeth, but too late. I’d recommend Christine talks to a few quantity surveyors – the Gods of the building industry – to beef up the GCA code of practice. Building contracts usually oblige employers to pay the main contractor on fourteen days so a sharp QS sometimes slips in a ‘proof of payment’ clause to ensure subcontractors are not left dangling for ninety. A topic close to the heart of all small businesses.

Harry Starks was last seen sailing off into the sunset to begin a new life in Morocco, poker in hand. I wonder if he’d like a job at the GCA?

 

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!

 

The Chancellor’s July budget from the all-new, all-Conservative government was disappointing for small businesses. George Osborne described it as ‘a budget for working people’ but not many were impressed. There were no new incentives for entrepreneurs or start-ups and the only rabbit he produced out of his hat was the ‘National living wage’ set at £7.20/hour from April 2016. But this was for over-25’s only with under-25’s still stuck with the lower ‘National minimum wage’. This was retained for under-25’s to ensure they can ‘secure work and gain experience’ i.e. not be priced out of the labour market. Despite this the independent Office for Budget Responsibility predicted job losses, particularly in the agricultural sector so in response George cut Corporation tax from 20% to 19% (from 2017) and increased the National Insurance ‘employment allowance’ which waives contributions from small businesses to the tune of £3,000 per annum.

Small businesses are deeply unimpressed

Research confirms small businesses are deeply unimpressed. Those in the retail sector consider this no substitute for the more, errrr…informal wage arrangements often seen in the Markets industry. They would far have preferred an increase to the Vat threshold – a very real disincentive to making the leap into Vat-registration.

The budget also contained proposals to review the old Chestnut of Sunday trading legislation

The budget also contained proposals to review the old Chestnut of Sunday trading legislation. Osborne suggested decision-making might be devolved to local Councils to support ‘bricks and mortar’ retailing versus it’s online competition. The arguments for and against are well-rehearsed – increased costs over 7-days without increased takings etc – but unfortunately his glamorous blonde colleague and Minister for Small Business, Anna Soubry MP (Con. Broxtowe, Notts.) forgot her job title before going public with the proposals. She should have consulted with a few more small business representatives before suggesting critics such as ‘Keep Sunday Special’ are “…harking back to a world that probably didn’t exist. Sunday was the most miserable day of the week”. She should, for instance have talked to the Federation of Retail Newsagents or Association of Convenience Stores. They rejected Osborne’s proposals, suggesting less than one in ten customers wanted changes. Other critics included ‘The Sun’ newspaper which – after ditching Page three’s ‘News in Briefs’ – let columnist Rod Liddle loose to sum it up nicely as ‘a wonderful excuse for me to buy yet more crap’.

Nor were the proposals well-received by two of the ‘Big four’ supermarkets. Tesco and Sainsbury own lots of Convenience store outlets which can stay open already, so don’t fancy opening expensive Supermarkets as well. Asda and Morrison though don’t have the same High Street presence so were enthusiastic. This proposal is now out for consultation so if you’d like to share your views about trading 7-days per week I’m sure Anna would like to hear from you. She can be emailed at: anna.soubry.mp@parliament.uk

What the report really highlights is a total lack of regulation in this important area

At about the same time the CMA (Competition and Markets Authority) confirmed it had found evidence supermarkets are misleading customers with price promotions – but the pricing guidelines mean the problem is more of a cockup than a conspiracy. This came after a 3-month enquiry triggered by a ‘Super complaint’ lodged by the Consumer Association magazine ’Which?’ The CMA confirmed although there was evidence of misleading pricing on the 40% of grocery sales on promotion at any one time, the problem is not widespread. Supermarkets generally take compliance with pricing seriously and the problems identified by ‘Which?’ are caused more by lack of clarity in the pricing guidelines. The CMA made some weak recommendations about price comparison data and ‘Was/Now’ promotions, where by law the period on offer of an ‘Is now’ price cannot exceed the period of the higher ‘Was then’ price. The industry-funded and entirely voluntary Retail Ombudsman suggested pricing guidelines need updating because “The problem is the current rules are merely guidelines, which present retailers with a lot of wriggle room. What the report really highlights is a total lack of regulation in this important area”. This sounds rather like the problems of food labelling and the impossibility of legislating for every possibility.

