‘It ain’t easy ‘ ….Being an online retailer !

It is also the title of a David Bowie song from way back in the early 1970’s, way before the internet, but not door to door van deliveries. My ‘Old Mum’ used to give her greengrocer a written list and he delivered it to the front door a day later. And she was doing that in the sixties. No internet, no iffy broadband, no crashing web sites, no ‘out of battery‘ phones. Pen, paper, man in greengrocer and a green van ( colour that is, not in the slightest bit eco-friendly) . Simples as a wise Meerkat once said.

That Greengrocer eventually closed because of the rise of the supermarket. What do you make of that because my mother then had to drive to get her greengroceries. Now, it was not down to my mother that all independents closed, but there is some irony in that some consumers lost an element of convenience in the name of convenient shopping.

Race forward sixty years and we are back to delivering our purchases via a method somewhat more complex than pen and paper. Before the shout goes out about the Internet killing the retailer , unfair competition blah, blah, blah., lets just take a gander (Look for non native English speakers of whom I know there are a few , or at least one or two)over the last 18 months . With the various lockdowns throughout Covid, the retail environment would have been even more dire. Dare one say the emotional health of the nation would have been somewhat worse the wear, in that costumers were , when finances allowed, able to indulge in a huge variety of product, whether books ,puzzles, hobbies, household products, clothing , all product that was not essential but enabled a slightly better environment when you were confined to your own four walls.

So if we can make the case that all online operations are not all bad then I think it is only fair to look at the case as to why they should not get quite the bad press most of the media seems to give them .

Whilst these 2 Charts are from different sources and slightly different years , it helps to illustrate the way retail is moving

There are broadly 3 types of B2C operators

Those who sell on the market places eg Amazon, eBay & Etsy etc

Those that operate their own Web shops

The Third being those who operate on both

Let’s examine the the second ie those who trade via their own web shops.

Before doing that it is important to make thing clear about online operators , for the most part they do not operate on the High Street therefore their rent and rates will tend to be lower than a Bricks and mortar equivalent per square metre. There ends in my view their main economic cost benefit .

Basic Higher Costs for Web shop operators Vs Bricks and Mortar

1.Unit size tends to be much larger than equivalent bricks and mortar
2.Stock holding is likely to be much higher
3.Technology both hard and soft high cost of entry due to much greater demands on the systems
4.Greater number of SKUs-Independent brick and mortar (in Party) maybe 6000+ ,web shop more like 30,000+
5.Can take up to 30 minutes to load one new product onto a web shop (that is similar for the market places, if not more so)
6.Very high cost of marketing or web awareness. It would be no exaggeration to say this can be in 6 figures
7. High cost to maintain awareness
8. Cost to deliver (no cost to Bricks and mortar). Current major issue is a problem concerning shortages of drivers
9. High cost to maintaining customer loyalty (Since there is no face-to-face interaction like in a retail store, the development of trust and loyalty takes more time and effort in eCommerce)
10. Cost of returns (Over 60% of online shoppers look at a shop’s return policy before making a purchase.)
11. Cost to pick and pack
12. Increasing IT requirements such as data analysts

These are just some of the cost issues. Other barriers facing B2C e commerce platforms are (all involve cost at some point)

Online identity verification
Overall cyber security
Shopping Cart Abandonment (apparently this can amount to anything between 60-80% )

Many of these issues can be offset by using the market places such as Amazon & eBay. Yet these have their own pitfalls in terms of there is, of course a cost, pricing is very aggressive, you can be competing against a far bigger supply chain, and you are reliant upon the whims the platform you are using and subject to their rules.

Here’s a fascinating little fact

It takes about 50 milliseconds (that’s 0.05 seconds) for users to form an opinion about your website that determines whether they like your site or not, whether they’ll stay or leave.

sweor.com


and another …….

47% of Users expect a maximum of 2 seconds loading time for an average website

sweor.com

yet another ….

Users spend an average of 5.59 seconds looking at a website’s written content

sweor.com

Take the sum of these 3 stats and you are not looking 8 seconds in total. It takes that long to walk into a shop before you have begun to get an impression of what is on offer. That said there are some retailers where I have made a very precise decision not to enter in a fraction of that time , which will say loads about those particular shops.

The following diagram may also illustrate how being an online seller is not that straight forward. Show me a bricks and mortar retailer that is faced with any of these dilemmas.

