Tag Archives: retail strategy

TGINF- Thank God Its Not (Black) Friday

We should probably  all be grateful that Black Friday is over and done with for another year. But what have we learnt from the biggest shopping day of 2017? 

There’s nothing quite like the cold panic of a missed opportunity. Particularly if said opportunity comes in the form of a heavily discounted HD television, bargain flights to Majorca in  mid-January (who wouldn’t?!) or a half price sofa-bed (ideal if you can carry it out of the store mid-customer stampede).

Media hype surrounding “Black Friday”, which slowly seems to be evolving into “Black Week” and surely soon to be “Black Month”, increases year on year.  Retailers face intense and  increasing pressure to slash prices and offer the biggest and best best deals to entice Christmas shoppers and out-perform their competitors. As such, the fuss and excitement leading up to the biggest shopping day of the calendar year is palpable. The world’s consumers anticipate great things.

But does the propaganda live up to the reality? And what are the downsides of events like this for our supply chains, our procurement organisations and SMEs?

Black Friday 2017: The stats examined

Spend: It’s hard to argue against the importance of Black Friday to the economy. According to the National Retail Federation’s 2015 report,  up to 30 percent of a retailer’s annual sales occur between Black Friday and Christmas. Last year 101.7 million Americans braved the crowds, an increase of 37 per cent from the previous year and spent $655.8 billion over the four day weekend. This year, that figure is expected to have increased to a whopping $682.0 billion, and that’s just the U.S.!

Savings: The debate rages on over the true value, to the consumer, of Black Friday. Are you really nabbing a bargain? Aside from the obvious fact that many consumers wind up purchasing un-needed items, statistics show that many items, as much as six out of ten, are actually cheaper at other times throughout the year.

An Underwhelming start to UK’s Black Friday: Some members of the British public were seemingly raging on Twitter on Friday morning over the perceived anticlimax of Black Friday.

Others meanwhile, poked fun at the distinct lack of chaos in stores across the UK, noting the ever-present, ever-respected British culture of courteous queuing!

 

Debt: According to a 2016 survey by TD Bank, 25 per cent of Americans will take three months to pay of the debt racked up on  Black Friday and the remainder of the holiday season

South Africa: South Africa has been hailed this year as the nation most devoted to Black Friday.  Last year “South Africans made 226 per cent more purchases [than at any other time of year] on [Picodi]‚ more than twice as large a percentage increase as that of any other country.” And the frenzy doesn’t seem to have lessened this year with media reporting the mayhem inside shopping centres.

The demand of black Friday on our supply chains

As the BBC pointed out, whether they like it or loathe it, “most retailers on – and offline – will find it difficult not to join in” with Black Friday. If they don’t partake they’ll lose significant custom, which places enormous pressure on smaller, or struggling, organisations with tighter margins and less turnover.

However YouGov research commissioned by Amazon found that nearly 1 in 4 UK SME retailers intended to participate in Black Friday 2017 and 82 per cent of those participating are expecting to sell more stock on Black Friday than on an average day. The key to success for these SMEs is getting the pricing and forecasting right.

The anticipated frenzy also makes it difficult for organisations to accurately forecast volume of stock. According to data collected by Love the Sales, there was an unprecedented 43 per cent increase in the volume of items on sale in October this year compared to last year. Buy too little from suppliers, and  they’ll run out of stock, buy too much and face having to do further discounting in the new year to shift products.

In these circumstances, buyers must ensure their supply chains are strong enough to cope with the increased demand for products and, most importantly, that their suppliers meet their compliance requirements.

According to courier insurer Staveley Head, more than 82,000 lorries will be on the road to deliver on Black Friday, with Royal Mail bringing in an additional 6,800 vans just for the peak period.

Edie.net urged organisations to run traceability checks to identify any exploitative labour practices within their supply chain and recommended  using the Internet of Things to track supply chain processes and spot any unusual patterns of behaviour.

In other procurement news this week…

Apple’s Illegal Labour

  • Apple’s main supplier in Asia has been employing students illegally working overtime to assemble the iPhone X, as it struggles to catch up with demand after production delays
  • 3,000 students from Zhengzhou Urban Rail Transit School were sent in September to work at the local facility run by Taiwan-based Apple supplier Hon Hai Precision Industry, better known as Foxconn
  • They were told that a three-month stint at the factory was required “work experience” that they had to complete in order to graduate

Read more at Financial Times

50 per cent of procurement pros are unhappy with salaries

  • The latest procurement salary guide by recruiters Hays found 56 per cent of procurement employees reported a high level of salary dissatisfaction, and almost a quarter of those surveyed stated they intended to leave their current job because it lacks future opportunities
  • The average procurement and supply chain professional’s salary has increased 2.1 per cent over the past year, above the overall UK average of 1.8 per cent, Hays found. This rises to 3.6 per cent for procurement managers and senior buyers and to 4 per cent in the public sector
  • Hays salary guide is based on job listings, offers and candidate registration, as well as a survey of almost 17,500 employers and employees, including more than 700 working in procurement

Read more at Supply Management

You Could Be In For A Nasty Shock This Easter

What’s “shrinkflation”? It’s the practice of selling a smaller product at the same price, and it’s increasingly common in the chocolate industry. Procurious looks at three big stories about Chocolate supply management that have hit the news in the past week. 

