Fancy a Coffee … IKEA ?!

This is not another coffee rant. Actually it is not really about IKEA, well it sort of is , but not exclusively which will probably mean I may hang onto another reader .

It is more about retailers looking at ways of developing their business when they are in a saturated market. Which is where IKEA believes it is. They have , openly , stated that they do not see much growth in their stores situated in developed economies. 

So what is the coffee connection. Well, those of you who spend their Saturday nights partying down at their local IKEA store, will know they all have cafes . But what many will not know is they have opened a stand alone Cafe, called the ‘Dining Club’ in ‘hip’ Shoreditch in East London. This is mildly interesting but what is of particular relevance is that this cafe will host you a dinner party.

They will provide you with a chef who will then help you create a meal for all your friends (up to 20) within the shop. There will be IKEA’s kitchen products on display, but the only real snag is that it will be food prepared  ‘Swedish’ style. It is an experiment and is only being trialled in September, but  is  a good example of a retailer thinking ‘out of the box ‘in a manner that probably does not tread on the toes of many other retailer. Certainly not furniture retailers.

The coffee, the cooking ,  are specifics and have no particular relevance. How I see it as a business that by being creative has developed an idea that involves their customers, the local community and further down the line an additional stream of revenue. It is not just about just cutting prices. IKEA whilst offering very good value has never just been about prices. It has always been a retailer who offered original solutions to modern day living. What other reason would there be from an operation that gives names to  all their products, which are unpronounceable and immediately forgettable.

I am no apologist for IKEA, they have done the same damage to the furniture trade, as Tesco did to food shops, Card Factory to card shops and Poundland to loads of different types of retailers, but they all have one common feature. They all started , no matter how long ago, as a single independent outlet. A key difference is that IKEA  is creative. Not something the others are really known for. 

Creativity is not exclusive to the big boys. In many ways creativity is often hampered within big organisations. Decision making can be drawn out and cumbersome . There are new kids on the block , showing that creativity has a place and a future in retail. Tiger (a Danish company ), started  with one store in 1995 and now has over 550 world wide. What does it sell? Stuff you didn’t know you wanted, don’t need , but at a price that makes you think ….

“That looks different , I must have one …”

Evertyime you go in, there is different ‘don’t need or want stuff’ but it is presented in a way that says ‘buy me’. Well that appears to be the case, I have resisted but many don’t if you look at Tiger’s balance sheet and the queues at the tills.

No retailer has the right to exist, it has to earn that right and that undoubtedly has become more difficult in the last ten years. But there are success stories out there and there will be more. With the McDonald’s machine,commanding the burger fast foodmarket , you would think there were few burger restaurant opportunities left. Well, the biggest growth in fast food in the U.K., during  the last 5 years,has been ‘gourmet burger’ restaurants.

I don’t know much about the ‘act of being creative’, Julia will attest to that. But I can, sometimes, recognise the results. It applies to all types of retail , from the necessary to the unnecessary. With it won’t guarantee success but will help enormously on the way, without it , the future will be an even greater struggle.

Spoilt for choice….or are we?

There is rarely a day that passes without some part of the media bellowing on our how much choice we all have . If you go into a coffee shop and are faced with the bewildering list of possibilities that are available to imbibe in your daily dose of caffeine, you would be forgiven for believing it. The humble sandwich , needs a spread sheet to calculate your bread requirement  …

Hi Guys, would you like rye, granary, white, brown, seeded, gluten free, seedy white, seedy brown, roll, bread, panini , baguette, focaccia, wrap or flatbread ….

God forbid if you are having a coffee and sandwich for lunch. If you ain’t decided before you go in, you ain’t going to be popular with your fellow lunchers  standing behind you in the queue. When you have got the bread and coffee figured out , you’ve got the filling to choose.

just some more to choose from…

Having said all that, within the UK the coffee retail market, it  is dominated by two brands , Costa and Starbucks. It’s a bit like computers, there is a bucket load of different types but they way they operate is dominated by two brands Apple or Microsoft. Not much choice there, then.

Well that’s food  and drink . Travel is another area where the level of choice has developed exponentially. Oh and I have been told that there are a lot more varieties of drugs around today. However, on a more mundane back to everyday life, I suspect that our level of choice  is not as great as we think it is.