Governments have talked much about taxing the ‘ so called‘ advantages of the online operators . There maybe an argument for the likes of Amazon, but for the rest it is taking a sledge hammer to crack a nut. There has never been an argument for additional taxation for the supermarkets .  Tesco & Sainsburys alone take over 42% of the market. Who had it before they existed (as supermarkets) ? The independent retailer . It is how retail evolves. The market place has to adapt as it always has. Nobody said it was going to be easy.

No Retailing is easy. It never has been, and it wont get any easier. It has to evolve to survive. There will always be the ‘naysayers’. Online is here to stay and so are good bricks and mortar retailers , we started with Bowie so I’ll finish with Ike & Tina Turner

Working together we can make a change

Working together we can help better things

Ike & Tina Turner 1970

Bit of a shame Ike didn’t think more about some of the words he sung , but that does not detract from the essence .

Shortages…..what do you mean? We are not in the middle of a bloody war !

National archives (Note: Fires not Fries)

Toilet rolls …No. Sanitisers ….No. Pasta….No. Chips….Yes.

Now before you start calling your local chippy and Pre-Ordering your month’s requirements or buying a new freezer to keep a years worth of frozen chips, it is not the tasty sort we are talking about.

Jaguar Land Rover, Ford, Volkswagen, Tesla to name but a few are cutting back on production because there is a shortage of semi conductor chips that are used in modern day vehicles. This has come about because during the pandemic there was a huge drop in demand from the automotive industry so chip makers switched to chips for laptops, electronic gadgets, and mobile devices etc as the demand spiralled .

Yet this is just the tip of a veritable iceberg. Just go into your local supermarkets, and look carefully at the shelves, you will start to see a lot of stuff missing . Construction materials , medicines, bikes, and many food products are just a growing list of products that are going to be hard to get over the next six months .

The construction materials shortage has impacted self builders, renovators and DIYers, and further problems are expected

Jack Woodfield Homebuilding & Renovating

There is currently a global shortage of raw material shortages, stemming from global demand and other external factors (including the slowdown and in some instances, factory closures, outside the UK), which continues to constrain production of certain products, such as insulation, paints and adhesives, as well as packaging for products.

Jack Woodfield Homebuilding & Renovating

Samsung warns chip crisis could lead to shortage in TVs and home gadgets

Samsung’s chip division saw profits drop after it had to close vital US factories in February James Cook ,Telegraph April 2021

A combination of covid, major supply chain disruption , demand changes , cost and organisational issues within world shipping have created that oft used phrase a perfect storm.

What may come as a little bit of a surprise to some (but not perhaps those within our own industry ) is that you may not be able to not be able to pop into your local Party store , or your favourite party web site and buy the latex balloon of your dream. The worlds latex balloon manufactures are being faced with exactly the same problems as that of rest of worlds supply chain.

  • Extraordinary demand (throughout Covid)
  • Shortages of raw materials
  • Manufacturing limitations due to covid restrictions
  • Shipping disruptions

The following is an an extract from a statement put out by the Balloon Council of America (Organisation representing major Latex Balloon Manufacturers in the Americas.)

Industry Update: Growth and Supply Chain Impact
It has been over a year since the pandemic began impacting our lives and business. As leaders in the balloon
community, it is important that we address the disruptions in the supply chain that the industry continues to
experience.
Although we are shipping large quantities of balloons, we have seen a marked increase in demand and the reality
is COVID-19 continues to impact all segments of our industry. Some of the challenges that we faced early on
continue to cause disruptions and impact the overall business.
• COVID-19 has continued to impact employees. Safety is essential. In many companies, new work rules,
social distancing, and physical barriers have been necessary to ensure a safe work environment and these
changes usually mean a reduction of efficiency and output. We have also faced challenges in finding and
retaining employees during these challenging times.
• Balloons are an element of a global supply chain, and many suppliers, both here in the U.S. and overseas
that we don’t control, have been similarly hit, impacting their ability to deliver raw materials or services.
This has been an ongoing issue in the past year.
• The whole supply chain, including freight companies, continues to struggle to operate efficiently and has
not been as predictable pre-COVID-19.
We know this is frustrating for balloon buyers at all levels. Manufacturers, related products suppliers, and
distributors are doing everything in our power to ramp up volume and responsiveness. TBC members are trying
hard to control the things we can, such as increasing production capacity, asking our employees to work overtime
and recruiting additional workers.
It will take more time for the supply chain to reset but we are tirelessly working to achieve our goal to return to
pre-COVID-19 service levels as quickly as we are able.
The global vaccination effort currently underway offers a beacon of hope that a return to normality is a possibility
in the not-so-distant future. That said, every day we are hearing stories about new variants that may or may not
respond to the existing vaccines. Few expected the pandemic would be this severe for this long, and none of us can
really project when its impact to industry will be over.
Balloons have brought joy to many people throughout the pandemic. As an industry, we are committed to doing
everything possible to get business back to pre-COVID-19 service levels. We are all working to make that day come
soon, and our teams won’t be satisfied until we achieve that.
Thank you on behalf of all the manufacturers and distributors who are TBC members for your patience and
understanding during these challenging times.