Regulation impacts complexity, complexity impacts costs, and costs impact the size of your chocolate bar.

Shrinkflation: Why Brexit means Cadbury chocolate bars will get smaller

It might be time to panic-buy your favourite Cadbury chocolate bars in bulk, because Cadbury UK’s parent company (Mondelez International) has warned that Brexit could lead to higher prices, or shrinkflation.

What’s shrinkflation? It’s the practice of selling smaller products for the same price. Mondelez has done this before, when its new-look Toblerone was revealed to have wider gaps between its iconic chocolate triangles, reducing the weight from 400g to 360g but selling at the same price. A pack of six Cadbury Creme Eggs – an Easter favourite – was also reduced to five eggs with only a slight decrease in the recommended retail price, from £3.05 to £2.85. The company has pointed to rising commodity costs, the falling value of the pound and an increase in cocoa prices, while Brexit is expected to make it increasingly costly to do business with other countries in the future.

Mondelez’s UK boss Glenn Caton told The Guardian that his organisation is watching the Brexit negotiations closely. “First of all [the Government] needs to make sure we have a stable and thriving U.K. economy,” Caton said. “If the economy is growing, all businesses benefit from that. Secondly, ensuring there is no new, more complex regulation and that there is free movement of goods and minimal barriers to trade. Regulation impacts complexity, complexity impacts costs, as do trade barriers and tariffs.”

Mondelez has invested more than £200m in Cadbury UK, including £75m on modernising manufacturing at Bournville in Birmingham, the home of the 193-year-old Cadbury brand. Bournville is also home to the global R&D team, which has grown from 25 to 250 people since Mondelez took over in July 2013.

Mars reinvests US$70 million in US supply chain while president warns of protectionism

Mars is re-shoring its manufacturing operation in a move that will mean over 95% of its chocolate products sold in the US are made domestically.

The investment of $70 million will add approximately 250 new jobs to production sites across the US, including a Mars Food factory in Greenville Missouri which will receive a $31 million injection. Last year, Mars poured US$52 million into its chocolate factory in Ontario, Canada.

The announcement was made on the same day that Mars Good President, Fiona Dawson, told the American Chambers of Commerce to the EU that protectionist trends worldwide are “threatening to undermine global trade and make the world less connected”.

“The absence of hard borders with all their attendant tariff, customs and non-tariff barriers allows for an integrated supply chain, which helps to keep costs down. The return of those barriers would create higher costs, threatening that supply chain and the jobs that come with it.

“If Britain ends up trading with the EU on the basis of WTO rules, ‘Most Favoured Nation’ rates would come into force. In the area of confectionery that alone would mean tariffs of around 30%.” 

Prince Charles seeks to halt chocolate-industry deforestation

HRM Prince Charles, a keen environmentalist, convened a meeting with global cocoa and chocolate companies to target deforestation in the cocoa supply chain. Delegates from twelve major companies, including Hershey, Mars and Nestle, met with senior government representatives from two of the world’s leading cocoa-producing countries, Cote d’Ivoire and Ghana.

In his speech to the attendees, Prince Charles noted that aside from environmental damage, “The most powerful direct reason for action is that deforestation threatens to undermine the very resilience of the cocoa sector itself, and with it the livelihoods of the millions of smallholders who depend on it, due to the increased climate variability that follows forest loss.”

The meeting resulted in a Collective Statement of Intent to end deforestation and forest degradation in the cocoa supply chain.

That’s more than enough about chocolate. In other procurement news this week…

UK Grocery Chain Waitrose introduces trucks powered by rotten food

  • Waitrose has partnered with bio-fuel company CNG Fuels to place an order for 10 flatbed trucks that will be powered entirely by rotten food.
  • The fuel will be sourced from unsold food at supermarkets across the UK. Globally, an estimated one-third of all food, or 1.3 billion metric tons of produce – goes to waste every year.
  • The new biomethane trucks have an average range of nearly 500 miles, with the biofuel to cost 40% less than diesel fuel. The biomethane emits 70% less carbon dioxide than diesel.