Meanwhile in the dysfunctional world of Euroland ..

Meanwhile in the dysfunctional world of Euroland the Germans played a game of blink – and lost. The unblinking Greek Prime Minister Aleksis Tsipras called the EMU’s bluff and after three (or was it four?) sets of ‘final negotiations’ agreed to some watered-down austerity measures in return for a bail-out of the Greek Euro. The Bundesbank smiled at the breakthrough through gritted teeth as the UK blocked it’s £1 billion contribution to the Euro Stabilisation Fund and City of London bankers stuck two fingers up at their rivals in Frankfurt. The Euro dropped to 72p from 97p in 2008 and although sterling is not yet back to it’s pre-financial crisis exchange rate, it is going the right way. Which is nice.

The German Chancellor reportedly arrived in Athens for the last round of emergency talks to be greeted by an officious Greek immigration officer armed with a clipboard and a list of questions: “Name?” he asked:“Angela Merkel” she replied. “Nationality?” he asked. “German” she replied. “Occupation?” he asked. “Nein – not yet” she snapped. ”First ve haf to talk……”

 

In April this year the shiny new CMA (Competition and Markets Authority) emerged from a union of the former Office of Fair Trading and the Competition Commission. People are watching it closely: Initial shock revelations include someone has been price-fixing galvanised steel water tanks and online review websites are not trustworthy. Well there’s a surprise. Whether or not the CMA gets around to reviewing something worthwhile such as supermarket tactics to bankrupt independent retailing remains to be seen.

Review websites often ‘lose’ poor feedback in return for sponsorship

According to the CMA some 25 million shoppers use review websites such as Amazon and TripAdvisor to ‘inform’ their purchases but many of the reviews are rigged. Review websites often ‘lose’ poor feedback in return for sponsorship, whilst manufacturers offer rewards for favourable reviews and post criticism of competitors. None of this comes as a surprise to anyone over 8 years old but encourages genuine shoppers to post outrageous comments about some products. I recommend Amazon’s eye-wateringly funny review of ‘Veet for Men Hair Removal Gel Cream’ at www.amazon.co.uk/Veet-Men-Hair-Removal-Cream/dp/B000KKNQBK 

Someone who does believe in frankness and honesty is the (Canadian) Governor of the Bank of England, Mark Carney

Someone who does believe in frankness and honesty is the (Canadian) Governor of the Bank of England, Mark Carney. Last month he gave a highly critical after-dinner speech to city bankers to coincide with publication of the ‘Fair and Effective Markets’ review by HM Treasury. His speech left the audience squirming uncomfortably on their well-padded behinds as they remembered how the (now disbanded) Financial Services Authority failed to reign them in prior to the financial crisis. Carney was not averse to a bit of self-criticism either, describing how the Bank of England allowed the crisis to develop. The Bank’s contribution fell short…and neither identified the scale of risks in the system nor spotted gaps in the regulatory architecture’ he said. Arcane governance had blurred accountability and more would now be done to strengthen control. He added: ‘and that includes 10 years in Wormwood Scrubs for any of you guys with your hand in the till’ - or something like that. Former Governor of the Bank of England Mervyn King, former FSA boss Hector Sants and former Chancellor of the Exchequer Gordon Brown chose not to comment.

The Treasury review proposes extending criminal sanctions from investment bankers to foreign exchange traders

Chancellor George Osborne also spoke at the dinner. He publicly supported Carney with: ‘The public rightly asks: Why is it after so many scandals so few individuals face punishment in the courts? Individuals who fraudulently manipulate markets and commit financial crime should be treated like the criminals they are.’ The Treasury review proposes extending criminal sanctions from investment bankers to foreign exchange traders plus harsher penalties, something shareholders in RBS and Lloyds would doubtless like applied to reckless executives. City of London Lord Mayor, Alan Yarrow said upholding professional standards should be the norm. ‘It’s like a supermarket with no security cameras – if someone takes something without paying, it’s still theft. There is no escape. People should uphold professional standards irrespective of whether the regulators are there or not.’ Well, actions speak louder than words Alan. We’re waiting.  