Today’s national High St chains , select,primarily, on maximum earnings per ‘sku ‘ ( stock keeping unit) . Which is what you would expect , as they are there to make money. But the reality is that this invariably means a reduction in choice. Quite simply major retailers will not stock items that don’t  earn their keep and that means if two ‘sku’s’ of the same product earns more than one of a much demanded product and one of a lesser demand, then the same products idea wins out every time. The other key component is that if a supplier has only one or two terrific items , it is very unlikely they will see the light of day, especially with multiples as they all have the very strange notion , created by accountants, that it is too costly to list a supplier for a small number of items. Show me the evidence that listing a supplier for one item, where in reality that one item could create high volumes and good margins, would not out way any notional increased cost , then I would give you historical evidence to the contrary.

Everyone will have favourite products that they struggle to buy. Julia and I like liquorice allsorts. For a couple of years we struggled to buy them. Fortunately , the truth has been uncovered and retailers have found a demand as they are to be found in every supermarket and most petrol station forecourts! Winners all round ! We are happy and the retailers are happy. However , that’s the good news. In the very same outlets , you will find  two, sometimes three metres or more of confectionary, where there will often be doubling , if not tripling of ‘sku’s’ of the same  products, restricting consumer choice. 

It could be said that online operators now offer that  greater choice. Many online businesses have been started on the model of offering items that are not easily found on the High St. And there you have one of the biggest ‘ ‘. But that isn’t all that it is cracked up to be as they have their own selection procedure. In my opinion , one of the criteria must be stuff you don’t need and probably didn’t think you needed until you saw it on their web site. 

More relevant is that a lot of the big online  players are adopting similar policies to that of High St retailers and that is selecting product only on the basis of volume and margin. The rational is very similar, the cost of adding product to the site is now very high. The big exception is, of course, Amazon, who tries to sell everything. Who is it that strikes fear and loathing into every retailer’s heart, why, of course, Amazon!

Now if I were to relate this to the Party market, it would not be difficult. Many of the online players are focusing on a limited number of high volume items , but with little margin. Many of the U.K bricks and mortar party retailers, much restricted by the lack of space, as they tend to be quite small in terms of square footage tend to repeat the pattern but for different reasons. They require high volume products, but many offer exactly the same product from the same suppliers as everyone else . Apart from lack of space , other rationale exist such as not knowing what is available and conservative (small ‘c’ I hasten to add) thinking.

The success of independent ‘niche’ retailers in other markets suggest that there are alternative ways. Take the confectionary chain Mr Simms Olde Sweet Shop. They started in 2004, with one shop, growing throughout the financial crisis, to where they are now  with one hundred.Principally, they offer choice, where choice has not always been made available. Very little of what they stock would have been considered high volume or even branded product.

The problem with choice is that there is a bit of a dichotomy . What the consumer would like to buy does not always match up with what the retailer wants to sell . Don’t be taken in by the major players continually bleating on about the ‘customer is king’ . That is a half truth. 

Ultimately, we, consumer or retailer, all have choices to make. It is just perhaps that choice is not always quite as great as it is cracked  up to be.

What does Team GB bring to Party ?

I like sport, I like watching the Olypics (especially minority sports, but not horse dancing) and I like working in our industry. So that ties all the stands together very nicely , but has little conclusion apart from a bout of smugness for the last two weeks.

I did not title this …bring to the  Party….as I want to reference the Party market as apposed to the grand all encompassing meaning of the word The Party , as in the whole of society, though I do think there is a connection.

This smugness is reinforced by the huge success of Team GB. There are aspects of this that I believe can relate to the future success of our industry and for that matter any other UK industry or organisation. Team GB has succeeded for a number of reasons:

1. Well resourced

2. Judicious use of resources 

3. Allocation of resources according to achievement 

4. Long term planning (8 years, not just 4)
The one word which may rancour with a number of readers is ‘resources’. In most cases this means funds, of which many will not have access to inexhaustible amounts. However, if you take one sport , in particular, ie cycling, there are aspects that don’t always relate to money alone.

The cycling teams achievements are based on Dave Brailsfords principals of incremental Improvents. They break down every aspect of the rider and the bike  and look to to see where they can make a marginal improvement. With the bike they will look at the saddle, the chain, the handlebars , the wheels, even the paint and look to make small  improvements on these and every other feature of the bike. With the rider they will look at fitness, personality, emotion, clothing, helmets, diet , to name just a few features, and once again seek to make marginal improvements. Every individual improvement is not a game changer in itself but added together they make winners.

I can see a blueprint here for all of us. If you take a retail store and examine just a few of its components :

A) does the store look fun and inviting?