Read more on Konbini.

Boeing’s VP Supply Chain nominated for US Deputy Secretary of Defence

  • The White House has nominated Boeing’s Patrick Shanahan as Deputy Secretary of Defence, with a view to tap Shanahan’s knowledge of the business side of military aircraft procurement.
  • In December, Trump rattled Boeing management with a Tweet complaining about the high cost of replacing the presidential plane (Air Force One) and threatening to cancel the program. Since then, the relationship between the White House and Boeing appears to have improved.
  • Under new ethics rules, Shanahan will be required to recuse himself from any Boeing-related procurement contract decision for the next two years.

Read more on Seattle Times.

Is Black Friday Still Important for Retailers?

Millions of consumers will be after a Black Friday bargain today. But, as a single day, is it still as important for retailers?

ComicSans/Shutterstock.com

It’s that time of year again. The Thanksgiving turkey is digested, attention turns to Christmas, and Black Friday has arrived. Traditionally an American shopping day, Black Friday has expanded to hundreds of countries around the world.

An estimated £4 billion (nearly $5 billion) will be spent over the next 4 days between Black Friday and Cyber Monday. Of this, around half will be spent today, and an estimated £1.27 billion will be spent online.

However, as consumers change their shopping habits at this time of year, retailers are doing likewise. There are a couple of reasons for this, which we will have a look at now.

In Store vs. Online

The abiding image of Black Friday for most people is massive crowds, stampedes, fights over bargains (and the occasional punch up). The potential deals that stores offer are enough to turn the shoppers against one another.

And for many, this is enough to put them off leaving their house at all. In fact, the number of people heading out to the shops in the US on Black Friday has dropped to below 25 per cent, driven by more Millennials choosing to shop at home.

However, that doesn’t mean that less money is spent. In the USA, experts predict that total holiday spending (the months of November and December) will hit $632 billion. And, for the first time, over half of that money will be spent online.

Retailers are also changing their habits when it comes to opening times today. In previous years, many have started their sales at midnight, in order to maximise the shopping time available for consumers. But many stores are now choosing to revert to normal opening hours (something of a relief for staff, I’m sure!).

Surveys have shown that 59 per cent of shoppers do not agree with stores opening on Thanksgiving. But it’s not just consumer pressure, and benevolence to staff, keeping stores closed. The fall in in-store trading over the Black Friday weekend means that retailers aren’t turning as big a profit as they would like.

Add to the mix increased costs of opening (higher staff wages, security, logistics, and potential bad press), and it shows why retailers are stepping back from early opening.

Black Friday ‘Creep’

Another reason for retailers not seeing the benefits of Black Friday in store is the so-called ‘creep’. Much like adverts for Christmas 2017 started a few weeks ago (I kid you not…), online retailers have started to spread the sales out.

Amazon, largely considered to be the biggest exponent of Black Friday, started their sales in early November. And it plans to run these daily sales until the 22nd of December too. They weren’t the only ones, with Tesco amongst a host of companies starting sales earlier this week.

Some online retailers have done this to spread the logistical load of ensuring everyone gets their purchases in time for the holidays. Amazon are clearly learning their lesson from a few years ago, when it experienced serious bottlenecks in deliveries.

Bad Deals and Brexit

One thing that consumers need to be aware of before splashing the cash is that they might not be getting the best deal. A report from Which found that only half of Black Friday deals are actually cheapest on that day.

Retailers have been accused of inflating their pre-sale price to make a deal seem better. And, in fact, shoppers may have been able to find products cheaper at different times of year. The UK Government’s Pricing Practices Guidelines (PPG) states that any sale “must reflect the most recent price an item has been sold at for 28 consecutive days or more.”

So it’s worth being careful when it comes to your shopping, and not get swept up in the promotions. However, that said, UK shoppers might want to take advantage of the lower prices this year. As has already been seen this year, prices for goods and services look set to rise in 2017 as a result of Brexit and a weak pound.

The majority of rises are likely to happen in January, with Next, electronics retailer AO, Apple, Microsoft, and Dell, all either anticipating rising costs, or putting prices up already. So it might be that British shoppers won’t get the same deals this time next year.

The Last Word

Deals or no deals, I’ll be one of the Millennials shopping online today (after working hours, of course!). However, I wanted to leave the last word on Black Friday to Asda. The retail giant was one of the first UK stores to bring Black Friday deals to this country, thanks to its links to Wal-Mart.

However, following chaotic and violent scenes in 2014, the company shelved its plans last year. And for 2016, they’ve taken a novel approach to announcing a similar strategy for today, and why they’ll aim to have low prices all year round.

If nothing else, the video should make you smile. Happy shopping!