What is this about?
In retrospect, the muddle of Brexit, intended or otherwise, will prove to have been a major potential benefit for those NAMs that have realised the need to think for themselves. They no longer rely upon political leaders and the system to point the way, and cushion them on the downside.
In terms of timing, this has all occurred in unprecedented times, and as we now know, unprecedented means unprecedented…so history provides no guidance…
As the EU negotiations unfolded and unravelled, we have watched with mounting incredulity government experts demonstrating give-away-everything ‘negotiation’, making a dog’s dinner of the entire process, and exhibiting skill levels that would have earned a junior KAM a speedy passage to one of the ‘safer’ back-office jobs, years ago. Whether cause or effect, UK retail has been driven into turmoil, backtracking rapidly from ‘big is beautiful’ in terms of ever-increasing demand, breadth and depth of a 90,000 SKU assortment, and 100,000+ sq. ft. outlets, with market shares to match.
Overnight, the world became smaller, faster, closer, cheaper and more frequent in terms of shopping habits, revealing in a stroke, the long tail in retail – 80% of turnover being produced by 20% of the products – all resulting in large space redundancy by a traditional trade that seemed oblivious of the need for change, and anyway are locked into bricks & mortar palaces…
Meanwhile, those downmarket, common and foreign discounters found a voice that more closely matched new market dynamics and resulted in a steady 10%+ growth in a flatline environment, all at the expense of the expert mults…and everyone ignored the virtual reality of Amazon.
Normally, this degree of market revolution would require and result a complete change in operating management, but pragmatic NAMs know better…
Where is it headed?
Bearing in mind that in order to be able to profit from change, it is necessary to anticipate and react now to future developments. In other words, we must attempt to foresee the ‘inevitable’ progression of current trends and act now in anticipation. Essentially, this means accepting that the mults are never coming back to historic levels of performance in their current form.
For instance, see how a resurgent Tesco is struggling to maintain a 27% share, on diminished profitability, as it resets its assortment back to 40,000 SKUs from their historic 90,000s. As a result, they thereby reduce their sales per sq. ft. and dilute their ability to pay increasing rentals based upon floor area that cannot be reduced in line with demand. In addition, given that fulfilment costs make online less profitable than bricks & mortar business, the more Tesco grows online, the more it will dilute its bottom line.
The discounters are here to stay, have a long way to go, in a market that still has not hit bottom in terms of reduced demand by increasingly savvy and less wasteful consumers, all insisting upon demonstrable value for money, and equipped with hand-held devices that validate their choices, and inform their friends…
How does it affect me?
The impact on NAM jobs can already be seen in the consolidation of supply and retail organisations as companies merge and take or are taken over in attempts to staunch the haemorrhaging of businesses caused by current and future changes in the market.
As with measurement of profitability by store in retail, so too every supplier-side business unit will come under the financial microscope and will be compared with all other pieces that make up the corporate entity. The customer business unit representing from 5% of company turnover (and profit) will attract more than its fair share of this scrutiny. It follows that the NAM, as business unit manager, will own the glory, or carry the can, depending upon customer performance.
In terms of the day-job, NAMs have to be capable of adapting to new market realities, discovering all the entrepreneurial skills that can optimise business basics. In other words, working for yourself, thinking for yourself, realising the need, and finding the courage to revert to basic principles in managing your major customer.
What to do about it?
This means developing all the skills of a CEO, applied to the management of a customer business unit. It means being able to place the customer in a global, regional and local market context, factoring in the political and economic environment, and then using finance to measure where the customer is now, where it is heading, at what level of support and risk. And above all, being able to influence and manage expectations, realistically.
Essentially on your own, thinking for yourself, based upon first principles of business, as if it were your own business, achieving via persuasion, in one of the fastest developer of capabilities in business…
