Economic Growth = A Cow’s Fart….

I think that when I was a ‘Wee Lad‘ science lessons had involved the measuring the amount of methane that shot out of a cow’s arse , I might have taken a lot more notice. But sadly it did not , so I didn’t .

My interest in cattle ( and science) waned completely, apart from avoiding them when walking in fields or peering through a butchers window .My renewed interest, having no connection to Covid, the Environment or Veganism but the Economy.

In a book ‘Get Ahead…in Physics’, the science editor Tom Whipple of the Times described an experiment involving the measurement of methane. Very simply the scientists measured what went in- so to speak and what came out. This included their poo, their urine, the methane and everything else at the bottom of the enclosure including dandruff (bet you didn’t know that). initially they weighed everything that went into the enclosure, including the calf, and the oxygen , and then weighed absolutely everything after the process. Hey presto …. there was no change in the totals. In this case before=52.5kg, after=52.5kg (including dandruff don’t forget). This is the Law of Conservation of Mass, which applies to everything .

This is not the first time I have drawn upon the efforts of our beloved cattle to bisect our economic climate . Last time I used cow’s farts to analyse pricing . Now I am using farting to discuss growth. Growth, I believe is as relevant to the Law of Conservation of Mass, as is Everything.

In the current climate , I get somewhat that economists bleat on about predicting negative growth levels in every economy . You don’t have to be a financial wizard to realise that if a good chunk of any economy is put on ice for at least six weeks, it will account for at least a minimum decline of 6% (working on a very generous assumption it is only 50% of the total economy, and six weeks = 11% of a year). No matter what happens in the following weeks a 6% gap is not going to be made up. So, PC(Post Covid) growth is going to be critical to ensure that all economies at least get back to base and beyond, in order to repair the financial damage. However BC(before Covid) I did not and still do not see how growth can continue ad infinitum.

We are a planet of finite resources . Ever since, well at least, the bronze age mankind began its consumption of the worlds resources. Overtime, technological developments have used additional resources generally with huge benefits for most us . The Malthusian Theory that population growth would outpace that the means of subsistence, has been proved wrong , or at least for the moment. There has to be a limit somewhere. Does, Zero growth world wide = The limit to which we can support the population at that time ?

Technology will continue to have major impacts upon growth. Historically, some of the simplest forms of technology have had the biggest impact on world growth. In the 1950’s the humble container is said to have been one biggest influences on the huge growth that occurred in the three decades post the war. The technology was not especially advanced it was more a simple solution pushing back on traditional labour practices which in many cases held strangle holds on the worlds docks. It is argued by some economists that the influence was greater or equal to the that of the development of the internet . If that is the case it would also be true that the development of containerisation took less resources than the development of the internet as it stands today.

Environmentalists are constantly telling us we have limited resources . It is not an environmental issue . Or rather, it is but that doesn’t win every argument. What we should agree on , is that the redistribution of wealth should one of the considerations when pursing endless growth when at some point it becomes unachievable. This is not an anti-capitalist viewpoint. From my point of view one of the biggest problems with capitalism is that the markets are constantly seeking growth.

I see it that it is no coincidence that during China’s massive growth over the last twenty years, the rest of the first worlds growth has been less dramatic. There is an historical context . Up until the 1500’s the wealth and power was in Asia, then it tipped over to Europe ,now it is going back. There are few periods when there has been anything close to a balanced scenario.

It is not something we should pursuing in the short term, nor the medium term but in the long term we must consider alternatives ways of operating successful economic systems without the relentless pursuit of growth . Simplistic perhaps, realistic I think so .

If our eyes and ears (and noses) are telling us there is too much cow farting going on, we should, perhaps , desist on trying to see who can blow the biggest raspberries.

Composting, Compounding,Composing or just plain Confusing?

I get it. I really do. I get Climate Change . I get that there are very serious environmental consequences relating to excessive consumerism, polluting detritus, rapid increase in urbanisation, (or rapid increase in land given over to agriculture) or (and even, as well as ) natural climate change .

What I don’t quite get, is the understanding of what really needs to be done. Let me qualify that . There is a mass of data and general information but there appears little acceptance of the consequences of not approaching that data with a more rational and holistic approach. If we are consistently bombarded with worst case scenarios and hair shirt resolutions, I firmly believe the general public will eventually switch off and say it won’t happen to me…..

