Sainsbury and the argonauts….

Actually it should be J.Sainsburys and Argos, but it does not scan so well.

This is the recent financial story of Sainsburys (one of the U.K. Leading grocery outlets, for those non UK readers) is stalking the Home Retail Group. The main interest is Argos, the on street, online operation supplying  mainly electrical and household goods. 

I haven’t a clue as to what the future direction of grocery multiples should be. And I have no more idea as to the direction of the future of the likes of Argos. But what I do know is that Sainsburys are undergoing a tough time and are struggling to redefine themselves, and Argos, whilst achieving some online success, are struggling with their own identity, and profitability.

Now, apparently the rational for this merger, is that Sainsburys are looking at developing their online and logistical operations, taking on the likes of Amazon. Well excuse me for being naive but that ‘…ain’t going to happen…‘. Nor, with my  extremely naive, retail analysts dunces cap on, is the merger of two organisations, both with sets of different sets of problems,likely to succeed.

The riddle does not stop here. Sainsburys started the Homebase chain and sold it off, when deciding it was not part of their core business. The Home Retail Group, current owner is selling it off to an Australian DIY group. All the main grocery retailers have stated  that they need to concentrate on their core business ie food. So why is Sainsburys going in another direction ? Is it because Amazon are increasing their food offering ? Whatever the motive there is now another suitor, the parent company of Benson Beds, the mind boggles.

Well, what has this to do with the party industry? More than you think . Argos is a portal for eBay, and a number of online party suppliers are using said portal. The parent company of Benson Beds, is called Steinhoff International, a South African operation with 6,500 retail outlets, selling furniture, household goods and general merchandise. All of a sudden it suddenly becomes more interesting…

As to where this all goes ? Who knows? But it is worth keeping an eye on it as at sometime or another it will impact on our market place in some way . I know which suitor I would prefer, if it is going to happen and doesn’t sound like a German beer…

1% inflation….for some maybe .

Party buyers and suppliers have all now returned from several weeks of globe trotting . Hard negotiations by day, fine dining and quaffing of the world’s best vintages by night. Or at least that’s the perception 

Suppliers can gloat over a hoard of orders, and tremendous new contacts. Buyers will be delighted by the extraordinary deals they have negotiated and brand new products they have found. Or at least that is the dream.

There are many issues facing our market, one of which is, as with others , is the consumer understanding of flat lining inflation. Of course, fuel is down, interest rates are at a historic low, commodities have fallen out of bed, food prices are low, but the reality is that  none of these have much influence over any of our cost base.

Sure many suppliers will have had published few increases, retailers will have little opportunity to raise prices. The truth on price inflation is somewhat different from what the macro economists would have us believe.

Suppliers are facing fluctuating euro/dollar, sterling/dollar, euro/sterling and all in reverse. Price increases on products where competing factories have closed, leaving limited supply, changing conformities leading to higher testing costs. Retailers (particularly in the UK) constantly face ever increasing rents and local business rates, and now in many cases a bigger wage bill. All of this ignores the constant price pressure from online operators home and abroad. For the homegrown online operators they are under pressure from those overseas, putting even more downward pressure on prices. 

The bottom line (being very clich├ęd) is the bottom line ie profitability. If you are experiencing little growth and little price inflation, the likelihood is your profit margins are decreasing. Is the consumer interested? Probably not , until you are no longer there. Then, we are only party suppliers, their memory will be short , in most cases it will come down to ….do you remember there used to be a party shop here ?still this is a very nice cafe….

At least the retailer will be remembered, if an online operation disappears no one is the wiser. 

So the next time one of your customers complains about you having increased the price of something , lambast them with the realities of commercial life. I would comfortably bet they will care not  one jot.