Jun 22, 2015 | Branding, Customers, Marketing, retail, Small business
retail crash test dummies abound
Watching the rather sloppy way Grant O’Brien was moved on by Woolworths last week, I got to thinking about all the converging things happening that will impact the FMCG landscape over the next few years. A superficial look would suggest that things are pretty set, and change that happens will be incremental, but a closer look would suggest there is a lot of paddling going on under the surface.
These are the things I see:
Coles resurgent.
In the 40 years I have been around, I have seen the pendulum swing a couple of times, and it looks like Westfarmers have pulled off another mighty swing with Coles. Across pretty much any parameter you choose to look at, they are catching or have caught Woolworths, and remain on the improve.
Woolworths momentum.
In this high fixed cost retailing game, momentum is a huge contributor, not just to the financial outcomes, but to the day to day operations and shop floor “feel”. The momentum seems to be all against Woolies now, after enjoying the benefits for a long period. Their failure to drain cash from Coles by putting pressure on Bunnings with Masters has not just crunched their financial results, but it seems to have knocked the wind out of their confidence at the sales face across all their formats except perhaps Dan Murphy’s, which seems to be bucking the trend. Woolworths do not have a player in the office supplies game, which must be hurting them, further draining competitive resources.
Discounters are winning.
Aldi is doing really well, opening stores and taking share hand over fist. I have not seen the figures that would substantiate the notion that woolies are losing more to Aldi than Coles, but it would not surprise me at all. On top of Aldi’s blitzkrieg, it seems that their German competitor Lidl is coming. Lidl is a potent long term competitor with substantial experience across many markets.
Costco is seemingly carving out a niche, although not as aggressively as was first forecast, but the crowds in the Costco store at Auburn in Sydney would suggest they are not going away any time soon.
The $A.
After a period well above US $ par, the Aussie is back to more like its long term position. However, the carnage wrought by those few years on the mid sized supplier base cannot be turned around. Retailers by going offshore when they could and leaving their local supplier base to contract will have a continuing impact, as now the dollar is sensible again, there are few suppliers left with the wherewithal to be reliable national suppliers. It is also clear that those who have survived are a pretty resilient bunch, and are disinclined to replace their eggs back in a basket they cannot control.
Housebrands.
Coupled with the carnage of the high $A, the retailers strategic decision to rationalise proprietary SKU’s and replace them with tiers of housebrands to capture the proprietary margin has further led to the rout of the mid sized suppliers. Those left who might be inclined to chance their arm are generally not large enough, and lack the sophistication to manage a business relationship with a major retailer, but some will probably go broke trying.
Margins.
Many FMCG suppliers lose money on most sales to supermarkets. The negotiating power of the retailers, resulting trading terms and promotional guarantees that enable retailers to never pay beyond the discounted price, while restraining top line price increases to compensate has led to the situation where only a madman or the financially illiterate would stake their house on success in FMCG.
Innovation avoidance.
Markets evolve with innovation, but the barriers against success are so large that risk avoidance is the priority. Suppliers trumpet a new pack colour scheme as an “innovation”, and retailers get serious by asking the few second tier suppliers left to copy the proprietary market leader for yet another housebrand “innovation” . Retailers think they are good at innovation, but the experience from around the world as well as locally is to the contrary.
Promotion as marketing.
Continual price promotion only erodes the value of a brand, but brand building is a long term proposition, while staying on shelf is an immediate priority. Guess which wins, and we are rapidly approaching a brandless future beyond the few global mega brands that have the grunt to stay on shelf while spending with consumers to brand-build. Marketing budgets have been consumed by promotion spend. We have a generation of marketing people who have never experienced or even seen real marketing in FMCG.
Wholesale death.
Metcash as pretty much the last man standing is being squeezed by overheads and competing access to consumers outside the major chain supermarkets. Their recent financial results demonstrate the challenge of being the middleman in an environment where it is increasingly easy, and there is increasing motivation to go around the middleman. They seem to be trying with IGA, and with some success, but the local positioning of IGA mitigates against the mass merchandise wholesale business model they operate. Nevertheless, I do see IIGA as a potential bright spot for smaller suppliers who are unwilling or unable to service Woolies and Coles.
Opportunity?
Amongst the doom and gloom, I see several bright points of opportunity.
- While the traditional marketing strategies no longer work, it remain a fact that it is consumers who actually put their hands in their pockets to buy something. Retailers are just a choke point in the system exercising control, and the emergence of digital marketing offers small businesses the opportunity to engage and motivate their consumers to ignore the predations of retailers and express their purchase preferences with their money.
- The shortage of retailer suppliers may lead to a loosening of the noose around those remaining, and open opportunities for them to focus on a niche to deliver a product offer that the retailers do want, but that is hard to copy effectively. Combined with digital marketing, there are opportunities to engage with consumers in ways not dominated by price promotion and generic substitution.