Pickles made few friends amongst local councils whilst spearheading local government spending cuts

Meanwhile, having won a clear majority in the general election the Prime Minister reshuffled his cabinet without needing to consult his coalition partners. Eric Pickles, plain-speaking head of the Department of Communities and Local Government was promoted to the House of Lords with a Knighthood and an ‘anti-corruption role’ which sounds a bit South American.  To replace him David Cameron promoted Greg Clark (47) to become Secretary of State for Communities and Local Government. Described as a ‘soggy left’ Conservative from Middlesborough, the former Financial Secretary to the Treasury has a hard act to follow. Pickles made few friends amongst local councils whilst spearheading local government spending cuts and the 2011 Localism Act which gave community groups the right to take over council-provided services. His enthusiasm for the ‘Big Society’ agenda bolstered a reputation as a vocal critic of local government, particularly after the child sexual exploitation scandal in Rotherham and local governments’ ineffectual response to the 2014 floods. Greg Clark faces an equally tough time at the DCLG as he now has to implement a second round of even deeper cuts to reduce the governments spending deficit. 

Canadian lobsters are now in the front line thanks to Smartphone technology

And finally: Another Canadian product has also been in the news – Lobsters. In the struggle to attract consumer spending Canadian lobsters are now in the front line thanks to Smartphone technology. Shoppers in Newfoundland can now use smartphones to scan live lobsters in fishmongers tanks to discover where their seafood is from and who caught it and when.

Tracing food back to source is not a new idea but using QR code tags to provide customers with this level of detail is

The traceable lobster program is part of thisfish.info, an initiative of Ecotrust Canada, an environmental charity. Each lobster caught by a participating member is tagged with a unique QR code which customers scan for information about the catch – when and where it was caught and by what method, plus a biography of the fisherman. Tracing food back to source is not a new idea but using QR code tags to provide customers with this level of detail is. Some Newfoundland restaurants have been serving QR-coded seafood for a couple of years and boosting sales by linking into wider consumer trends. A spokesperson said: ‘Customers love a glimpse into the lifestyle of the person who provided their supper that night. Where they live, how old they are and how long they’ve been fishing. Consumers are focusing more on where their food comes from, if it is sustainable and healthy and whether the people who catch it are paid fairly’.

No lobsters were available for comment.

 

Supermarkets suffer the same problems as market traders – but on a grander scale. This includes underestimating how long it takes to generate turnover and profit sufficient to cover borrowings. We’ve all seen the enthusiastic but inexperienced start-up who lasts 6 months before the savings run out and he does a midnight flit leaving unpaid rent and suppliers behind. ‘Turnover is for egotists but profits are for realists’ is a classic saying – and a classic argument for cheaper bank loans and more tax breaks. Hopefully George Osborne will consider both now he doesn’t need to worry about re-election.

It took Aldi 25 years to generate enough turnover to become the UK’s sixth largest retailer

It took Aldi 25 years to generate enough turnover to become the UK’s sixth largest retailer. This was confirmed by first-quarter figures showing they’ve secured 5.3% of the retail grocery sector. That puts them ahead of Waitrose (a mere 5.1%) but still a long way short of Tesco at 28%. But every little helps.

What a pity they’re German, not British

At the same time Aldi announced ambitious expansion plans with another nine London stores in 2015 and a nationwide target of 1,000 by 2022. Contrast this with Tesco who ditched 40 + planned openings in the UK plus more abroad before posting a £6.4billion pre-tax loss. The fact that Aldi is both foreign and privately-owned simply rubs salt into the wound. It is not subject to corporate shareholder pressure for increased profits, year-on-year so could take it’s time to understand an overseas market. What a pity they’re German, not British.