I won’t drone on about electric cars, and the impact upon the environment on producing millions and millions of batteries. I won’t drone on about the lack of infrastructure. Nor will I speculate on how that change in infrastructure will impact upon the environment. Further more I won’t comment at length about a recent report suggesting that are times when when recharging your electric car cost as much as filling it with petrol. But I will talk about ‘bin bags’. Simple example. Most bin bags available in supermarkets and dramatically thinner, some compostable (come back to this). Avoiding cynicism (thinner bags) assuming they are like this to reduce plastic waste. My experience is that , we actually use twice the amount as if you put anything remotely heavy , slightly sharp or has an edge means they split and you end up using twice as much.

Plastic ,now that’s a material about which there is a massive misunderstanding. Based on a general assumption that everything a bit squidgy or stretchy is plastic. But that’s for another day . Many conversations with retailers at a recent trade exhibition illustrated some of the confused issues we are all faced with.

Nope my customers tell me they won’t buy plastic toys….they want wooden toys…

Admirable thought but how realistic is that intention. The end game for that train of thought has to be the global elimination of the manufacture of plastic toys. No big deal , plastic toys are hardly one of the corner stones of life as we know it. So you replace them with wooden toys. Well, for starters I am unconvinced that you can replace them in total with wood from sustainable forests. Moreover, it puts further pressure (created by all the future demands on wood) on sustainable forestry resources. It has social implications. Plastic is cheaper , compared to wood. Privileged kids have their toys, less privilged don’t. the question cannot arise of Can I afford to be environmentally aware ? Composting, do most know what it really means ? Do they compost ? Or do they stick it in recycling thinking it’s the same thing? No most don’t know. Not only don’t they completely misunderstand the concept ‘To Compost’. As many items that are compostable are not recyclable .

Mixed messages….lots of objections to HS2. Quite justified on financial grounds but when some of this objections are environmental it is much less clear. Do we want big reductions in air and road usage or not? It would make a lot more sense to extend it from London to Glasgow. Would it not?

Compounding….

You’d think the more ‘info’ we get the better it is. But we are literally we are under an information deluge, bit like the current rainfall. There is so much of it we don’t know what to do with it. It only compounds and exacerbates the confusion.

Confusing….

Diesel good …. very rapidly became diesel bad ….

Britain’s Power system has been decarbonising at a faster rate than any where else in the world .

Emissions have fallen buy over two thirds in the last decade. From 160 million tonnes in 2010 to 54 million in 2019

In the electricity sector, a decrease in demand for power proved to be the biggest driver of the decline in emissions, according to the report by academics from Imperial College London for Drax Electric Insights.

Demand fell by 13 per cent, even as the population grew by seven per cent and GDP rose by a quarter, as measures such as more energy efficient lighting, manufacturing and other efficiency measures took hold.

However the rise of electric vehicles and household heat pumps threaten to reverse this trend, the report warned.

Independent Feb 2020

This is a massive problem that needs massive answers. But those (no I haven’t a clue) answers need joined up thinking, and those joins need to cross boundaries. Moreover, the answers we are being given, lead to even more questions. The fear has to be that if the public is only given solutions that they don’t understand, find very confusing, and above all too extreme they will eventually pull the blinds down and say they are not going to play anymore .

No passion so effectually robs the mind of all its powers of acting and reasoning as fear.

Edmund Burke

I would add that I wrote this before the present Corona crisis. Everything that is above remains the same . What may have changed, in whatever direction that maybe, is societies approach.

Did The French invent Coronavirus ?

Albert Uderzo is not a name that would immediately spring to mind. But the pic above might and he is the Guy that created Asterix. Unfortunately he died last week aged 92. Nothing to do with Covid apparently. It was a heart attack and he did like booze and fags, his own words (not booze and fags of course, more pastis et gauloise , as he was French).

In 2008 he sold the rights to publisher Hachette Livre. and in 2011 he gave up illustrating the books but continued to support the continuation of the stories .

So what’s this got to do with the price of bread. An amazing piece of prescience on behalf of the new creators of the aforesaid Asterix. In 2017, there features a character called …..drum roll….Coronavirus. Who is, of course, a masked villain who will stop at nothing to win.

Courtesy of the Financial Times

So there you are. Now you know and I have nothing more to say on the subject ! The only other thing to be said is that he did not win (Coronavirus that is).

Oh, and except you can see clearly from this that the French did not invent coronavirus. They, positively fought against it. However, the nasty little git must have shoved of to Asia and had a bash there .