I make no apologies about the length of this specific extract as hopefully it will be of interest to the odd reader who is involved within the party industry and it would be remiss of me if I did not highlight these problems, particular as this product has put food on the plates in our household for many years.

Moreover, these issues are the very same (or similar) facing the entire supply chain in many product areas.

Most consumers wont even notice , or rather they may have difficulty in getting their brand , but there will be an alternative. Yet higher up the supply chain, the pain will be greater. Because of the way the supply chain operates in most markets, it is just not that straightforward in finding another supplier.

What does of course happen when supply dips , and demand remains constant or increases then so do prices.

Yet we are not at war. Well maybe we are in a sense, of all trying to fight a virus, which is complex enough but then putting into the mix the complexities of world trade, there is a inevitably about the impact of the supply of goods and services. Despite this ‘inevitability’ , none of us actually know what is going to happen from day to day . So if you cant get exactly what you want today, but you want exactly what you want, hang on a bit and you will probably get it. If you don’t want to wait buy something else.

Brexit …..aaargh….Jan 1 …brrr…Customs… aaargh !

Over the last four years , I have tried as much as possible not to post about Brexit. However, from a purely practical point of view I have relented, in the hope I can inform in an apolitical way.

Unbiased (I keep biting my lip even when I only write those words), I am going to try and put some of facts down which will hopefully inform traders who have been buying from suppliers within the EU, on what they need to do. I would like write about exporting to the EU , but that is even less clear and to be honest my interest is in stuff coming from the EU.

So lets start with some facts. There are 11,000 containers of UK Government PPE at Felixstowe docks. Ships coming into both Felixstowe and Harwich have been subject to delays for some time now. The Customs IT systems are not fully tested yet. Every UK point of entry ie ports & airports invariably run different types of software for customs declarations . It is muted there will be all singing, all dancing single system by 2025 . No matter whether there is a deal or no deal on Jan1 2021 things will change big time. If you did not really understand the words ‘free movement of goods’ you will then .

What’s to do then ? If you import absolutely anything from the EU or intend to then the following 2 steps are essential.

  1. Apply for an EORE ( pronounced by HMRC as EOREE. Well at least someone has a sense of humour or irony) .
  2. Apply for deferred Custom Declarations and Vat payment
Eoree -Amused me !

You have to do No 1 before you No 2 (that may chime with some- schoolboy humour). You can only apply for 2 if you have not been a naughty person with HMRC. If you are having difficulty loading the HMRC site to download this form, it maybe the browser, as it only works on certain browsers. But HMRC Help Line doesn’t seem to know that. It also doesn’t explain the forms you may or may not need. The one that you probably do is called C1202 as it is a direct debit mandate for HMRC. Without this you are unlikely to get approved . Here’s a good ‘un, you have to complete the form online but then you have to print and post it. This implies that they could have anywhere between 100-200,000 postal applications between now and Christmas, which they will then have to handle manually. Having just had two weeks locally of no postal service, the signs are pretty ominous.

If your application for deferred status is confirmed it allows you to do 2 things …

  1. From the Jan 1 to June 30th you can defer making your customs declarations. But you must keep a record of all your transactions during that period. I will itemise the data you need later.
  2. Whilst in the EU there was an agreement that all VAT transactions between states did not carry VAT on the invoice. This stops on Jan 1. From then on, there will be no VAT on an invoice from an EU supplier but you will have to record the VAT that would have been due on that same invoice in your VAT returns.

The Following list are the core items you will need to record for customs declarations :

Customs Procedure Code

Supplier

Date

Consignment no/ Invoice no

Product code

Description

Tariff code

Tariff Rate

Cost Price

Quantity

Total Due

Without doubt I will have missed certain elements but these are the basics. If a deal is reached, I get the impression that declarations will still have to be made as to what they contain is another matter . One thing is for certain is that you will have to record the Vatable amount as that will certainly be due on July 1. I cannot speak for the Northern Ireland Protocol, as that is another layer of political customs speak. Nor do I have any knowledge of specialised products such as plants , food, oil, gas, aero engines, airplane parts, chemicals, drugs………All of which I assume comes into the definition of oven ready deals.