It cost Tesco £1.2billion in write-offs when they pulled out in 2013

Asda retained their second place at 17% whilst Sainsbury held on at 16% but is suffering the same fall-out from overseas expansion that characterised Tesco under former Chief Executive Phillip Clarke. Tesco thought the best way to maintain turnover profits was overseas so launched their all-new ‘Fresh ’n Easy’ brand in blue collar USA. But they underestimated just how ‘mature’ US consumers are and that car workers in Detroit don’t understand self-service checkouts. It cost Tesco £1.2billion in write-offs when they pulled out in 2013.

Sainsbury’s venture into the unsophisticated retail economy of Egypt went dramatically wrong

Maybe Sainsbury’s new CEO, Mike Coupe should have considered this last year when he took over from long-standing predecessor Justin King. Sainsbury’s venture into the unsophisticated retail economy of Egypt went dramatically wrong when the Egyptian Courts charged JK with some (admittedly very dubious) allegations of embezzlement. Unfortunately Sainsbury had got into bed with a local developer who then went bust which cost them a modest £111million in write-offs after 18 months. But the ex-partner continued to pursue Sainsbury for alleged embezzlement so when Mike took over he travelled to Egypt to appeal against a guilty verdict. He very sensibly caught the return flight before the outcome of his appeal was announced which was just as well because he was sentenced to two years in Cairo Clink in his absence. There’ll be no more Egyptian sightseeing holidays for Mike unless he wants to do it in handcuffs.

This is not what one expects from a FTSE100 Company

The amazing thing is that investors learnt about this from the media, not from a Shareholder announcement. This is not what one expects from a FTSE100 Company and must rank alongside JK’s 2007 denial of Sainsbury colluding with suppliers to rig dairy product prices. Until two months later that is, when he announced a £26million out of court settlement with The Office of Fair Trading to avoid prosecution. Hmmm…….

Taking your eye off your home turf and forgetting what you do well may be a big mistake.

It seems the bigger you get the more confident you are that size alone will enable you to do a better job than the locals, even if you choose the right partner. Taking your eye off your home turf and forgetting what you do well may be a big mistake. Tom Jones (yes, THAT Tom Jones) was top of the bill in Las Vegas for 40 years before being offered a lucrative partnership in a new Hotel development. He’s no fool when it comes to business and turned it down, saying: ‘What do I know about running Hotels – I’m just a boy from the Valleys who can sing a bit’ which was not unusual.

The ‘Big Four’ Supermarkets are now faced with an inquiry by the Competition and Markets Authority

The fallout of all this is going to get worse says Begbies Traynor, the corporate insolvency practitioners. They suggest 1,400 wholesalers face imminent collapse as price wars escalate and buyers cut out the middlemen and deal direct with producers. After all, someone has to pay for the ‘£1 deals’. More worryingly they predict a bleaker picture still when Aldi and Lidl capture up to 20% of market share as predicted. They point out that: ‘The majority of Aldi and Lidl’s packaged stock is own-brand sourced from overseas, so struggling UK suppliers could find themselves squeezed even further’ – particularly if Sterling continues to strengthen whilst the Euro goes South. To add to Sainsbury problems the ‘Big Four’ Supermarkets are now faced with an inquiry by the Competition and Markets Authority (successor to the OFT and Competition Commission). This was triggered by a so-called ‘super complaint’ lodged by ‘Which?’ magazine alleging they systematically mislead shoppers by reducing pack sizes without reducing prices and make seasonal offers where the ‘previous higher price’ only applied out of season etc etc. I can’t help thinking this will only restate the bleeding obvious and result in a few adjustments to the Pricing guidelines and Groceries code of practice.

Mind you, a bit of adjudication in favour of shorter payment periods for suppliers would be welcome. Tell me about it.

Tesco’s plans to close 43 ‘Express’, ‘Home Plus’, ‘Metro’ and ‘Superstores’ by mid-April has been well publicised, as has their proposal to scrap another 49 NEW stores planned for the UK. The Company has also scrapped plans for 13 new stores in Hungary, but it’s not clear whether the sites will be ‘land banked’ as it’s called or sold-off, and if so on what terms.