Lots of Time + Pent up Energy= Too much Thinking

There are those, close to me, that would add the word muddled in front of Thinking. I refer, of course, to those amongst us who are confined to quarters. Therefore, I am going to use headings to try and be disciplined about Thinking . The following defines my interpretation of the above formula….

Lots of Time

I know it is only a few days into imposed social isolation and the weather has been wonderful (certainly in the UK). But the ‘lots of time bit’ has not dropped yet. So I get up a bit later, maybe 30 minutes. Take an hour plus to read newspaper, instead of 15 minutes. Then comes commercial houseekeeping , emails etc…. followed by coffee break 15 mins. If we are going to the supermarket , we walk (was that wrong?). So its a half an hour there, half hour back, 45 minutes queue , 20 minutes inside (now going by car 4 minute drive, but with the queuing,combined with doing some shopping for elderly neighbours round trip still takes best part of an hour and a half) . So now its Lunchtime -half an hour then exercise , takes between one hour and two, depending on whether it’s walk or bike. With other odds and sods its 4 pm plus, if I am lucky.

Pent up Energy

Err…, see above under exercise and supermarket visit. Oh yes, what is it about walkers. Who are these walkers? Most of whom , in a previous life, it would never have crossed their mind to go for a walk. I have 3 methods of spotting them.

1. When they approach the edge of the pavement there is a look of bewilderment in their eyes as they are not sure what to do.

2. When they have gone about 500 metres there is a look of fear as they are not sure how to get home

3. Those that venture into more open areas and you are at least 30 metres away from them, they do another 10 metre hip swerve, as they have no concept of space or distance.

Here’s a no 4. Invariably they are dressed as ninja daffy ducks. They have scarves around their faces and hoods up, with only their eyes showing and when they walk they actually waddle.

Are they victims of the toilet roll syndrome. ‘everyone seems to be doing this , so s’pose we should as well’

Too Much Thinking

Once again I am going to use headings to try and be a little more disciplined with my thinking. The headings I have selected are ones where I have had some clarity of thought, in addition to restricting it to a reasonable list.

Crime

Now there is an odd one . Why think about crime? Well, primarily, because I thought household burglaries would fall as would street muggings. However, my next train of thought was what would Jonnie Robber (always blokes ) do for cash . But more siginificanlty what would those who commited crime because of the need to pay for their addictions eg Drink or Drugs. They still have a driving need for to feed their addiction, are they just going to stop ? Or just as importantly where are they going to go for funding ? So to speak. An interesting juxtaposition ,is that in the Favelas of Rio the drug lords are enforcing self isolation to protect the population whilst the President derides Covid as just the ‘sniffles’.

“Whoever is caught on the street will learn how to respect the measure. We want the best for the population. If the government is unable to manage, organised crime resolves,” read one message sent to residents of a Rio de Janeiro slum. Financial Times 27 March 2020

Society

Sociey has and is changing , perhaps mainly for the better. However, I am not convinced these changes will be long lasting after the pandemic is over. Many said Brexit changed UK society. Now Brexit is nothing like the situation were are in now . I am not convinced it changed much, it only exposed what was already there. With Covid, having a worlwide impact, in one way brings people together, but my concern is that once it is all over, this togetherness will be forgotten . And what is just as likely is an increasing fear of outsiders .

Consumer Behaviour

Perhaps not so far reaching , and maybe not so important, but it remains significant as it will be all about getting an economy back on its feet. There are a number of factors that come into play, working out how, what and when is a completely different matter. Consumers will have been locked out of their normal patterns of buying behaviour. To a degree, if they really want to buy something (non essentials) they will go online . Is this pushing the consumer further to online ? Not totally convinced as I believe over a period of time some will start to value the experience of going to a retailer and go back to them. The consumer is finding out now that they cant just pop into a local High Street to try a product out before buying online. Hopefully they will understand the function of a Shop.

As for the health of the High Street, it is not going to be good . The weak ones will go including the ‘biggies’. There is nothing to suggest otherwise . On the positive side, there will be opportunties for the good independents. The local consumer , on the whole, is trying to help the independent where it can . Currently, this relates to local grocery stores, restaurants offering take aways, pharmacists and newsagents. There will be many out there who have never actually been into their local shops, who may now understand their function.

Once we are let out of our homes , will we rush out to the High Street ? Simple answer, is ‘Yes’. I am quite sure there will be a very short Retail boom. However, will this last ? Here, I am not so sure. I suspect there will be those who were already questionning their ‘consuming activities’ and think I did without that for weeks/days/months on end. Do I really need it ? I feel that it will impact further, on the consumers demand for things.