- Local suppliers with a following in a region do have an opportunity to build a business. Coles have been playing with this for a while, and it does work, although the model of local supply does not sit very comfortably alongside the national supplier mentality that exists. For retailers to really get behind this opportunity to nurture “local” they will have to wear an increase in transaction costs, as well as make exceptions to their trading patterns. The big blokes may not, but there are real opportunities in the independents and non chain retail segments.
- Niche retailing will boom, and suppliers have the opportunity to participate. Harris Farm in Sydney continues to rise and rise, and even Thomas Dux, owned by Woolworths but operated largely separately are harbingers of the future. Consumers are increasingly engaged in their retail food shopping, they want their concerns and individual tastes to be met, and that cannot happen in a mass retail outlet focussing on discounting and housebrands.
I am sure there are thoughts I have missed, and would welcome feedback on them as well as comment on those above.
Jun 18, 2015 | Customers, Leadership, Operations, Small business
courtesy www.myob.com.au
Most businesses want to grow, even just a bit, it is not only in the DNA, but some scale makes life in most areas easier. So how do small businesses go about it?
4 basic strategies.
1. Empower the team.
Make every front line person as well as the office realise that their input and customer service is essential. It can be done, and it works. Bunnings is king of the hardware space, delivering great outcomes for Coles, whereas Masters has been a disaster for Woolworths, yesterday claiming the scalp of the MD Grant O’Brien. I shop at Bunnings a lot, drives me nuts, but at least their people their have product knowledge useful to a casual renovator, share it with you and smile. My two attempts at Masters have been different, and there won’t be a third. Whilst these are both large businesses, it is no different for a small one. Make everyone aware of the 8 moments of truth, and committed to improving them on each interaction that occurs.
2. Critical processes need to be documented.
This is not just to pass the various audits haunting us, but so that employees and everyone else knows what is important and what to do. Documentation makes for robust repeatable processes. The challenge becomes one of continuous improvement, as once a process is documented, it sometimes takes on a persona as being “done”. Within continuous improvement lurks the obvious but often overlooked fact that to improve you first need a stable, measured processes as the starting point for improvement. Documentation provides that starting point.
3. Automate repetitive tasks.
If the same thing is done regularly, in the same way, automate it. Then you get accuracy, reliability and cost reductions, and who does not want those. Often there is a cost up front, but taken in the context of the potential savings and productivity improvements they are usually small. The most common automation target is customer service. It can be very successful at stripping out costs, but go too far and customers go somewhere else. A “learning” FAQ function makes great sense for many, and make sure you do not lose the opportunity for the personal touch.
4. Make everything searchable.
Documents, emails, social media posts, everything that gets done should be in a central repository searchable by anyone when it is needed. The waste of having documents in silos is enormous, unnecessary and just plain stupid in this day and age.
The technology is now such that it is possible for small businesses to be significant global players in a narrow and deep niche should that be their objective, but even for the local businesses without those grand aspirations, scaling operations is a key consideration in the quest to maximise that other most important resource, your time.
Jun 12, 2015 | Change, Customers, Marketing, Strategy
apologies to Scott Brinker, www.chiefmartec.com
Faced with so much choice of technology and platform options to reach and engage consumers, many marketers are paralysed. On the other hand, many are tempted to be all things to all people, simply because the tools are there to reach them, and they hope that they strike a hot prospect somewhere.
“It’s a numbers game” dominates many conversations, and it seems limiting your options is silly.
However, the customer has extraordinarily well developed bullshit meters to filter out the digital noise, so unless you are very specific with the offer, it will not pass the filter, it will not be seen.
It seems to me there is way too little being done to consider the people we are trying to reach. It is ironic that the tools have given us access to their lives, but often we choose to ignore the individual and chase the usually poorly defined “triibe”. A great description coined by Seth Godin, now misused by many.
We need to stop obsessing about the tools and ask ourselves three basic questions:
What is it we are trying to do?,
Why should anyone care?
How do we use these tools now available to make a difference?.
It seems to me there are four strategies
- Establish your “Why“. Simon Sinek in his seminal TED talk compellingly makes the argument that this is the core of marketing, to quote, “people do not get what you do, they get why you do it”.
- Build relationships. This sounds a bit yukkie, but when done with a genuine desire to help, and add value to others, it delivers to both parties. The twin brothers of C21 marketing, “Social media marketing” and “content marketing” have between them led us astray. Everyone is working feverishly at the tools trying to be different, the face in the crowd that stands out, but mostly failing, there are just too many faces, and too few asking the follow up question of “what am I going to do with them when I have their attention”. For the faces, they are attracted from time to time and let down somehow, and have become even more reluctant to give anything easily.
- Bridge the gap between what you say, and the customer experience. Too many marketers are there for the money, not for the joy of delivering on the “why”, and do not really care about the challenge of getting their customers to say “that was amazing?” Marketing is emerging as the difference between success and failure in this commoditised and transparent world, so you better get some of the rare good stuff.
