The mysterious pot at the end of the convenience rainbow

November 12, 2014 10:34 am
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The retail landscape has changed dramatically in the last two decades, especially when it comes to food retailing. In the nineties, companies went head to head buying large plots of land to host large scale retail outlets. For a time, more effort was placed on securing land from competitors than on the retail offering itself.

This started to change with the purchase of London newsagents T&S by a wholesome London market retailer named Tesco. It seemed a strange purchase, going back to its routes, but in essence it was 5-10 years ahead of its competitors.

Tesco realised the market was saturated and made a leap of faith. Shortly after, Sainsbury’s followed suit and more recently so has Waitrose. Even the likes of Morrison’s who promised never to enter the convenience market have changed their mind.

So that means pretty much all of the big chains have solved the convenience market, right? Wrong.

Convenient Locations

As I see it, this is only one third of the prize and the rest of the pot is hiding in the corners of consumer insight innovation. We can split the convenience offering into three parts. Part one is the simplest – a convenient location. Most, as discussed, have nailed this by situating their stores next to hotels, in train stations and petrol stations, and everywhere in between. Funnily enough, the Co-op is now in a better position by having at least one store in every postcode. Their inability to translate their power into a large format retailer in the 90’s may have been for the best.

Convenient Formats

The next two are harder to crack. The first one is convenient formats. This is not a completely untapped market; however, most have only dipped their toe thus far. Smaller portions, smaller quantities and less visual impact in store space are not hugely attractive offers to most manufacturers as this adds complexity in the manufacturing operations and their supply chains. More pack sizes, different pack formats and more complex distribution networks all point away from convenience specific products. However, there is a mammoth change in the way consumers shop. The social demographic of populated areas is changing. Consumers are smarter and savvier and if we decide not to offer what they need then we are missing out on a massive opportunity. A smaller portion of milk may cut it but the 2ltr bottle of washing up liquid will still make people jump in their car and drive to the overhead intensive large format retailer on the weekend. Worse still for the multiples it may even force consumers to take a little trip to a high quality German discount retailer…

Companies have started to answer the simpler questions; which size of chicken do customers want and where do they want to pick it up? We have matched the size and quantity of our offering to match consumer NEEDS.

So what’s next? It is simple (in principle)…pure product innovation. No longer giving customers what they need but what they WANT.

Convenient Products

Not only are customers more savvy but they are more demanding and time poor. How many people want to go to their local convenience store after work, travel home, marinate some meat for 2 hours and then cook a stir fry? Some, but these are the minority, those who have a love for cooking and the luxury of time. And besides, these people are more likely to travel to the larger format or luxury stores to buy their food. The people we need to target are those seen dashing to catch their train/tube/bus as they don’t have time to wait for the next one; they’re still clutching their flaked Alaskan salmon with soy, mirin & ginger in a small (free) lime green bag though. They love good food but don’t have the time to craft it themselves. What does a Tesco metro or a Morrison’s local have to offer them which isn’t in their normal stores?  Not a great deal.

Manufacturers and retailers need to offer more to reap the potential rewards of the convenience market. Not higher quality ready meals or smaller packets but a different offering for people who WANT something different. Satisfying those customers who say ‘Wouldn’t it be nice if…’ may be the final nut to crack and those who manage to achieve this task are those who will buck the trend of declining sales by removing themselves from the race to the bottom.

The aim of a Convenience retailer needs to be offering the same standard of living for its customers but not at the expense of time and effort.

Conquering the crisis of complexity

November 11, 2014 11:17 am
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Business Unit Director Mark Fox explores why many clients are quick to dismiss the simplest solutions when looking at solving problems in their business.

Simplicity’s goal is to find the simplest way to represent something, stripping away all that isn’t essential and expressing what’s left in the clearest possible way. Simple should not be confused with simplistic (overly simplified) it is the happy medium between too much and too little.

On initial engagement with a major FMCG client recently, improving the quality of their customer service was deemed to be a series of highly complex and difficult to deliver tasks and actions.

In reality, after an initial diagnostic, of course a range of complex solutions were evident if preparing a defence. However, in order to resolve the issue there were a number of solutions available which were relatively “simple” to implement;

 

  1. Redeployed the quality standards that were written and “filed” to ensure that manufacturing produced right first time product to an efficient level
  2. Returned critical production equipment to good condition ensuring maintenance and cleaning was at the required levels
  3. Reinstalled the methods of autonomous operator maintenance and preventative maintenance.
  4. Retrained employees to appropriate levels, ensuring that the training validation was linked to performance levels so we had an objective way of linking competence to performance

 

In simple terms, do what you say you should do on paper, and performance will improve.  In a 4-week period of working in tandem with the client, the original standards were implemented with the already existing sustainability process and this has yielded the necessary increase in OEE. The metrics were modified slightly to provide a more balanced and cohesive approach to performance and we continue to work together a couple of days per month, challenging a strong and motivated team.

 

Coriolis can help you see and think differently, avoiding unnecessary complexity.

Budgeting is as much about you

November 11, 2014 11:10 am
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“We need a 20% reduction in operating costs with no constraints on demand”

The method of the resourceful is to plan with daring and execute with vigour.  All too often we have the daring but lack the vigour.

The relevant teams then try and integrate existing improvement plans building overlay on overlay resulting in an ever confusing view of the following year.

The financial outcome is a result of well planned and executed strategic themes. “A budget is a quantitative expression of a plan for a defined period of time. It may include planned sales volumes and revenues, resource quantities, costs and expenses, assets, liabilities and cash flows. It expresses strategic plans of business units, organisations, activities or events in measurable terms.” In reality this is managed by a “Balanced Scorecard” complementing the P&L.

Traditional budgeting methods are not declining in importance – a recent CIMA global thought leadership report indicated that their use in setting bonuses is increasingly prevalent.

More than half of the respondents in this thought leadership review reported some form of change in their budgeting process in the past five years. Three general themes emerged;

  1. Greater involvement of junior management in budgeting processes,
  2. More accurate and detailed analysis
  3. Tangible measures reflected in the appraisal process

For many of us, the budget process is infrequent and we take the approach that budgeting should not be difficult or complex. Unfortunately it can be difficult and complex, as departmental goals are intrinsically linked. Businesses often seek support from the large accountancy firms to audit the outcome at the end of year. Would it not be more prudent to seek the support of specialists in preparing for the forthcoming year, ensuring both business and personal targets are achieved.