Banks

I need someone to tell me how is that when the bank rate is virtually zero, and the government is covering 80% of commercial loans, that lending rates are going up . I don’t want to knock the banks as they are critical in the current climate and don’t need knocking down, but this has to be addressed.

There is so much more thinking to be done……and probably lots of time to do it.

Law of Supply and Demand…..(or how to make the page bleed)

Under normal circumstances, the laws of supply are one of the fundamentals in microeconomics determining price levels within a market place.

We are not, however, in normal times . When Covid 19 first raised its ugly head (do viruses have heads ? Microbiologists essay question) early February, for me anyway, the questions started to arise concerning supply chains from China .

The intials concerns were are we going to get stuff …and when ? Thus intimating there maybe shortages. There was no hint of any price increases, apart from higher shipping costs if manufacturers such as Land Rover started to air freight parts. This rapidly changed to panic buying of product buying of product such as Toilet Rolls and sanitisers. Again no price risers. Or rather not by reputable traders, you cannot take idiots and profiteers as part of the Laws of Supply and Demand. They are, essentially, the laws of the black market. Move on rapidly again and we have economic concern of no demand (apart from food, medicine and Netflix subs), perhaps ‘takeaways’. Lack of demand and prices fall. Rather they should, but with few exceptions (oil) this is not necessarily the case. I think the implication here , is that the retailer is taking the view if nobody is coming into my shop, what is the point of dropping my prices and taking even less money. What they are doing , or at least some, they are offering additional services such as free local delivery.

Now I am not an economist. Hang on a mo…I am. I am the proud owner of a mediocre Economics A Level, achieved after much hardship in the early seventies. Hardship as I was forced to write the papers with an ‘Osmoroid Pen’ (image below). As to those close to me will know I am not known for my copperplate handwriting. I would be proud to lay claim to my eloquent academic prose seemingly making the pages bleed with detailed analysis. But I cant . They bled because the ink ran all over the paper. Julia, also, adds I was just plain lazy.

Osmiroid Pen Set – with explanations for those that have never seen a cartridge pen ! Or ‘How I make a page bleed’

I can also lay claim to knowing Adam Smith, not the Adam Smith(he died in 1790), but that’s not the point. It enhances my mediocre ‘A’ Level by association. Instead of claiming I am from the school of Adam Smith Economics, I can say that I did Economics, at a School where there was an Adam Smith. I digress…I go back to ….. I am not an economist but the Laws of Supply and Demand do not generally involve Moral and Ethical influences. They do involve human behaviour but currently , and I really do mean the ‘immediate’ now , as things are changing so fast, the moral and ethical factors are, I believe, having an impact upon the Laws of Supply and Demand.

There is, now a third unknown . Most of the time these laws operate in democratic capitalist societies. What we are now, temporarily, experiencing is the suspension of capitalism with massive state intervention (certainly in the UK) and that is with a right of centre, libertarian conservative Government. As to how this all pans out Socially, politically and economically, is anybody’s guess. Plus when the gates start to open, atthe end of the of all this , will the Laws go into overdrive or will everyone be so grateful that they are actually selling something they will forego market forces ?

Footnote: I said things are changing very fast and within the last 24 hours The Sunday Times have said that Tesco has but prices up on a number of products. This isnt quite as clear as that as they have said in the main they have removed Mutli Buys to avoid ‘over buying’. At this stage I have some sympathy with that rational as I don’t beleive Tesco would be stupid enough to take advantage of the current situation . Here is another statistic that has been banded about. Approximately 25% of the nation’s calorific intake comes from restaurants, Cafes , fast food joints and take aways. The vast majority of this intake is now being transferred into the supermarkets. It takes time and money to re-adjust to this shift . Consequently it is not just a spike in Demand it is also a shift of the pattern within that demand.

Atishoo, Atishoo! We all fall down…

Ring-a-ring o’ roses,A pocket full of posies,A-tishoo! A-tishoo!We all fall down.

For those of who you who don’t know this nursery rhyme, either because your parents were highly protective and didn’t want you facing stories about pestilence and disease, or that you are from overseas , it was apparently referring the plague that swept Europe on many occasions starting in the 13th Century.

Doubts are cast upon this interpretation as the rhyme did not appear until the mid 19th Century. Yet the myth remains. None of this really relates to my post. Moreover, I am not convincing myself that I should be writing about it all apart from it gnawing away at my inner most thoughts. It, being Covid 19, Coronavirus, the ‘Crisis’ or whatever either title our esteemed media chooses to call it depending upon their focus for the day.