None of this helps with the importing from nations not in the EU but have free trade agreements with the EU. There are fifty plus such nations . We have made a couple of deals notably Japan, Switzerland , Norway and Iceland but there are a number of significant trading nations where we will no longer have a free trade deal such as Mexico, Vietnam and Turkey. And I am not so sure there is a lot of help available. There are grants for training on customs procedures and there are also grants if you want to set yourself up as a Customs Agent ! I think that in itself tells a story. There are also many HMRC webinars . Having recently sat through one , I would not raise your hopes of celestial enlightenment . Maybe others are better .

I lied. At the start I said I was going to be apolitical . I have been . Now I am not. The UK Government has been floundering about in very deep waters dealing with Covid. So has every other National Government. No matter what shade of political belief , no Government would have got it right. It is one of life’s undeterminables. And it will continue to be so. The Government has a duty to preserve and protect the lives of its citizens. Where there are definitive actions that could be taken they should take them.

Which brings me back to Brexit. I am a remain voter accepting of the UK decision to leave. What I cannot agree with is reckless political ideology that puts our nation in harms way or at very least increases the risk to both health and wealth. One of the underlying principles of paying off the huge debts that have been incurred (quite rightly) is the returning to some form of economic growth. Even (at least most ) political Brexiteers agreed that the first months of Brexit would be very hard on the economy, and that was pre-covid. Consequently , I get very wound up by superficial ads with actors, apparently in large warehouses, saying we are ready are you? When they, the Government are very evidently not. Moreover, how would you expect hundreds and thousands of businesses that have currently got to deal with more economic, financial and emotional hurdles to deal with than at any other time since the 2nd world war .

So please tell me UK Government why you have chosen not to doing anything about the one thing you did have control of ie Brexit Transition you chose to stick with political ideology . That is to say you kept your snouts well and truly stuck in a political bucket . Take back control , whatever that means but do so when you when can at least see the steering wheel. As a consequence we can look to at very least six months of even more supressed if not depressed growth rates. Ta very much .

Kerb Crawling..The New Business Opportunity!?

Courtesy ‘mac’ Daily Mail

It is one of the world’s oldest professions. It can be highly profitable . It is a very quick and easy way to start a business, if you are prepared to be out there in all weathers.

Selling stuff on the street is common place throughout the world. Whether it is street food in South East Asia through to Street grafters flogging Bargains to unsuspecting consumers throughout towns in the UK , there would be few anywhere in the world who would not have bought something from a street vendor at some time or other. So nothing new there then.

Well there is sort of .. rather sort of new . I first experienced something which I thought at the time was very innovative. During lockdown when restaurants could offer takeaways , a local restaurant offered a Kerb Side service. You ordered and paid via your phone and when you arrived you stayed in your vehicle , sent a text you had arrived and they would come out and put the collection in your boot.

In the US this has gone a stage further. A number of retailers concerned about Covid did not want shoppers back in their shops. Yet they still wanted to trade. Their solution is to make their shop window their Shop Window. so to speak. The principle is the consumer pulls up in front, or is walking on the pavement, and the retail offer is shown clearly in the shop window. The buyer then phones through to the store say what they want, pays for it and hey presto it appears at the front door or is delivered to your boot (Trunk as the Americans would say).

Whilst click and collect at the curb side is not in itself revolutionary , it is when there is a store that informs you and you use the shop window to make your purchase. It favours the smaller stores and those with limited store offering . It also favours small stores that have small stores or rather very shallow but with a long frontage.

Party Store In USA. Courtesy BBC

It helps if you are not on a Red Route (London) or Double yellow lines, that aside if you are actually on pavement there is potential there for many retailers. By restricting your selling space to a window is very restrictive, but the alternative is that less customers or even nobody comes into the store . This is not instead of a website it is another tool. Potentially it would attract the passer-by, especially if they are going somewhere else and think ‘I can order this now and do what I was out to do and collect it on my way back.

THE WALL STREET JOURNAL -Stay Forever Store ‘Walk up & Browse’

I have heard from a number of customers that during lockdown they executed a similar plan. They did not make specific use of their windows but they offered a drive by service via social media and in conjunction with their web sites. This is by no means a Retail Panacea but it is another weapon in the armoury (….or ‘tool in the box’ depending upon your mind set).

