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Christmas retail results: An interpretation

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Today’s retail results reflect an economy that is in transition. Those companies that have a blended point of purchase proposition are in a stronger position than others. But the results and are a mixed bag and include companies that have outperformed expectations and those that are about to have difficult conversations with their financiers in the weeks to come.

To paraphrase Gerald Ratner who was interviewed on Radio 5 Live today “Those companies who are in second place are nowhere, those companies that offer a premium brand with a premium propositions are going to win”

So what’s changed from last year when even those who had a great proposition but were in second place were making a profit.  It’s an age old belief that is being played here by consumers globally. People only buy from people they know and trust when money is tight. Brands that are succeeding today have a history of value, a proposition that is current and a relationship with the shopper that transcends the rest.

A quick look at the financial papers today confirms who is doing it right and who is playing catch up. M&S, JLP, Next and Sports Direct are the bell weather stocks that are controlling this space. Companies playing catch-up include Game, WHSmith and HMV. Is it time to reduce the foot print on the High Street and to warehouse stock on-line?  20 years ago rents contributed 10% cost for any High Street retailer. Today it’s closer to 20%.

Out of town centres are running at approximately 12% of cost base. The consumer spends less time on the High St and more time on-line. Why would any retailer open up on the High St today? Pop up shops are becoming with the norm in the Mall and on the High St. Why? Because the rents are not competitive and the consumer is letting someone else take the delivery charge.

In a competitive market where sales are at best stagnating controlling the cost base has always been the answer. But that was before the maturing of on-line shopping. It’s important today to understand what percentage of retail is derived from on-line sales, shops and cost control. Now is the time to build a trusted blended proposition that drives success from less on the shelf on-line.

Europe: What now?

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Last night David Cameron made a decision that will shape our economic future for the next decade at least. By protecting the UK Financial Industry he has allowed UK Plc to manage it’s own destiny.

Prior to last night we were a peripheral player in Europe as we were not part of the Euro, although in Europe. Therefore very little has changed today. Tomorrow however is a different story. UK Plc is now capable of climbing out of its own recession, it doesn’t have to rely on Europe to set the speed.

Why is this so. The housing market will become the engine of economic recovery. For every job created in the construction industry 3 other jobs a created. House building is fuelled by mortgages and loans provided by the finance industry. To kick start this process, deregulation in the planning industry must release the breaks for economic recovery.

Further exposure to economic european taxes and increased debt from failing nations will stall this recovery.

The UK economy is fundamentally different from that of France and Germany. Our economy is service lead and knowledge based and as the leading global financial market David Cameron had to protected this industry otherwise we would be assigned to the debt scrap heap of Europe.

Beatles or The Rolling Stones on Linkedin

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Recently on LinkedIn we asked a series of questions relating to partnership or pairs.

Like most relationships we were intrigued with the notion that opposites attract.  We started with simple phrases, allowing people to respond to the word or phrase they preferred.

We recognised that LinkedIn as a closed group, and the responses, were those who chose to answer this curious set of questions. So what of these questions?  They consisted of various opposites including “Summer or Winter?  Book or TV?”  Different questions were posted on LinkedIn each day over a 30 day period.

We expected little but we were surprised.  Those who answered had various profiles and the responses were wide-ranging, some were controversial in places, but above all were thought-provoking. When we analysed the results we quickly realised, we needed to develop a sampling model that was more encompassing, that had a wider reach and that utilised a more credible methodology.

You can participate in our new questionnaire here. We focussed on popular culture, ranging from rock bands, through movies, technology to lifestyle.  Questions included – Stones or Beatles?  Bill or Mac?  Snow or sun? So back to the questions polled.  Another thread quickly emerged as we tried to increase the momentum of questions supplied.  Namely, the understanding that people had for the perceived good over bad.  It is often anticipated that in times of economic downturn the majority of respondents choose safe and traditional answers, e.g. more people chose The Beatles than The Stones.

However we realised that people also challenged the norm depending on brand recognition.  Apple over PC?  Apple tended to be favoured.  Summer vs Snow – people chose snow. What else did our survey tell us?  We learnt that people instinctively recognised the value of team.

When asked about Lennon or McCartney people still preferred the collective talents of The Beatles and McCartney over Lennon?  Although the iconic songs remained with Lennon. Maybe The Stones remain Top of the Pops because the team of Jagger and Richards play to each other’s strengths. Break the team up like Lennon and McCartney and the individual parts do not outperform the sum of the parts.

So maybe the conclusion is that employers need to think long and hard before teams are broken up to save costs.

To do so may lead to irreconcilable differences

Joe (Part 2)

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How many times do you pick up a paper and read that the CEO of ABC Inc has resigned or been released due to poor performance?

You could argue that it doesn’t happen often enough or that it happens all too often.  Either way it’s something, you can rest assured, which will lead to significant change for all those who work at ABC Inc.

Over the last 15 years ABC Inc has been focussed on delivering shareholder value.  It’s been the mantra of every CEO that has taken the reins, as Joe in the mail room will tell you; ABC gets a new CEO every 2 years.  That’s 7 CEOs in 15 years, and still shareholder value is maintained.

“What could ABC do if the CEO remained in post for 5 years?” thinks Joe.

But “Who is the shareholder that demands the shareholder value?” asks Joe.