I don’t want to go down the line of listing the annual death tolls of car accidents(approximately 1800 in the U.K.),murders (approx 15,000 in the USA), and approximately 12,000 people died in Spain of infectious diseases in 2016. But do we stop driving, visiting the States or holidaying in Spain ?

The next 2 images are taken from The Times, 29/02/20, Essay by their Science Editor on the Coronavirus.

I am in no way denigrating the significance of the current virus outbreak. People have and will continue to die as a consequence of being infected. But this does not equate to some of the irrationality that is being displayed . Because of my job , I spend a lot of time on the car . I listen to a lot of radio and some of the calls I find completely bonkers. This may come as no surprise as many who ring ‘phone ins’ are bonkers. The following examples are bang on the nail , so I may have not got the quote word perfect but the sentiment does not differ.

Caller.…I was going to visit my daughter in Madrid .

Host.…why there are no infected carriers currently in Madrid

Caller…that’s not the point …..

Caller…I have cancelled a flight to visit my daughter in Bali

Host….but there are no reported cases in Bali…

Caller…yes but it’s in Asia

Enough of all this . I think everyone will have come across similar stories andhave their own opinions to the validity of people’s decision making processes.

It is a major problem, if no other reason than we are constantly being told it is . Still doesn’t explain why the world has been deprived of its stock of toilet rolls. But I would really like someone to explain to me what role of the worlds central banks intend to play. Interest rates have been reduced, funding has been promised, extended tax deferments,quantitive easing suggested and whole load of other pretty complex tools, yet to the small business what help is any of that.

If the consumer cannot go out or will not go out to buy, if they can’t go on holiday or travel , if they can’t earn their wages, if they loose their jobs, if there is no product or service to sell , wont go to restaurants, festivals, movies, and sporting events, all these proposals will just become deferred debt . When the time comes for that debt to be repaid, they will have no money to pay it, as their businesses will have gone pop.

So after the sneezing, and we have all fallen over , wiped ourselves down , got up, everything will be well in the garden. It may well be the case but may I suggest that after we have all become practised hand hygienists , we go easy on those toilet rolls…

Retail …has it anywhere to go?

partybus

Just occassionally, I read, hear, see a bit of news which for a fleeting second, says to me

bloody ‘ell, I said that would happen two years ago

And just fleetingly, I think ….I am Bloody good at this, should I have been a predictive analyst…or written a book like ‘Future Shock-Alvin Toffler 1970’ ….until rapid realization dumps me back to ground level , when I think about the hundreds of other predictions that I got, and still get, wrong.

So I am very wary of so called ‘experts’ in their field making predictions, when in my experience, they make as many bloomers. Yet, I have just read an article by Mary Portas, not someone I always agree with, but the essence of what she says resonating with some thoughts of my own, I felt they are worth examining .Without blowing my own trumpet, actually I will, one example she discusses , I highlighted and wrote about a couple of years ago (July 2018, to be exact) but will come back to that later.

I make no apologies for cutting and pasting Mary’s article , but it would be a waste of time just paraphrasing…..

It’s a new economy that businesses have to get used to, one that’s built on a new value system. If you look at the past 30 years, consumerism has been peaking and the whole infrastructure of retailers has been around who is the biggest, the fastest, the cheapest. It’s all been down to operations rather than an understanding of how people are living.

Big retailers will give you many reasons why the high street is failing and this won’t be among them. The first reason they give is the internet, the second is the economic climate, that most people are strapped for cash, and the third has been the uncertainty of Brexit.

Of course, all of these play a part, but the biggest reason has been that we’ve changed our value system as people. What we’ve come to realise as a society is that the tenets of capitalism, that ‘more equals better’, is not going to be better for us as people or for our planet.

The bit here I don’t agree with is the last sentence. Certainly, there is a proportion of society that I would agree with,but for the majority(who have a disposable income )I think it just a little more straightforward do I need more stuff?

However, the next short quote, I am in total agreement…

The businesses that can connect with people as people, not merely consumers, will start generating a whole new way of shopping.

 

A great example is Eat 17: a couple of lads from Walthamstow [north-east London] saw the local Spar and thought, “We can do something with this.” They realised there was not much money in the area, so they kept the low-priced stuff, but they also started to work with small, independent producers. They get their sausages from the local butcher and they get the local florist to deliver. And they’ve created this brilliant supermarket. There’s a space where people can sit and eat too, instead of a dodgy cafe, they get the greatest street food vendors to come.

