The retail revolution

 

Napoleon once dismissed England as a nation of shop keepers, fast forward to today and he would observe we are a nation of online shoppers.

 

Accompanying the rise of online shopping retail chains do not need as many stores as they did in the past, a trend that is accelerating rapidly.

 

Customers are becoming ever savvier in looking for value for money, employment is tight and also we've seen a massive growth in the supermarkets in terms of non-food retail.

 

Now further adding to the problems of the “bricks and mortar retailers” is the rise of “showrooming.”

 

Essentially this is customers going into a shop to browse but in reality an exercise to check out goods and then search on line for a more competitive deal.

 

 

The growth of online shopping is a juggernaut now accounting for 15% of retail sales - and forecast to be at least 30% by 2020.

 

This Christmas day is forecast to set a record for online shopping. The industry association for online retailers estimate that, a record £636m will be spent on Christmas Day this year, a 36 per cent increase on 2013.

 

Those retailers who fail to exploit all areas of multi channel marketing whilst finding themselves saddled with the burgeoning costs of maintaining retail outlets will continue to be squeezed.

Morale is the lynchpin of efficiency

 

 

Figures from the Office of National Statistics show that over 1.4 million UK workers are currently on zero-hours contracts.

 

Whilst employers cite this as a tool to enable flexibility in the workplace there is no doubt that this particular “employment contract” does have a negative impact on the morale of the workforce.

 

This seems not to have percolated into the mainstream of management thinking.

All too often the attitude of the management seems to be that the current backdrop will of itself be the motivating factor.

 

Obviously as companies struggle with their profitability, it is not a question of throwing money at the workforce but what is required is more of an attitudinal change.

 

Bringing the staff on board may well be as simple as communicating the company’s situation in a clear and concise manner rather than a throwback to the old Victorian style of management i.e. “if you don’t like it there are plenty of others ready to take the job”.

 

There is no better motivation than a clearly thought through strategy which is well communicated and executed.

 

It is no coincidence that the companies who emerge stronger from challenging times have been able to do so largely as a result of the efforts of a committed and diligent workforce.

 

 

A false sense of well being

Until such times that they are directly faced with a problem it is the nature of most companies to assume that all is well with their systems and operating procedures.

 

The reality is that these are the companies that are most likely to be blindsided.

 

Constant monitoring of counter party risk is the order of the day combined with disciplined inventory control.

It can prove costly to rely on past performance as a guide to reliability in the future. Be alert to tell-tale signs such as unusual ordering patterns, delays in payments etc.

 

In truth very few businesses fail overnight and there are usually enough warning signals which should enable a supplier to reduce its risk.

Current market conditions will continue to test but undoubtedly there will also be opportunities for those placed to take advantage of less efficiently organised companies.

 

Those companies who are alive to risks are far less likely to fail compared to those who bury their heads in the sand.

 

Caught in a vice

 

In a market where prices are squeezed to the absolute and in order to protect margins suspect practices and questionable ethics will inevitably come to the fore.

 

The current economic reality will continue to underpin the demand for cheap food but in satisfying this demand there is a price to pay.

 

The latest example was the furore caused by Premier Foods attempt to receive cash-payments from their suppliers the so called “pay to stay” policy. Such was the widespread criticism that Premier was forced to make a “u turn” but this was not the first company to implement a levy on its suppliers or else threaten to withdraw the business.

 

The combined effect of the recession, the growth in online retailing and the increased market share of discounters such as LIDL and ALDI has shaken the likes of Tesco, Sainsbury and Morrison’s.

 

For supermarkets focussing on market share food prices must be kept down, at all costs. But in the case of farming it is such a long cycle and there is little account taken of retrospective costs for the producer.

 

Looking back 25 years ago, British people probably spent about 22% of their disposable income on food. Now the average household spend on food is between 4 and 8%, so it has actually become cheaper.

 

The reality is that the 'bog-offs' - the buy-one-get-one-free deals are not actually sponsored by supermarkets. They are paid for by the producer who has to agree to them under tight terms and conditions.

 

Producers are under no illusion that in the desperate fight for market share they will be faced with ever squeezed margins in the months ahead.

 

 

Playing the game

 

The cornerstone in any business relationship is the question of trust.

 

The ultimate demonstration of trust and good faith is when a supplier delivers goods to a customer on deferred payment terms.

 

It therefore is incumbent on the buyer that they acknowledge this act of trust and observe the agreed payment terms.

 

With the current pressures it is easy to understand the temptation of “pinching” a few days extra credit but this type of behaviour soon begins to pall.

 

Once a supplier feels that their buyer is taking undue advantage the relationship is damaged sometimes irreparably.

 

For any relationship to be sustained there has to be mutual benefit.

 

When a buyer gains a reputation for persistently crossing the line the merit in maintaining the account is questionable.

 

Juggling jelly

Managing any business in today’s environment is a complex affair – it has been likened to spinning plates whilst juggling jelly.

 

Particularly for the owners of SME’s it has never been harder to keep track of the various elements which are buffeting the business.

 

Now might be an appropriate time to run a check over those areas of the business most likely to cause problems in the coming months. 

 

It is a self-evident truth that many a crisis could have been averted by timely intervention. 

 

This is where an independent appraisal can identify areas of potential concern but more importantly the ways and means by which to address them. 

 

The question that needs to be answered initially is – for how long can I keep all those plates spinning?

 

There is nothing new, only different

 

It is rare in life either privately or in a commercial environment to come across an entirely unique or new situation.

The financial crisis which last faced the world markets and business has parallels with previous financial crises such as the 18th century South Sea Bubble, the Victorian Banking crisis of Overend & Gurney, the Great Depression which followed the 1929 Wall St Crash, and the Dot Com Crash.

 

In all of these episodes the common denominators were reckless pursuit of profit whilst fundamentals were ignored, the so called “get rich quick” school of business.

Following each of these debacles there was a collective reigning in and return to the principles of sound business.

However memories are short and it is not long before the blurring starts again and risky practices again become more and more the norm.

Complacency has resulted in the demise of numerous organisations.

As George Santayana commented “those who cannot remember the past are condemned to repeat it”.