The #Ribenagate fall-out for Tesco

ribena

Tesco announced that it will remove added sugar Ribena cartons from its shelves in a bid to combat childhood obesity yesterday and caused a media storm in the process. Good PR or bad decision making?

The reasoning behind the retailer’s decision is admirable: a bid to reduce childhood obesity, and follows from the removal of confectionery products at the till. The move has the potential to push brands to invest in new product development and research to find alternative products that meet taste and quality standards but are also better for us, especially if other retailers follow suit.

At the heart of the ranging decision was a good PR story.

However given the social media fall out yesterday, the good PR story was turned into a joke that other retailers have the opportunity to benefit from.sainsburys ribena ad

Tesco were ridiculed for their decision to remove Ribena but not Coke or Haribo. In principle a stand against childhood obesity would sit well with Tesco which is well matched with families, but because it is limited to just Ribena cartons and Capri-sun pouches, the message is completely lost. If you are going to take a stand then do just that. Don’t offer a half-hearted nod to the problem.

Many parents were incensed by the idea that they were not able to say no to their children and that Tesco should make that decision for them. Other parents of children with diabetes also complained explaining that a high sugar carton of juice is exactly what is needed to prevent a child lapsing into a diabetic coma when they are unable to chew.

The knock on effect of #Ribenagate is that Tesco look foolish, they alienate parents and customers shop elsewhere. It must always be a considered decision to delist a product taking into account reduced choice, price gaps in the range, space, popularity and of course negative PR. The supplier may also be supplying other products and delisting one could have a price or listing impact on others.

The fallout from this has been such that we would expect Tesco to relist the SKUs shortly and let the whole thing blow over. Another stand against obesity can be made if other retailers are likely to follow, if alternative products have been developed that can meet customer’s taste expectations, and if Tesco don’t move faster than the customer is prepared to.

Being cynical, Capri-Sun was also de-listed but there was less of an outcry over that. Perhaps this was a ploy by Tesco to see which brand is least popular?

supermarket promotions sqr

The Power of the Customer over Supermarket Promotions

supermarket promotions

Suppliers, or more specifically brands, used to be in the driving seat, they would dictate when a product would be on offer and the supermarkets took it or left it.

Then the power shifted, supermarkets were stronger, the lure of distribution too great for a supplier to resist, and the suppliers would create promotions to suit the supermarket’s calendar and budget.

Then the power shifted again, this time towards the customer. Many would say that is where the power should have always rested but in fact, without choice, the customer was in the hands of the retailer. However with greater choice comes more power. If the customer doesn’t like something they can complain but ultimately they can walk… to the next supermarket.

The trail of lost market share is testimony to that migration to the discounters, who don’t have the same business model as the Big 4. Their model is everyday low price. Few promotions, if any, simple low prices and special buys. There is no illusion, no mental calculations, no smoke, no mirrors, and the customer likes it.

The complaint that supermarkets are misleading customers with confusing price promotions, particularly was/now strategies, has been taken seriously by the Competition and Markets Authority, but the question remains whether the supermarkets will also be taking it seriously.

While the supermarkets have believed they hold the power in the grocery supply chain they have maintained the tried and tested promotional mechanics with good effect. But the £1billion spent on price reductions by the Big 4 in recent times is indicative of an overhaul.

Asda have a new strap line, “Save money. Live better” and the pocket tapping advert are a big indicator that perhaps their promotional strategy might be shifting, slightly. Waitrose’ Pick a Promotion is a shift away from the tried and tested model, passing the power to the customer to select the promotions most relevant to them. The signs are there that retailers are trying to think beyond the norm and move with the times.

As much as 40% of grocery spending is on items on promotion so there is a very long way to go before there is measurable movement in supermarket promotional activity, and a long way to go before customers are re-educated to not expect brands to be on promotion.

Brand loyalty is only as flexible as the amount of time between promotions. The risk for supermarkets is that the customer has been educated to expect a promotion, and if one doesn’t materialise they are likely to switch brands, or supermarkets. The only way out of this trap is to reduce prices permanently, hence the vast investment in price cuts. The effect on margin is painful, suppliers lose leverage, and the return to good old fashioned brand marketing takes precedent.

Ultimately it won’t be the CMA that changes the supermarkets promotional strategy, or the suppliers, it will be the customers. They will continue to switch their shopping choices, and supermarkets to follow price but more importantly to go where they feel they are valued and where there is trust with the retailer.

Supermarkets take heed.


If you would like to talk to us about your promotional strategy, please get in touch.

 

MandS facia

Does Marks and Spencer need a central operations review?

M&S front

So the general merchandise blip was just a blip. Marks and Spencer reported another decline in like for like sales of its general merchandise business, in most part down to a sluggish womenswear range where the troubles have been and continue to be.

One or two key pieces that get a lot of press does not a season make. Last quarter did better than most expected, on the back of good PR and having enough stock of what the customer wanted to buy. However the underlying issues have not been addressed. A good womenswear season skews the results as does a poor womenswear season. A cooler Spring will be blamed leaving the business with excess summer stock that is probably selling now it is in sale and the weather is more seasonal. How that will affect the gross margin targets we will not know until later in the year but at the moment the forecast remains unchanged.

suede skirt ms

Marks and Spencer do very well in attracting press to one or two key pieces each season which is to be applauded, but while the buyer receives the praise, it is coupled with criticism for a lack of stock, either due to limited distribution or because the marketing team have released a garment to press that is not yet available in store.