He seemed oblivious to the relief of independent retailers in Bilston Market Hall and on the High Street and those locals who’ve stared at this derelict site for the last 14 years

The announcements provoked outcry amongst MP’s protesting at the effect on their constituencies. One of the most strident was Pat McFadden MP (Labour, Wolverhampton South East) indignant at Tesco’s decision to scrap development of the former Royal Hospital site in Wolverhampton. He seemed oblivious to the relief of independent retailers in Bilston Market Hall and on the High Street and those locals who’ve stared at this derelict site for the last 14 years. He proclaimed the news from Tesco was a ‘betrayal’ and proved the Company ‘could not be trusted’. No-one can accuse Pat of jumping to conclusions – he’d taken 14 years to work that out. Nor did the news have the earthshaking effect he’d hoped for amongst dispirited locals. No member of the Hungarian National Assembly was available for comment.

Provided your pockets are deep enough there is nothing to prevent you from buying premises ‘just in case’ and very little to prevent you from leaving it derelict thereafter

But Pat’s comments DID highlight a major flaw in the UK town planning system – how all supermarkets (not just Tesco) ‘land bank’ future development sites, then leave them derelict. This practice has been criticised by the Competition Commission as an underhand means of preventing competitors from expanding into their business – which is of course exactly the intention. Provided your pockets are deep enough there is nothing to prevent you from buying premises ‘just in case’ and very little to prevent you from leaving it derelict thereafter. Effective legislation to prevent land banking does not exist so supermarkets and housebuilders continue to buy-up sites as soon as a new Local Plan is released which zones areas for future development. As the Commission has pointed out, if a developer can snap them up quickly and on the cheap – often by an initial payment plus top-up bonus once it is built-out – then that effectively blocks the competition. Between purchase and build-out the planning authority is largely powerless to prevent the site being left derelict and has to tell anyone applying for a similar use: ‘Sorry – there’s another site already allocated for that use’. That’s why draft Local Plans generate so much interest from developers.

There has been talk about forcing developers to relinquish land-banked sites under threat of Compulsory Purchase Order, or forcing them to put the land to ‘beneficial use’ – but who will pay for it?

This problem has not been helped by the Dept. for Communities and Local Government (DCLG’s) shiny new National Planning Policy Framework (NPPF) introduced in 2012. Secretary of State for Communities and Local Government, Eric Pickles MP (Conservative, Brentwood & Ongar) has been widely-criticised for replacing 1500 pages of national planning policy built-up over 40 years with 50 pages devised in 40 months. The new slimline NPPF is accused of being far too pro-development and lacking a means to counter land-banking – frustrating local planning authority efforts to phase development to a rational programme. There has been talk about forcing developers to relinquish land-banked sites under threat of Compulsory Purchase Order, or forcing them to put the land to ‘beneficial use’ – but who will pay for it? Not local government for sure. To compound the problem local planning authorities are under pressure to meet DCLG targets for more homes for our expanding population. Landbanking means green fields are often built-out It will be interesting to see whether Tesco hold onto or sell-off their cancelled development sites. Councillor Roger Lawrence, leader of Wolverhampton City Council, said: ‘The Council has done everything it its power to support Tesco to proceed with their plans, and I and senior council officers will now be seeking urgent discussion with Tesco about how to take forward the development of this key gateway site.’ Well, unless Wolverhampton CC make some outrageously expensive taxpayer-funded concession there’s not a lot they can do to force Tesco into action. And if Tesco do sell-off then you can bet they’ll slap a restrictive covenant on the title deeds to frustrate any competitor from acquiring the site in the future.

A 23% drop in Waitrose operating profits has meant bonuses have been cut for the second consecutive year

Another group which is far from happy are the 94,000 staff who own John Lewis and Waitrose. Traditionally some 45 – 50% of trading profits have been paid-out as bonuses to the ‘partners’ each year but a 23% drop in Waitrose operating profits has meant bonuses have been cut for the second consecutive year, from 15% to 11% of annual salary. This was despite the upmarket grocer increasing like-for-like sales by 1.4% and gaining market share against its rivals. The boss of Waitrose, Mark Price, said the Company is battling against shoppers ‘moving away from a single, weekly out-of-town shop to multiple smaller purchases from convenience stores and online’.

