More Than a Smart Bull-Market NAM?
By Brian Moore, Global Retail Consultant and CEO of EMR-NAMNEWS

It can seem that anyone can succeed in a bull-market, although in practice it often appeared to be the other guy, over the past few years… The downturn has already produced casualties, and it is unrealistic to believe that the next three years will show any significant improvement.

However, while the experts are splitting hairs on definitions, pragmatic NAMs view ‘recession’ as a major opportunity for business development, applying real business account management skills, rather than regarding the downturn as an excuse to run for cover… In effect recession changes the shape of the ball-park and relative importance of the players, as the pitch becomes smaller, leaving fewer places to hide. This has got to represent opportunity...

As the economy turns downwards, the supplier-base becomes destabilised as a reflection of the different risk-profiles of suppliers. In other words, depending upon whether they are risk-averse, risk-neutral or risk-seeking, suppliers will react differently to downward change in the market. This will leave room for risk-seekers to gain more than their ‘fair share’ of diminishing demand at the expense of those who are risk-neutral. Obviously, even in good times there is very little space available for risk-averse suppliers...

Shoppers’ demand-patterns change, with brands and own-label changing in their relative appeal. As a result the balance of appeal changes significantly, resulting in new opportunities for those NAMs sufficiently flexible to spot and respond to new demands by shoppers. In addition, the balance of appeal of different retailers and formats alter, again presenting opportunities to the NAM not awaiting a return to normal.

New patterns emerge in the research, but obviously in retrospect, thus requiring real imagination to pitch the trend forward and use financial skills to scope out and re-assemble the offer-package in anticipation of the change. Even more so within the customer. Recessionary pressures can cause fundamental change even faster in retail. In other words, the relative speed of reaction of the retail business model means that whilst a supplier’s new product can take nine months from the initial creative spark to achieving presence on shelf, in the retail business model a buyer can accept a new product at 0900, and by 1600 on the same day be in a position to delist the item, or double the order.

This speed in demonstrating success or failure, coupled with the ability to calculate and demonstrate the financial impact, can help the innovative NAM to identify, anticipate and react faster to new opportunities than competitors awaiting a return to a more manageable upturn-environment, thereby gaining from the many advantages of recession.

Mapping out the downside in financial terms allows a proactive NAM to explore and face up to a worst-case scenario, generate contingency plans, but more importantly, ‘park’ problems in order to focus upon optimising probable output. While others are awaiting an upturn-led recovery, or obsessively cutting costs in a retrospective approach to maintaining profitability, the real gain lies in allowing a downturn in the market to provide an opportunity to re-evaluate entire strategies, from an entirely new perspective.

Money becomes even more of a key driver. The ability to measure and interpret financial performance becomes paramount, as it is then necessary to make true like-with-like comparisons between different supplier-competitors and retail customers. Being able to cost out and demonstrate the financial impact of a brand upon a customer’s business, relative to other suppliers sets a financially skilled NAM apart from less numerate players…

As money becomes tight, so the relative values of different business models become apparent. For instance a £1,000 investment in the trade for a supplier making a net profit of 10% requires incremental sales of £10k in order to cover its cost, whilst for a customer making 5% net profit, that same £1k represents incremental sales of £20k in terms of value. Even if a competitor supplier has the advantage of a margin of 15%, the ability to open a gap and use the technique better than the competing NAM, sets the financially-skilled NAM apart.

In fact, as the downturn bottoms out, NAMs’ recession-based skills become even more valuable and helps them become even smarter, as the inevitable upturn develops… 

Date article published: July 2008

For KamTips on 'Spotting and Reacting to the Warning Signs in Recession…' see Namnews – July 2008