Whilst having developed during the Pandemic, it is not uncommon for retail innovation to jump to the front of the queue during any crisis, it could be a very useful tool during ‘normality’. It can be thought of metaphorically reaching out to the consumer and looking at ways that make it easier for them to buy from you. Instead of you having to drag them in from the street you are meeting them half way in the Street.

“This is the new abnormal and the consumer wants a different experience,” said Mr. Fawkes of PSFK, the research firm. “If the legacy retailers won’t provide it, new entrants will.”

THE WALL STREET JOURNAL

Why don’t we ‘Party in Chains‘ like the rest of the World?

Yes, another unashamed bit of Product Placement

Perhaps the Brits are prudish, a bit reserved , not sure what is involved, think its a bit continental, and we get drunk too quickly.

Now I know the odd non U.K. citizen who may read this, says I know you brits like having a good time and dressing up in chains but that is not the point . Is it more to do with High Street rents, cost of operation, and too much online competition ? Quite simply a Chain of Party Shops does not exist in the UK and it has puzzled me for some time.

Oddly, Covid has helped with my enlightenment. For many years, the U.K. has been considered one the major markets for party products outside North America. Of course part of Northern Europe has ‘Carnival’, Many Spanish speaking nations have some form of Fiesta, Italy has Carnivals and Fiestas , the Brits have long been a nation using any good excuse for a Party.

That all said, the biggest Chain, in the U.K., was never bigger than 5 stores. Several years ago the American franchise chain Partyland established 12 branches, there are now 0. the remains of Partyland became Pure Party which was subsidiary of the Card shop chain Birthdays. I think at it is peak the Pure Party chain was over 40 stores. Unfortunately they were run like card shops. Both have long gone.

In France there are various chains with 20+, in Spain Party Fiesta has 130 (not all in Spain), and Germany with the likes of Karnevalswierts with 10 (1 in Holland) and Dieters with over 30. Needless to say the largest is in North America, Party City with the best part of 1000 stores. In the UK there have attempts by large multiples to try add on ‘party sections’ but all have failed through lack of sales per square foot. I have to add a small footnote here, there is one such operation in the U.K which is within a supermarket chain but from all accounts it is under constant review.

Enlightenment came via Covid lock-down. There are of course major structural issues ,which as already stated, focus heavily on operational costs being especially high in the UK for a retailer of any type, in addition to the effectiveness and impact of UK online operators. What I saw during lock-down and the eventual opening of retail early July was the split between those that had an alternative during lock-down and those that did not. Moreover, the successful operators, generally had a good relationship with their local community and were active on social media.

The common factors did not stop there. On the whole the successful retailers were family owned and run, and were single unit stores. The final piece of the puzzle was that they had a strong Balloon Business.

On the surface there is nothing there, which could not be replicated in multiple locations. Except the ownership, Family owned or single owner operated. It is very evident there is a strong connection between those single owner or family owner operated stores as against multiple stores. If this connection with the community is maintained and nurtured it becomes an integral part of the business. This is really difficult to do within a chain.

So why did lock down become a source of enlightenment ? From hearing some many stories from retailers about how they were pestered (not in a nasty way) by local customers as to when are you opening up…or can we get x,y & z from you somehow. None of this relationship came about because of lock down but highlighted what was already there . The local independent Party Retailer, is a bit like your favourite local Italian restaurant. When the owner goes home to Italy in the summer , the restaurant is never quite the same, until their return. Depending upon the location, the independent party retailers I know ,generally only go away when their locals go away.

For those of you not involved in the Party retailing, and are wondering about this mystique . Thinking Look I run a chain of card/grocery/shoe shops, it is all about good customer service, good management, good staff training… Stop there. Your staff don’t have to get up at 4 0’Clock on a Sunday morning to prepare for someone’s special event that very day . Get it all sorted then drive to wherever it is, lay it all out before the rest of the world has had breakfast. Then, perhaps later that day you might have to go back to collect some of the kit involved . The retort could be our family runs a very successful chain… Yes but your family(or single owner) is not in every store and this is the big difference with the successful Party Store. They have to be .

Yes, you can train teams to do that . But here’s the rub you could not afford to pay them or at least you could not afford to pay them at a rate that would make it the project profitable. The magic word being profitable. It is only profitable if it is you doing it. And yes, you are correct , it is not costed correctly. But that’s where the single ‘independent/ family owner’ comes into play. They need to make a living but profit is not the sole motivation, or even the main driving force.

That, in my opinion, is why there are no real chains and there are not likely to be in the near future unless the structure of the market changes dramatically. I, just, don’t see it happening anytime soon.