Tesco is trying to rebuild its fraught relationship with suppliers.

Finally, after it’s £260 million false-accounting scandal (booking ‘supplier discounts’ before receipt) Tesco is trying to rebuild its fraught relationship with suppliers. The Company is waving the magic wand of a friendly online Tesco Supplier Network to help 5,000 suppliers communicate with their Buyers and each other – complaints included. Given their rough treatment of suppliers in the past the rumour has it few are likely to let bygones be bygones. The magic wand is seen as a big stick in disguise.

At the risk of sounding London-centric, the changing face of London markets is providing an astonishing example of how good markets successfully adapt to their constraints and circumstances.

Recently, I have been hearing success stories emanating from the East End Chatsworth Road Market in Hackney, London E5 (It used to be Clapton in my day). A traditional street market, the linear High Street includes rows of lock up shops fronted by market stalls, catering for the newly mixed demographic of different ages and ethnicities.

I speak somewhat informatively as from the age of eight, I had to work on my father’s Chatsworth Road stalls every Saturday and during school holidays in what was at the time a largely poor neighbourhood where the most exotic products to be found were Fry’sTurkish Delight bars, more accurately described as FTD – misshapes.

Chatsworth Road was of fundamental importance to the local community, selling everything from live eels to white goods

The market and fronting shops were always exceptionally busy as locals performed their daily shop and I can’t remember  there being any form of supermarket back in the late 60’s and early 70’s within walking or bus journey distance. Chatsworth Road was of fundamental importance to the local community, selling everything from live eels to white goods.

If I am honest, I feel more nostalgic now with fond memories of how life used to be and have forgotten the freezing cold winter days: flashing out at six in the morning and sweeping up at six at night, but life was straight-forward and honest and my parents earned a decent living from the market.

It appeared as though the retail core had been sucked clean out of Hackney

During the 80’s I worked as a civil engineer in London and would occasionally take a nostalgic drive to Chatsworth Road and was shocked by the desertification of the area. It appeared as though the retail core had been sucked clean out of Hackney by the supermarkets: shops were boarded up and to all intents and purposes, the market had disappeared. However, the sun now shines once more over Chatsworth Road as it has learned to provide the good folk of E5 with what they want and cannot find in the big five – multi-ethnic variety, professional service, tremendous food, cafe culture and above all, unadulterated honesty, a theme which transcends the generations.

Chatsworth Road is just one example of successful and organically developed market regeneration

Chatsworth Road is just one example of successful and organically developed market regeneration in London, of which there are many more. The notion of delivering what people want will filter through other British towns and cities, further underpinning the great British Market renaissance.

 

With thanks to I Love Markets for kind permission to use their images in this article.

 

I Love Markets celebrates London’s markets and all of the wonderful things that can be found within them. We believe that to discover the heart of London, you need to discover London’s Markets. No market is the same and we want to help you discover the unique experiences that each one has to offer. Find the latest news, markets and events at www.ilovemarkets.co.uk

Adam Corbally motivation

I was having a weekend away in North Yorkshire last week with my family when I found out that there was a ‘local produce market’ on nearby. Now I love to visit a market anytime and see what is on offer especially whilst on holiday, so off I went to see how other people do things and what was on offer.

Great British markets truly are the original supermarkets

The weather was great, the market was packed and some of the products on offer were nothing short of amazing - best of all the market was on a Saturday and had integrated with the regular traders so you could literally get anything you wanted, proving that Great British markets truly are the original supermarkets!

I looked around to see who was manning the stall and I could see a tall lady sat on a stool with a ’50 Shades of Grey’ covering her face.