B) is the stock clean and displayed well ?

C) is the product range the best on offer ?

D) can the pricing be improved (and I don’t just mean down)

E) are staff as trained as well as they can be?

F) are the staff motivated ?

G) is the owner motivated?

H) are your customers truly satisfied ? 

There are many more aspects to retailing but if you take the above 8 ,as an example,and were able to make marginal improvements in each and everyone, then I believe you are long way to ensuring long term survival at the very least , and long term success at the very best. It is very easy for me to make these comments about other people’s businesses , as sometimes the answers  to the questions may actually need dramatic action. If this were the case, then at some point in the future that ‘dramatic ‘ action will have to occur. The consequence of not acting would be a dramatic consequence. Better that action be proactive rather than reactive. 

Whereas , the questions will be different , the principal would be the same for all organisations. 

And here is another penultimate  thought which has nothing  to do with our market but with ,dare I say, football . Over the last thirty years internationally the various parts of the U.K. have had little notable success. There are , obviously, a lot of reasons for this. My theory is that within the last twenty years UK Sport has gone out looking for elite athletes amongst the young and scientifically looking at what sports they would be able to excel, and then offering them opportunities within those arenas. I suspect this has deprived football of some of the pool of talent as thirty years ago the only real sporting success lay potentially  within football . Now there are at least  twenty  other sports. Of course, this theory main,y applies to males as the women have achieved more success !

The other upside to this  is that not all our youth are motivated by money. Whilst there are financial rewards that can be achieved within Olympic sports , they are , in relative terms, few and far between.

Finally, back to ‘horse dancing’ . I am in no doubt about the skill involved . However, and even the successful riders go on about this….

.”..if it wasn’t for the horse , who I have lived and worked with for the last x number of years, I wouldn’t have won “

” Are you going to Tokyo?”

” No, Neddy will be too old and anyway has been offered a job on the panel on ‘Celebrity Horse Prancing”

Well give them a strange horse and see how that works out. It seems neither an ultimate test of human endeavour. Nor does it seem to be a sport that would ever take a kid out of the ghetto. 

Kidnapped Swiss elves and slices of toblerone ?

As an industry one of the biggest problems we face are “knock offs ‘, generally from the Far East. The reality is that ‘it ain’t that difficult !’. Go into the market place buy the costume you want to copy , yes you might have to pay maybe ninety quid, but just break it down make a pattern and you are away. Not exactly a costly or demanding route to market.

But luxury watches , now that’s another story and a complete mystery to me . How they heck do those conniving , cheating, thieving, but fiendishly clever counterfeiters do it ?

First of all, I would assume, they have to get the real thing . Of course, they may nick one. Or they may buy one. But buying one at full retail would, in some cases, cost tens of thousands of dollars, pounds, euros , yen or whatever. So we can assume that they nick one. But they don’t just nick  one , as they seem to be able copy every model of every premium brand and they do it very quickly .

So the next step is to make it . Let’s suppose it is a Cartier Ballon Bleu flying Tourbillon Second  Time Zone in white gold , which retails for £121,000 . No doubt a snip especially , with such  a ‘sophisticated ‘ name, despite being a pain when completing the insurance claim after you have been mugged. The counterfeiter has the real thing in front of him or her ,and starts the procedure of putting together the fake.

Every little bit of that watch , the crown, the hands, the face, the strap, the buckle, and all other little bits of minutiae, in some cases even down to the presentation box,have to be copied exactly to fool the naked eye. Then the product is shipped , distributed throughout the four corners of the globe for around about £30. Then the process is repeated for the next model .Presumably everybody in the chain makes a margin, so how the bloody hell is it done, when you can get a Timex for thirty quid (I know ‘cos I just spent £35 on one).

Just maybe some fiendish Chinese’ne-er do well’ has kidnapped a bunch of Swiss elves, hidden them somewhere in the Tibetan Himalaya and threatened to force feed them toblerone unless they make perfect copies of the world’s most expensive time pieces. In the event that this is not the case,  and I have been told on good authority that elves are not experienced watch makers, please tell me how it is done.

Cost to serve ….

Between 1994 and 2004 , operating costs for retailers rose 19.4%. Between 2004 and 2014 , they rose by 33.4% , whilst retail consumer spending only increased by just over 2% in the same period. Whereas in the 1994/2004 period consumer spending rose by 5%. These figures are from research carried out by the British Retail Consortium. What is worse, is that  they have also commissioned a report called Retail 2020, which indicated that with a combination of the national living wage, business rates and apprenticeship levy , the equivalent of another 20% of  current margin, will be added to the cost base over these five years.

