With all attention focused on the structural changes occurring in UK retail, in particular the growth of the discounters and Waitrose at the expense of the Big 4, in a flat-line market, very little attention is being paid to the most obvious of knock-on implications, the need for some adjustment in how we manage this new mix of retail routes to consumer…
At current rates of large space redundancy, the economics of selling off ‘spare’ space – at a rate that forces buyers of the property to achieve sales intensities of £1,000/sq. ft.+ to justify the investment, the resulting property lock-in prevents major retailers from scaling down to the smaller, closer convenience outlets demanded by consumers shopping more often in smaller quantities.
This has to result in a gradual loss of market share from Kantar’s current levels of 73.5% for the Big 4, to a combination of the discounters, Waitrose, online and emerging formats. Incidentally, even if the Big 4 retain their fair share of online growth, online success does little or nothing to address their bricks & mortar surplus issues…
Just suppose that this slide is eventually halted at 50% share of the UK grocery market, leaving the four major retailers operating on ROCE levels that provide an adequate reward for risk, and maintain acceptable share prices. If in doubt, think Tesco cull and appropriate property divestment at any price becoming a route to viability and a settling point for the UK’s largest grocers….
The impact on the NAM role
With a 30% reduction in sales to the Big 4, this has to mean equivalent reductions in NAM numbers, with the required skill-set changing from optimising growth per se, to growing at the expense of the other members of the Big 4 i.e. helping to define and refine a major customer’s genuine competitive-edge vs. other players, and using that advantage to grow as part of a continuous working relationship. They will still be prestigious accounts in NAM terms, but will require strong but delicate handling, and 100% zero-defect service levels, more than ever before.
Within this intensively-competitive, high-stakes environment, the emphasis will be on quality improvement and cost reduction, literally making every penny count. In an era where even the short term is unpredictable, the Big 4 NAM will be expected to forecast demand, and optimise returns on resources in the medium to long term. The NAM will also need to justify trade investment budgets that can stand comparison with sums allocated to equally important major customers, given that any growth will be at the expense of colleagues managing the other three players.
Managing Waitrose will require similar skills, with the advantage of being in charge of a growing customer charging quality prices.
Meanwhile, Aldi and Lidl will require discontinuous one-off management to fit with their ad hoc, in-out business model in relation to branded promotions. This will require consummate entrepreneurial skills on the part of the NAM in order to optimise the few brand-promo opportunities, given that bulk of the core business is in surrogate labels. At the same time, their continuing growth will mean additional NAMs will be added to the team, tasked with ensuring error-free fulfilment of the one-off deals, and possibly fending off criticism from marketing and sales colleagues complaining about the distorting effects of the SKU surges via Aldi and Lidl promotions…
NAMs in charge of the pound shops will require yet different skills in that what started out as sample-packs have now morphed into mainstream sales SKUs, carrying the same overheads as regular packs. As such, and in the absence of inflationary acceleration of a move to £2 retailing, the emphasis will be on ensuring that any pack innovations will be fully costed to deliver adequate profitability in smaller sizes. At the same time, the NAM will be expected to handle sell-offs of redundant stock in the same channel, whilst attempting to prevent leakage into non pound shop channels…
Meanwhile, managing online will require a whole new breed of NAMs. With Amazon requiring bespoke management that will facilitate its growth at the expense of all other players, the emphasis will be on optimising the full potential of this No.1 player, while encouraging other online customers to adopt Amazon KPIs in terms of ordering, delivery and returns management, just to keep pace….knowing full well that Amazon will probably end up handling up to 50% of all products sold for folding money and its electronic equivalent.
Welcome to the future of UK retail…