One of the first stalls I came to was a real ale stall and I put a great order in with a very knowledgeable local brewer. Next up was an art gallery. Now a lot of people would disagree with me when it comes to art as I truly believe that we are all experts in our right. When it comes to art I think that we all have our own tastes, make our own interpretations and of course, ‘beauty is in the eye of the beholder’. So, as I started to browse I did so with a very open mind and unbiased opinion, not really looking for anything in particular, then I spotted a lovely oil painting of the countryside and lifted it out for a closer look. It really was beautiful and weirdly, seemed very familiar? I looked around to see who was manning the stall and I could see a tall lady sat on a stool with a ’50 Shades of Grey’ hardback book covering her face. I presumed she must be running the stall so I said, “excuse me, are these your paintings?” She lowered her book and replied, “yes” before raising it back up in front of her face! There were no prices in sight and the lady made me literally feel like I was interrupting. So, I walked away and had a look around the other stalls, chatted to traders, soaked up the atmosphere, loving the banter and filling my boots with everything from giant loom band sets for the kids to home-made sausages, spending a good couple of hours enjoying the full shopping experience you can only get on a market.

She still hadn’t mentioned the price which was nowhere to be seen

As I was leaving, I walked back the same way I had come and noticed the lady with the art who had been reading the book was packing away early, so I asked her the question, “quiet day today?” “yes”, she replied, “waste of time really, only sold one, not even took my rent!” I asked her about the landscape picture again and pretty much had to force her into a conversation if I am totally honest. It turned out that she had painted all of the pieces herself and that the one I had liked was of Holm Firth, the home of Last of the Summer Wine and 20 minutes from my home town, although she still hadn’t mentioned the price which was nowhere to be seen! So I asked her, she told me and this master piece now hangs proudly in my kitchen and is probably the best £25 I have ever spent, with a great story behind it.

On her return I was chatting away with customers and had already sold two paintings.

I then asked the trader what her background was and she said she had always worked in admin although was trying to get her dream of being a successful painter off the ground. I asked if she wanted to be a book critic or an artist? She looked confused so I asked her WHY she had bought the book she was reading earlier? She still looked confused although she went on to explain that she saw the book in a book shop, read the summary on the back of the book at which stage the lady in the shop said it was a great read. “THERE YOU GO” I said. Finally, the penny dropped with the lady and after chatting with her I persuaded her to stay a little longer and go and get the brews in whilst I looked after the stall. She was concerned about my knowledge of art as the café was quite far away although I reassured her I would be fine. On her return I was chatting away with customers and had already sold two paintings.

There are no secrets out there, it’s just a case of talking to your customers and letting them know you care!

The lady was so grateful it was unreal and asked “what is your secret?” The truth is, there are no secrets out there, it’s just a case of talking to your customers and letting them know you care! 

Of course there are a lot more tips to being good at sales, but talking to people is crucial and a great start. As I said at the beginning of this column, our markets are the original supermarkets and please, please let’s not forget what makes us better than the supermarkets: having great product knowledge and the ability to communicate with our customers! 

All good relationships are built on great communication. Happy trading.

Keep in touch,

Adam Corbally


 

Adam Corbally is a professional guest speaker, motivational coach, and serial entrepreneur, managing a series of successful businesses and brands in the UK.

Adam’s appearances on a number of T.V. shows has helped make him a well-known public figure.

Adam found his own way in life, learning as he went, quickly carving himself out a serious career as a businessman, he is now in the position to pass on that knowledge.

His fun-loving, approachable nature helped make his early venture an instant hit. Eager to build on his commercial knowledge and skills, Adam sought out business leaders and mentors who could help him develop his knowledge.

This training helped Adam realise that, armed with solid business fundamentals, he could apply his positive approach to other walks of life and enjoy similar success. The growth of his wholesale operation, veg-box delivery service, and property business are testament to this philosophy.

Adam’s unconventional route to commercial success is a popular topic at his professional speaking events, conferences, schools, colleges and universities. With Adam, what you see is what you get. He’s the same infectiously positive, open, and unashamedly outspoken. 

www.adamcorbally.co.uk

@Theadamcorbally