Now areas like Walthamstow will pick up and you’ll suddenly notice that a chain shop has come in because Eat 17 has created the footfall. They’ve created the place to go.

 

….These are the new anchors of the high street. Instead of “Oh, we have to get a Marks & Spencer or a Debenhams in here”, the new anchors won’t even be all retail, they could be a yoga studio, a crèche, community spaces with a socialising function. So yes, we’re going to have less retail, but we’re going to have better retail and better places to connect.

 

Eat17, was the core of my post back in July 2018. But I have seen it happen more recently and in other areas. In my own local shopping parade , there is a new deli, owned by a Dutch guy, who in one year has done exactly what Portas is talking about. I am not sure they are in this order but he certainly focuses on the following tenets….

What is the triple bottom line and why is it important?

The triple bottom line is people, planet, profit, in that order. Put your people first, because the planet will continue without us, but if we want to be on it, we need to change. We need to understand how we’re eating, how we’re travelling and how we’re buying. Put people first and it will be us that can make that change happen. And this means both people in your business and people outside your business. Not consumers or staff: People.

Result is success and other local retailers taking note.

Mary Portas, goes on to say that the likes of House of Fraser failed and Marks & Spencer’s are struggling as they contact to operate on the premise that the stores were places for moving stock. That, clearly, is no longer the case. It is much more difficult for the High Street multiple to engage with the consumer in the same way that the independent can. Which is why , for the first time for a long,long time that the Independent has an opportunity to be one step ahead.

Having just spent a week at a trade show talking to retailers, it is very evident that the creative and forwarding looking retailer is beginning to understand this . Only a couple of weeks ago the High Street of the year(as awarded by the greatbritishhighstreet.co.uk, a Government initiative) was a small town in the Valleys in South Wales, Treorchy. An area not normally associated with retail innovation. It was achieved by a large number of independent Retailers working and engaging with their local consumers.

As to my own industry, ie party, the signs are clearly there. Without change there is nowhere for the retailer to go….At the same time the supply chain needs to understand where they want to be and how they want to get there.

‘DiscoCounting’ ….or Disco Duncing ?

Lousy title . Corny, clichéd, and crap. But surely it’s got to be better than An analysis of the effectiveness of discount pricing strategies within the U.K. retail sector. If it isn’t you will have stopped reading this post by now, if you have managed to get this far. Yet, feedback suggests otherwise. At least 50% of my readership say otherwise. I know that Julia (the 50%) reads right through to the end. Put that in your pipe and smoke it (old English phrase for..my husband can’t do wrong).

There is nothing new in retail discounting. The first Woolworths was a Five Cent store. Marks and Spencer’s were originally Penny stores. When Jack Cohen (Tesco) started selling groceries, it was surplus stock. Throughout the decades many retail discounters have come and gone . In the U.K. the original Kwik Save supermarkets, expanded exponentially. During the seventies and eighties, various discount operators flourished then vanished , such as The House of Holland, Bewise, and many others. Today, there are those that thrive. The big daddy of them all is, of course , Walmart in the USA . Now still the worlds largest retailer. Throughout Europe, there are many successful discount retailers , Action and Hema in the Netherlands, Aldi , Schwarz and Penny Markt in Germany, and Carrefour in France, to name but a few. Within the U.K. there are some of our most profitable retailers eg B&M Stores, Home and Bargain. These all prove , to a degree, that it is and can be very effective form of retailing. Primark for example have just released another set of very impressive Christmas figures.But that’s not my argument. This are professional discounters who have built their business model on discounted prices .

Currently, every other retailer (well, not quite every) believes that the panacea to all retail ills is discounting. It ain’t and never will . Please somebody tell if I’m wrong but there are fundamental issues with discounting that undermines most retail models. If we assume that the discount being offered is real and true discount, ie not some bit of old tat or clearance you have bought in just to offer at an artificial discount. There are three immediate affects …

Loss of profit margin in percentage terms.

Loss of cash margin in real terms.

Simple example of selling something at £4 instead of £5=25% lost profit margin, and £1 less taken through the till. There is the hope that you may sell two items instead of one, but unless the customer needs or wants two , it maybe just forlorn hope. But if they do buy two it puts of a possible repeat purchase, which may have been at the real price.

