No Spain, no gain….

We are, all, experiencing turbulent times. No, nothing to do with the American elections or Brexit, but the end of the Long Black Friday, which now appears to encompass four days , as opposed to the standard  period of 24 hours, normally associated with one day.Every retailer going , clothes, food, electronics, holidays, broadband, restaurants, the list goes on,have sales beginning with the word ‘Black..’ at the end of November. As to whether it actually generates additional revenue or more importantly profit, is hugely debatable . However, retailers are now scared that if they don’t participate they will lose out.

Does it work ? The jury is  out. Initial indications suggest a 6-7% increase on 2015 , far below the forecasts of 25% plus, but still growth. Set against the trumpeted 7% growth in retail expenditure in October 2016, it does  not look that impressive. 

I digress, but not far .Clothing retailers, in particular, are finding it tough. Both Gap & H&M have experienced profit declines and we are all aware of the problems dogging M&S, Arcadia and the House of Fraser. There is one international clothing chain that appears to be head and shoulders above the rest and that is in deepest darkest Spain ,  in a giant warehouse full of little elves with tiny hammers beavering away (actually 350 designers and a very big IT department) called Zara.

What is different about Zara? 

Firstly with all their  designers there is  no head of design. The process is a team process , where a group of relevant designers make selections from a huge amount of data which comes from their huge IT section. They amass data from customers ideas, suggestions and comments from all over the world. They consider information from feedback by their country ‘directors’ and other sources . With all this product information to hand they identify what is wanted and then design the product accordingly , making relevant changes for different market places. When it goes into production they do not produce huge runs, even if the product is successful. If it is they will make small changes to the original design to ensure the product looks constantly fresh and new. Their target lead time from design to final production is 2-3 weeks. Their final aim is to ensure that their web site and stores  have new product twice a week.

In short,

  • Originating product that they know their customers want, by judicious use of data and customer contact 
  • Getting it to market quickly
  • Constantly introducing new product
  • Not flooding the market
  • Product Decisions by teams not tiers of management 

Does it work ?  Amancio Ortega, 80 year old founder and chairman of Zara, who this year briefly surpassed Bill Gates to become the world’s richest man before falling back to second place might suggest it does.

And the point being…

There are too many retailers out there relying on slashing prices, unimaginative product ranges, slow to innovate, devoid of new product, and not really understanding what their customers want . There’s a starting point. Show me another retailer that can get new product onto the market in 3 weeks . Or a retailer that has new product twice weekly in store. In a nutshell, any retailer big or small, should benefit from finding out what their customers really want, and have new and fresh offerings in their stores on a frequent basis. It has got to better than a  future  of annual ‘Bleak Fridays’.

Online price fixing…..

It may come as no surprise that some sellers on Amazon have been found to be price fixing.

The competition and markets authority, the body that oversees such activity, has announced that it has found evidence of collusion amongst sellers on market places such as Amazon.

It has published a quick list of do’s and don’ts 

  • Don’t agree with competitors that you won’t undercut each other, or what prices you will each sell your products for
  • Don’t discuss your pricing strategies with competitors
    Do familarise yourself and your staff  with the law. The CMA has a range
    of short and simple guides to help 
  • Do seek independent legal advice to ensure you comply with the law.

None of this will be news to those in the know. We have already experienced one ‘member’ of our industry being ‘done’ for price fixing(fine £171,000) But what is rather more interesting is that the CMA has fined a supplier for threatening online retailers….

In April the CMA fined Ultra Finishing £826,000 for threatening online retailers with penalties if they charged below the company’s recommended price for bathroom supplies.

This is much more interesting in that it suggests suppliers have to be very careful in the manner in which they treat their customers who maybe trading their product in a manner that may disturb their retail market. It is a double edged sword. 

Yet, I get a little confused by it all. How, for example, does a brand  like Apple manage to control their pricing without breaking the CMA regs ? And if they don’t comply why aren’t they prosecuted ?

Most suppliers take a responsible attitude towards pricing,  in order to try and maintain reasonable profit margins for all those within the distribution chain. Without reasonable margins the chain eventually disappears. Yet there appears to be a fine line between legitmate pricing policies and price fixing. 

Yet more confusion reins down on my little head, whenever, national retail chains launch ‘Sales’ when in many cases they have patently bought in stock for the sale. Whilst this is not price control, it surely must be on the edge of pricing morals.

Whilst the existence of a CMA type organisation has to be has to be lauded, to tryto ensure that the consumer is offered the best possible market price. Unintended consequences  can result in the opposite . In any one market, if margins are reduced by legal structures too far, it can eventually reduce competition and as that competition disappear, the price rises.