- Choose your tools based on the behavior of the individual consumer. There are so many tools, and combinations of tools available, that making the choices becomes a task of considerable proportion. Choosing the right combination can be the difference, so make sure you choose on the basis of the best way to match your messages to the behavior of the consumer, not by what is available. No good having a hammer when you need a screwdriver. When you are building a deck at the back of the house, the choice is obvious, but when building a bridge to the consumer, the discriminating factor is their behavior in any given set of circumstances, and this is really hard to predict, you really need to understand them in great detail. There is too much technology, it has become the end, rather than the means.
When you are stuck, give me a call.
May 21, 2015 | Customers, Sales
Making an offer they cannot refuse is the ultimate selling outcome, notwithstanding the limitations of the law, and common decency.
So how do you make a Godfather offer?
- Know your customer intimately
- Know their business intimately
- Know their pain-points like they were your own
- Create an offer that removes the pain-points for them
- Make the payoff compelling
- Make the payoff unique
- Present the offer like your life depended on it, with passion, conviction, and from the receivers perspective.
- Create tension in the decision by ensuring there is a decision time after which the offer is off the table.
This works pretty much all the time.
When you are able to the identify components of a problem a potential customer has, for which you have a solution that is both valuable to them, and unique, and you clearly understand all the challenges in their situation, why would they not buy from you?
May 18, 2015 | Change, Customers, Sales
mindset switch
Access to information, the tools to make up our own minds has not just changed our behaviour in the way the sales process works, it has changed our mindset.
In a fundamental way.
We believe information we source ourselves, and distrust anything we are told.
We filter the available information and make up our own minds about the bits we will accept, and blend into our version of the truth.
The power to say no” has never been stronger because there are a myriad of options available to us to get the information ourselves.
I work from a home office, and usually do not answer the home phone, as most of the time it is an unwanted cold sales call, and those who I need to be able to contact me almost always do it via the mobile or email.
However, last week I did answer the phone, and yes it was a sales call, but a pretty good one. A very nice Aussie lady, so her first language was English, rang and politely inquired if she could take a moment to speak about how her insurance company could save me a heap of money.
As it happens, I had been considering just that proposition, I am over 60, work from home, but still pay full whack contents insurance, so I had concluded that I should save some money by changing, or at least negotiating rather than just paying the auto premium.
So what happens when the nice lady rings, I surprise even myself given I had concluded that I should change and said “No thanks”.
It was not her, she did a good job, unlike most cold phone sales calls.
It was not that the timing was wrong, I had decided to do the research and take some action.
It was my mindset.
Being given information on a plate by someone who I saw as having a vested interest was automatically rejected.
Yes, I understood she could help, and that it was great timing, but the opportunity was still rejected almost without thought.
Imagine how hard it is to make a sale when all the stars are not aligned, when you cannot even get past the front door when they are!
Selling used to be a staged process with information delivered by someone who had the access you did not have, but needed to make a purchase decision.
No more.
The process has been completely disrupted and reversed, all the power is with the buyer, and if you try and sell them, even the if tools you use smell of you trying to sell them, you lose because the automatic response now is “No”
Think about it the next time you set about motivating the sales force at the Friday rev up, as you will probably just be wasting everyone’s time if you do not recognise and accommodate the mindset change that has occurred in the last decade.
May 15, 2015 | Branding, Customers, Innovation, Marketing
innovation comes from dot joining
Before 3M came out with the now ubiquitous little yellow pad of semi stuck sheets, nobody realised they needed them.
There was no clamour for sticky note papers to use as messages, place-holders, and the thousand other uses we have found for them, no market research pointed at the opportunity.
Someone connected the unconnected dots.
The story goes that there was a failed glue experiment in the 3M lab archives. One of the product lines of 3M is glue, sticky stuff used as a joining agent with uses from the home to building sites and industrial applications. Researcher Spencer Silver was seeking a super strong adhesive, the line of experiments was deemed a failure, it was not glue, it did not stick, although it seemed to be re-useable, the stickiness was not strong. It was however, long lived. One of 3M’s employees who was also the member of a local church congregation choir, frustrated that his placeholders kept dropping out of his hymn book made the connection, and a product was born.
Point is the research had been done, there was a solution in the archives in search of a problem.
The challenging task for innovators and marketers is to put ourselves in the position where we can connect the solution with the problem.
That does not happen in the office, it happens where there are conversations happening, often random conversations, between people with vaguely connected networks and ideas.
The science of networking indicates we get more from those we know vaguely than from our very close peers.
Why?
Because those close to us are typically the same as us, similar views, experiences and attitudes, exposed to the same sorts of stimuli, that is why they are close to us.
The revelations, the connection of the unconnected dots usually comes from left field those who we know, but not well, who circulate in different groups to us, have different knowledge, networks and interests to us.
Go talk to them, network, engage, step out of your comfort zone, and with time, curiosity, and yes, lady luck does play a role, you might find your Post-it-note. You will almost certainly not find it if the only place you look is inside your own patch.