Most importantly, is the loss of consumer confidence. By that I mean the consumer no longer believes in the discounted price, worse still , the real price . I, firmly, believe that is where we are today. The year is littered with sales. Black Friday, winter sale, summer sale, Boxing Day sale, blue cross sale (Debenhams- done them a lot of good), easter sale, Christmas sale, end of season sale, bumper sale, clearance sale, the list is endless . Even if the discounts are real, there are so many that the punter knows to hang on as there will be a sale around the corner.

Here’s another. Consumer inflation over recent years has been notoriously low. Retailers costs are the complete opposite . To pursue pricing policies which reduce your margins unless you have been able to combat those costs, is sheer lunacy.

Discounting is effective in clearing unwanted stock. However, today the danger lies in the fact that there is often good reason for it being ‘unwanted’. Bad buying, change in fashion or simply there is better available elsewhere, and maybe even at a better price. Within my own market, product that is past its want by date has in practice no value . When Frozen 2 was released, Frozen 1 merchandise could be barely given away . The reality is that old stock is bad stock.

Retail History repeatedly illustrates that discounting is only ever a short term tactic. Today it is rarely even defensive. The change in retailing has been rapid and dramatic (I do not refer to the effect of online operations). The change in consumer behaviour is equally dramatic (again disregarding onliners ). Any non discount retailer that uses discounts as a means to continuous survival, will not survive.

Disco dancing may have made Travolta into superstar, but it’s alliteration for retailers will take them to the back of the class, with the rest of the dunces.

You should be dancing , yeah, you should be dancing ,yeah

But not discocounting.

You think it’s all over….But what about “Planed Board with slightly rounded long sides” ?

Well it is now. Or so we are told. Well another General Election is. And probably the EU withdrawal agreement. Oh and another decade, plus Christmas for another twelve months. So it’s a bit more than just ‘it’s‘. Get it, it’s all over ….

But it isn’t . It’s only just started . The devil is in the detail, and there is a devilish amount of detail. I don’t just want to rant on about Brexit negotiations, all negotiations are detailed and complex . Flogging party stuff, like what we do , should be pretty straightforward. Like..

Morning ‘Guv’ ‘ere’s my bit of red, white, and blue bunting (please note this subtle tale of patriotism) is ten metres long and costs ‘nuppence’ . ‘Ow much would you like ?

‘Guv’ replies ‘sod off’ or ‘ send me bucket loads ‘.

But it isn’t , Straightforward that is. In some cases it has taken five years to get to the ‘bucket loads’ bit.

So when it comes to something like trade negotiations. There is just a little more detail. The following is an extract from a paper relating to some negotiating over various grey areas within tariff classifications.

Tariff classification of Planed board with slightly rounded long sides (TAXUD/3177523/2019)

Classification as “wood sawn or chipped lengthwise, sliced or peeled, whether or not planed” under heading 4407? Or classification as “wood … continuously shaped (tongued, grooved, rebated, chamfered, v jointed, beaded, moulded, rounded or the like) along any of its edges, ends or faces, whether or not planed” under heading 4409?

 

This particular extract is one paragraph out of a page and a half on this one product, from a document over one hundred and fifty pages covering a load of incidentals about stuff of which is little known by man nor beast. The point being, this is just a tiny window into the enormous complexity that is commonly referred to as international trade talks.

I don’t want to rant on about the U.K. Government’s up and coming trade talks with the EU plus the ninety odd countries that it needs just to replace existing agreements. There is no point as it now just has to be done . I just feel when I read this ‘simple’ extract, it was a perfect illustration of the complexities of any negotiations. With tariff codes, for those that don’t know there is a product title number then below this there are series of sub sets . Simples !

The HS (Harmonised System) comprises approximately 5,300 article/product descriptions that appear as headings and subheadings, arranged in 99 chapters, grouped in 21 sections

Now that’s only products, it does not include services, nor intellectual property, data and load of constituent parts to various market places. What is more it only identifies a description of a product , and has nothing to do with any product standard. But I feel a rant coming , so I shall move on.

Many commercial negotiations seem on the surface, to be unnecessarily complex. Yet, particularly in larger organisations, there are many ‘Ts’ to be crossed and ‘Is’ dotted. For example, and this is a gross oversimplification and generalisation, you may have a product accepted at the lowest level within an organisation. This, then,may go to committee or at very least senior manager to approve. The next step is for it to be accepted by the merchandising department. This is to make sure it fits in store, both physically and philosophically. Then, after that, come logistics. They ensure that it can be distributed effectively throughout the estate. If this is all ok, Quality control will ensure it meets all relevant legal and ethical standards. Within this process there will some involvement from finance, to ensure that there are the resources to take this product. And that is by no means the end of the story. The organisation will at some point have to decide if it worth going through all this for just one product. The answer to that is generally ‘No’. Consequently, if you are fortunate enough to get a range selected, there will be appropriate form filling for every individual item, to satisfy every department in that chain .