The good news is that Marks and Spencer is confidant and competent in its food business. The food team have a proven track record of organic growth, strong marketing campaigns and disciplined execution to deliver consistently. Add to that headroom for further growth as food expands further into new space and you can’t help but look at M&S as two separate businesses, one operating seamlessly, the other stumbling from one quarter to the next.

If we were asked by Marks and Spencer to make suggestions for its business we would definitely start with central operations, creating functions that plan, filter and channel into stores to fulfil the customer’s needs. Restructuring central operations is something that Retail Remedy has delivered in other fashion retailers very successfully and something that we know is incredibly effective in delivering profitable results in the short and long term.

It’s all about coordination and a central operations team managing retail operations and in store execution efficiently and seamlessly. If a piece of PR lands well then the customer will be asking for it in store. That’s when you want the product there ready to satisfy that customer, not weeks down the line when actually there is something else that has caught their attention.

While we hope that the womenswear buy is as strong as the next red hot piece to hit the fashion press, it is ultimately about how it is delivered in store. While the store formats leave customers drifting from one sub brand to another without knowing where they are going, the best range could still be disappointing without a concerted effort in visual merchandising and branding.

What we would like to hear from Marks and Spencer is two-fold; firstly a review of central operations, coordinated and efficient teams delivering what is best for the customer; secondly a visual merchandising overhaul to present what are on the whole good ranges in the best light possible. If we don’t, we could be writing the same thing again in another 3 months time. Let’s hope not.


Retail Remedy has successfully implemented  restructured central operations into many retailers with proven results. If you’d like to know more, get in touch today.

pepandco

PEP&Co – Spend a little. Get a lot.

andy bond pepandco

Andy Bond previews PEP&Co, Kettering

Retail Remedy was invited to attend a preview of the opening of PEP&Co, a new family fashion retailer to open in 50 High Streets in the next 50 days; an aggressive opening schedule that if Adrian Mountford, CEO, had his way would have been an even more aggressive two weeks. Funnily enough the take up of that offer wasn’t widely applauded internally, although there are lots of advantages to it, not least of which launching with the same range at the same time.

As it stands the chain will be launching with the same range in each store but spread out over the 50 days. Will Kettering look as fresh as the last store to open 50 days into its life? The Trading Director Cathy Haydon, thinks it will be a challenge but one that won’t hold them back. A nice problem to have will be a shortage of stock but there is Open To Buy available before the next season ranges come in October and stock can be brought forward if needed.

pepandco womens

The price positioning is extremely competitive, read low, with 95% of the range under £10, £1 entry price point and a maximum £25 for an overcoat or dress, To achieve these incredible prices the buy is very much built on depth rather than breadth, but with an average 4000 – 6000 sq ft, 7000 SKUs and 5000 options seems plenty.

Womenswear extends to lingerie and a couple of key outerwear pieces, footwear and a small range of handbags although at several points Haydon wistfully talked about the additional range she would like to add. It is safe to say that range selection has been more a question of what to leave out rather than what to include.

pepandco kidswear

Kidswear is very well represented and capped at age 12 with a strong element of PEP&Co branded merchandise as well as very competitively priced Disney merchandise.

pepandco babywear

The mix is a good balance with Disney not overpowering what looks like a good fashion range. Like all the ranges the £1 entry price point is well featured in Baby clothing and accessories, and includes a range of consumables like dummies, bottles and nappies.

Homeware was limited to one fixture and a wall bay and was reminiscent of a Wilko’s High Street offer, that is, enough to be a token gesture but not really saying anything comprehensively. Again the prices, from £1 are very good and fit the proposition well, a mum popping in to pick up a couple of pieces and adding a little something into the basket to liven up the living room. No surprise that Haydon has an extended range in the back of her mind for a time in the future when she has more space to play with.

pepandco store

What’s missing? Menswear. Men aren’t part of the family at the moment, much like Matalan’s Oxford Street flagship store. The proposition is family and within the target demographics Mum is just as likely to pick up a t-shirt for her partner as for herself so this is an element that could significantly boost the offer at a later date.

Market positioning is well thought out. Low prices, actually budget prices, and family fashion which translated as low fashion on the chart Adrian presented at the briefing, but in real life was very much current fashion for the modern mother. Prices are on a par with Primark but cheaper than Matalan, and fashionability is on a par with Matalan and lower than Primark so there does seem to be a gap based on those metrics.

pepandco positioning

Location is the other metric which again stands PEP&Co apart from the competition. The business is backed by Pepkor Group, a Cape Town based investment company with global retail interests and deep pockets. When we asked Andy Bond, PEP&Co chairman, about the future potential of PEP&Co beyond the 50 planned stores, his reply was candid. They saw 350 locations to select 50 to open in. The store potential is limited to the number of locations they can distil from the units available in secondary high streets. Matalan and Primark aren’t on secondary high streets so the limit is purely based on a good site fit and investment, the later not being a concern at present.

PEP&Co could be a force to be reckoned with. In the locations they are targeting, at their price point, the competition isn’t strong, and with the right buy, they will be a feature on the fashion retail landscape.

Update: First day trading targets at Kettering were achieved within 2 hours, so that nice to have problem Haydon talked about looks like it may materialise.  Congratulations PEP&Co on an excellent start.