None of this makes good reading, however, it is a reality and one in which retailers need to address to survive. I have never operated a retail store nor even worked in one, but I have spent a long time working with retailers and feel a shared responsibility in trying to look for solutions, to help retailers. Regrettably, as yet, I have failed dismally. But I have seen others that are looking at ways and means that are achieving some success. 

The consumer scene has much changed in recent years , to state the blindingly obvious. But it is not all about tough economic times plus the onslaught of the Internet . There has been a change in consumer spending habits . The consumer is looking to spend more of their ‘dosh’ on experiences. 

Waterstones, the bookshop chain, which was on the verge of bankruptcy five years ago, appears to have turned the corner. In its London West End store , it has incorporated a bar and cinema in the store. Great idea, that seems to be working , but most, if not all, the stores in our industry would struggle to find space for a bottle of wine and a TV. However, the point is they have looked for associated ‘experiences’. What is more relevant is that they have invested large amounts into staff training focusing on engagement with the consumer, something I have been bleating on about for some time. For Waterstones, it is working and they are now returning to profit. 

There a number of parallels with book stores and party shops . Both sell product that is easy to buy online, if the consumer knows what they want. But when they don’t and look for advice the retailer should always win. When I say ‘win’,I mean  ‘win’ over a web site. I have talked about this in previous blogs. The upsell potential of staff engaging positively with the ‘in store’consumer offers major opportunities for every good retailer. The example of Waterstones could not  illustrate it better. There is probably no other form of retailer who has suffered more from online competition .

However, there have been announcements in recent weeks that underline the changes we are experiencing.

WALMART – in the USA announced the closure of 260 stores. They are opening some new ones but only around 60. The world’s largest retailer closing stores is not to be overlooked.

IKEA – have announced consumer saturation. What they mean is that in the areas they are trading it is very unlikely they will achieve much growth because consumer doesn’t need anymore…it is a point of saturation…

Forgive me for the laziness of taking chunks of wisdom from elsewhere, but I think the following chunk from Forbes, is very poignant . The article was about not expecting continuous growth in retail spending at Christmas.

……The idea that we will forever increase our annual spending on holiday gifts suffers from the same sort of shortsightedness. Why should holiday spending rise every year? It turns out there is no good reason.

It is certainly true that many people and families choose to spend more on the holidays when they see their incomes rise. As you move from starving college student to young professional to upper middle class family, your gift buying likely increases. However, this is not without limit. At some point, most families simply reach a natural gift spending limit.

I believe this applies to all consumer spending in advanced economies and is backed by a lot of current research . Consequently , retailers , with the many other challenges they face , are faced with two formidable ‘book ends’, dramatic increase in their cost base at one end, and at the other, the end of natural growth in the consumer spend. Innovation and creative thinking will be needed, but the retailer cannot do it alone. For those suppliers who wish to maintain a presence in the High St , must help and support with that innovation and creativity . That said , I don’t think within the party market, that we are anywhere near saturation. 

One final point brought about by seeing something twice in one week. It relates to contactless payment. In one incident , I saw an elderly lady berating a retailer for not accepting contactless payment and with the other a woman walked out of a retailer because they did not accept contactless.

And ‘proper finally’ think  on this , if you don’t yet have contactless . The quote below (Financial Times) includes Apple & Android payments.

Richard Koch, head of policy at the UK Cards Association, said: “It took almost eight years for monthly contactless spending to reach half a billion pounds — now it’s grown by the same amount in just four months.

It maybe another cost, but going forward, it is cost worth considering.

Now we are going out ….what’s in?

Women ….that’s what. I am not going into whether Brexit is a good or bad decision, as currently nobody has a clue and anyway that is not the point of this blog.

One immediate consequence (amongst many others) is that the UK now have a 2nd female Prime Minister. Not bad when many European nations have not yet had one. 

The leader of the Scottish Parliament is female, as is each leader of the major Scottish political parties. The head of the Northern Ireland assembly is a woman, as is currently the front runner for the UK Labour Party  and the leader of Plaid Cymru(not forgetting the Greens) Oddly the liberal democrats are seem somewhat isolated in  the equality stakes. Oddly, because they are supposed to be what it says on their tin ‘Liberal Democrats ‘. Oh, and we have a Queen, not that anybody had a say in that but we can lay claim to a ‘full house’.