Easy peezey, it is not. Oven ready it is not. Straightforward it is not. So when politicians, journalists, media types, so called experts, plus a big chunk of our population, rant on about any negotiation should be very simple and straightforward, need think again or at the very least consider the issues concerning planed board, with slightly rounded long sides….

Christmas…is it good for your ‘elf?

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Christmas is an artificial Construct

I aways wanted to write that since I was a wee child and bumped from a key role in my school’s nativity play. Well probably not true, but I was given lead role, a few years later, as Basildon Bond, 0013. Result… and probably the reason I have such a jaundiced view of Christmas.

Churches and Children listen up, I am not saying Christmas doesn’t exist or it is bad for you, this is about, not being good for your ‘elf or your ‘welf’.

Since Victorian times, Christmas has become the ultimate consumer event of the retailers’ year. In recent times, this has extended beyond societies of mainly Christian based populations to virtually any society, of no matter what faith, as long as that society has the wherewithal to spend some money in order to experience and enjoy the ‘non’ religious aspects of let’s spend a load of money for no particular reason time of year . For crying out loud , the whole traditional Father Christmas image is  an artifical construct (got it in again) by  the marketeers of Coca Cola in the 1930’s.

For many years the Christmas season, often defined as the last three months of the year, has been the period where most within the retail sector, manufacturers, importers, distributors and of course the retailer themselves, have made their money . The rest of the years trading covered their cost base , and loosely speaking, the last quarter was the time when real profits were to be had. Within the last twenty years that has started to change . Retailing has become so aggressive, margins so pressurised that without good Christmas trading , the shear existence of those within the chain is threatened.

This is not healthy. All retailing is subject to event based peaks and troughs, whether it Christmas, Valentines Day, Easter, Mothers Day, Fathers Day, Halloween, summer sales, Boxing Day Sales, and now Black Friday. Apart from perhaps the catering and travel industry I can not think of any other market sector that has created such a bumpy annual trading period. In a weird sort of way all those events have, historically, been latched(or in some cases such as Valentines and Mother’s Day created) onto by the retailing fraternity in order to boost their business. Yet, the consequence is now the mad scramble to sell stock at any price. Perhaps a slight exaggeration, but relying on the success of such seasonality can only add to a retailer’s misery.

An example of using a season to smoothen annual trading is unusual but not unknown. A number of years ago Garden Centres, understanding that during winter they had a load of unused space and came up with the idea that they would be the perfect outlet for Christmas decorations as they had the space to display the products at their best . The consequence of this action is that they now dominate the Christmas decoration market. Conversely, the toy industry, in about the late eighties, so concerned about the size of the end of year peak at Christmas attempted a campaign to get parents to give a gift of a toy at Easter. Needless to say it was not a success. Paradoxically ,the party industry which, as Christmas is supposed to be party time, does not perform especially well at Christmas, but has become very reliant on Halloween. If it’s a poor year for Halloween, it is an especially poor year for Party retailers. Turn the clock back a few years, Christmas was the time Party Retailers revelled in it literally . Wind forward and Party Retailers become fearful of a bad Halloween and do little business at Christmas(New year is ok).

There is no magic wand to smoothing out big spikes in Retail. Yet, I have one client who started about five years ago and refused to buy product related to any major event . His business model was to make the operation profitable on everyday business. Within a couple of years he had achieved that . Any additional business created by these spikes was icing on the cake and as a consequence the core business is a lot ‘elfier’ for it (apart from all the icing -which can be very bad for your teeth).

I am not a grinch (perhaps a bit of one) but the Christmas for retailers and consumer alike, juts seems to be a load of stress. Stress in buying stuff they don’t whether is right for  those they are buying for and more often don’t really have the spare cash to afford. Then a load more cash is spent on far too much food, much of which does not get eaten. And that, that does get consumed , is because everyone overeats. No it ain’t ‘elfy, it makes you less ‘welfy’….And the Elf in the image ? By the look on his face , I think he is skiving, cos he is fed up with fat block with a beard in a red suit bossing him around. Oh and the Elves…No, they are real. They are just a transmogrication of the poor buggers stressing around in their white vans trying get that last present delivered on Christmas Eve, you were too stressed and forgot to order, for your nearest and dearest….