Empty shelves = no sales = no profit
Some things you remember, but other things are seared into the memory. Thinking back when I was a Trading Manager at Argos (Sainsbury’s) or heading up Own Label at Tesco, the biggest cardinal sin you could commit by a country mile was to rack up out of stocks in your category.
If your category availability was even a smidgen under the target (about 98% or 99% depending on the prevailing retail fashions at the time), there would be a big internal inquest. Everyone in the trading team would have their view on why the target was missed. There would be reports to write to the Category Director and all the rest of it. You’d then be mandated to hit the phones to bend the ear of the culprits, muttering scripted comments about ‘evaluating their position in the supply base’ whilst encouraging the higher performing suppliers with the promise of NPD listings.
Now look at the state of the trade. I have spoken to many MDs, CEOs and Sales/Marketing Directors this month and most of the comments on the government handling of the driver shortage and the supermarkets reactions are unprintable. What a mess. Brexit. National Insurance. Driver training.
What is clear is that the power has swung back towards manufacturers. Raw materials, labour, HGV and freight costs have all moved significantly upwards and suppliers are taking substantial cost increases to buyers. With reduced product volumes and lorries available, suppliers are unsurprisingly prioritising customers who are accepting the price increases over those that don’t.
So, in this context, the Morrisons half year financial forecast made me smile. They predict that in the second half of this year that not only will their ‘lost’ profit will be significantly lower, but they will mitigate potential cost increases in the supply chain. Well, I know Morrisons are ‘in play’ and subject to a bidding war, so these are exceptional times, but really? It’s not hard to see they are likely to be faced with a choice from suppliers to either take price increases or miss out on stock. Morrisons will want good availability to fuel a powerful purchase valuation from potential buyers, so the bet amongst the trade is on them accepting price increases to get their hands on stock.
The current crisis is partly clouding everything else that is happening right now. So, the demise of the ‘big four’ dominance of the market, ultra-rapid delivery retailers breaking the mould, brands selling direct to the consumer, platforms like Amazon and Ocado making waves, the move away from the big monthly shop and huge innovation moves towards plant based, fermentables, natural and organic are all playing out in store.
But once the dust settles the altered shape of the retail trade will be clearer and I think we could be entering the age of the smaller, more customer centric retailer (most of these new entrants will be online) rather than the one-size-fits-all grocer. But let’s get through the current issues first and then we can start to see what we are looking at.
One way of cutting through all this noise is to cut through and collect shopper data digitally – it’s a really interesting research technique that we are being asked for. Take a look for yourself by reading our blog post Digitalising Data Collection – The Methods Of The Moment.
On a lighter note, despite the weather it’s been a great August for the team. I shooed as many of them out the door as possible to enjoy their well deserved holidays and we’ve redecorated both floors of the office. We’ve planted out the back of the office and created a new meeting area and we are almost there with our BCORP accreditation, so very excited about that. Check out our August Sustainability Report to see what we have been up to.
You are spoiled for choice this month on the FMCG Insider Podcast, we have two great episodes for you. First up, I had a great conversation Milena Prinzi, she is a big name in the US haircare category and runs the largest hair magazine and blog in the USA. We talked cosmetics, accessories, wellness, lockdown hair and the intersection between health and hair. Listen to the Rocking The Hair Care Category With Milena Prinzi today.
Over the summer, I also spoke to Cafedirect’s MD, John Steel. We talk about social enterprise, the coffee market, the latest coffee trends, lessons from his long career and the future for the category. Coffee has always been a category that’s interested me for business and pleasure and I really enjoyed picking through the challenges the category faces with John in our latest podcast The Future of Coffee with John Steel.