What I am not here to discuss is as to whether they are good or bad at what they do. What I do want to reflect upon is that whilst an element of the leave campaigners wanted to take us back to the 1950’s , they have, inadvertently , brought UK politics into the the 21st century and way ahead of a lot of our democratic neighbours throughout world. 

This is not to infer that women are perfect or always right,  far from it but they are equal. History does suggest that they can bring aspects into ‘statesmanship’ that men can’t or don’t . Whatever their politics or beliefs Indira Ghandi, Benazir Bhutto, Golda Meir, Eva Peron, Margaret Thatcher, made their impact upon the world in a way that was beyond the reach of many men. The impact was not always to be considered beneficial , but that is not my point . The point is that women are equally as capable, and sometimes incapable as men. Other surprising nations who have had female pm’s are Sri Lanka and Bangladesh. These two plus Pakistan and India are not known for equality issues, whereas the EU is but falls down when it comes to Premiers, with I beleive only Germany, Denmark,Finland, Latvia and Croatia having female leaders in the last 30 years. The USA , of course, has as yet had none.

We are facing some huge changes , and in order to have any chance of succeeding we need to approach our future in a new and creative way. This is a good start. There is one major political difference between the sexes , woman don’t have an ‘old order’. There is no ‘old boys club’ and whatever political cliques that may exist, it would appear our new PM does not belong to any. Whatever our future holds it promises to be different, we just have to ensure it is ‘good’ different. 

Is there a party life after Brexit ?

Just prior to the referendum a couple of customers asked me what sort of effect it could have on our market place. Hence, I thought it opportune to express my opinion of the major effects on the Party & Costume market. Obviously, these are only my views so I shall try and keep to the basics and not get muddled in the devious and very inexact role of politics and personal emotions.

Hence , this is perspective of the short, medium and long term effects .

Short term

In practical terms nothing has changed yet We are still in the EU. However, there are two immediate influencing factors.

A) sentiment

Sentiment has a major impact on all markets. There maybe a change in the consumers concerns about the future and reign in spending. The party market has a good record in depressions, in that it can intially buck the trend as people party to cheer themselves up. Eventually though it will effect the consumer spend within our market place

B) currency

There will be huge swings in currencies and if they are ‘down’ swings , we will have price increases . 95% of the party product bought and sold in the UK comes from outside the UK (I am struggling to think of even 5% that is made in the UK)

 The upside is everybody will be in the same boat, but it will put pressure on the consumer spend. There is the slight possibility itmay discourage consumers purchasing from far eastern web sites or even looking.

Medium Term

We will still be in the EU. Currency will still play a part , but the fluctuations may have eased off. As we will be in the process of negatioting our exit, traders may start to ignore EU (not your regular suppliers) regs and import product that does not conform to anything and consequentially ,be a lot cheaper but potentially  of poorer quality. 

Demand may have flattened because of continuing uncertainty and a lack of growth.
Long Term

We will have negotiated exit terms. No idea about currency levels, nor demand, nor consumer sentiment. However, in terms of importing this could be very complex. We may have negotiated a free trade agreement with the EU. But at that point we, probably, will not have negotiated agreements with other parts of the world ie the far east, or the USA, for starters. Will major players, such as Rubies, Amscan, Unique , Pioneer et al relocate to the EU and then reexport to the UK ? The possibilities are mind boggling .

In terms of product standards major (UK)suppliers will still comply as they want to ship into the EU, however , we won’t have any input into those standards. EU suppliers will conform to the standards , consequently still supplying into the UK , as we will not have an alternative set of standards, certainly not by then if ever. 

Online operators will start to find it is a lot more complex supplying consumers in the EU. Obviously the reverse will be true but I suspect there is more trade going out from UK web sites rather than vice versa.

Oh yes, here’s another thought. When we are no longer in the EU , UK suppliers that wish to conform to any new norms or regs, will probably have to get these comp,ex documents translated as they probably will no longer be in English.

The reality is that  it is all hypothesis , as we have no idea what and when the future holds. The only thing we can be sure of is that it will be very different. Good or bad, only time will tell. 

There are so many interwoven layers with that have to  be ‘unweaved’ and then rewoven , that for any person or body to forecast that this or that is going to happen, they would have to be barking mad. But then that was true prior to last Thursday. 

I think there will be many pages to turn in this story, before we have even the slightest idea as to the consequences . As an industry, we have always been quite good at adapting. Here , the adapting needed maybe somewhat more testing.