Well it’s you and me, and all of us who have pensions, shares, or bonus plans that relate to the continued success of ABC Inc.  Think of all the companies that supply ABC Inc from the guy who sells the office stationery to the team who upgrade the IT infrastructure every 36 months.  There is the fleet supply team, the courier company, the web design team, the corporate gift supplier, the sales training team and the strategy consultants.  And that’s before we get to you the buyer, or the 20 year term employee who has retirement in mind.

We are all driving for our bonuses; we are all trying to close that order for or from ABC Inc, or are looking forward to the pension cheque when we finally cash in our ABC Inc chips.

“Yup, we’re all stakeholders in the continued wealth of ABC Inc,” thinks Joe.

But, as Joe will tell you, the guy who has the best bonus at ABC Inc is the 24 month CEO.  Every 24 months ABC Inc gives the new CEO a “golden hello” worth 25% of starting salary and an annual salary that matches the national debt of a small African nation.  And after the trust of the shareholders has been lost the 24 month CEO walks away with a severance pay cheque that includes 12 months pay, bonuses due and a pension equalling the 20 years Joe has served at ABC Inc in the mail room.

Now Joe readily admits that he is not the sharpest tool in the box, and that’s why he has never wanted to leave the mail room.  But he does ask himself what incentive does the 24 month CEO have to succeed in his job if the price of failure is retirement in a beach hut in Malibu for the rest of his life.

He does question the price of success, when the only decision that can be made by the CEO after the 6 month strategic review, and the 3 months of re-organisation that will inevitably take place, is what car the CEO orders.  You see, the 24 month CEO has it down to a fine art.  That Harvard degree wasn’t a total waste of time, just ask Joe.  The 24 month CEO strategises, re-organises for 12 months and watches his plan fail over the next 12 months.

But this is fine because the last remaining 6 months of his 24 months will be spent morphing his business strategy into a tactical fix, as the board loses confidence in the new strategy.  The 24-month CEO has designed a plan for failure, not his, but those that put him in the post.

Hey but that’s OK, the 24 month CEO has enough excuses to walk into a new company and start again.  He has calculated he can do this 3 times before he is found out, but by then he would have upgraded his retirement plan from a condo in Malibu to owning a beach complete with palatial house in Hawaii.

But Joe still doesn’t get it.  Who drives the board?  Then the penny drops.  It’s those guys in the suits who visit the ABC Inc theatre every 3 months to listen to the 24 month CEO layout his new strategy.

Weren’t these the same guys who were at Harvard with the 24 month CEO?  In fact wasn’t the 24 month CEO an analyst that sat in the auditorium some years ago listening to the old 24 month CEO giving the same pitch?

As Joe checks his mail he remembers that the guys who drive the board of ABC Inc are the same guys who busted the global banking system 16 weeks ago.

“Yup the world’s upside down,” thinks Joe as he puts the redundancy letters in the right pigeon holes.

“That’s why we need to know who is leading whom,” thinks Joe as he switches off the lights and heads home knowing that his retirement cheque is stashed under his bed.

Joe (Part 1)

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Joe is a retired mailman having worked in the mail room at ABC Inc for over 30 years.  Joe has seen it all before, and wonders why nobody sees the difference.  This extract has Joe greeting his nephew Danny just after his last day at ABC Inc.

That evening Joe watched the usual Monday night ball game. The Cincinnati Bengals were losing to the Seattle Seahawks 23 -15 in the third quarter when Danny, Joe’s nephew, dropped by.

Joe had got Danny his job at ABC Inc after he had graduated from NYC and each year Joe had seen Danny’s career progress, by the amount of mail Joe had filed for Danny in the mail room.  Being a mailman at ABC Inc had its advantages.

“Hey Uncle Joe, you well?” said the 35 year old Vice President of Global Operations, as Joe opened the door to his small apartment for his nephew.

“Danny how you doing?” replied Joe in that deep Bronx accent that was so loved by the New York blue collar workers.  Uptown America referred to the NY accent as the ‘does and dare’. This was a reference to the ‘th’ being replaced with the ‘d’, so ‘those over there’ became ‘d’oes over d’are”.

Danny had worked hard to develop the middle class American accent of an educated man and had erased the Bronx slang.  He had married Sammy, a fine girl from Up State New York and had the type of life Joe could only dream of.  Over the years Danny had learnt to adapt his behaviour to any given situation.

Apart from his education, this ability had allowed him to advance quickly in ABC Inc.  With his business degree, Danny joined as a junior in sales and quickly excelled in two things; beating his targets and working with his managers.

Joe often felt that Danny tried too hard to please and that someday he would lose momentum.  That day had come when Danny had to decide whether to provide everyone in his department a performance package.  This initiative was sponsored by the board of ABC Inc and was accepted positively by Danny’s team of 2000.  This team operated not only in the States, but also in Europe and the Middle East.  Each region applauded the new initiative, even before people had had time to read detail, Joe thought.

But the plan went ahead.  Everyone was targeted, incentivised and measured.  Each month Joe would ask the same question as he filed the pay-check for the Xerox boy, ‘How do you incentivise someone for copying documents?”  Danny had found a way and each quarter the Xerox boy got an additional blue envelope.  The problem was that everyone in Danny’s team got the same blue coloured envelope every quarter.

In time the bonus envelope became an expected ‘reward’ and productivity started to fall off.  Each month employees and managers alike found new and inventive ways to ensure that bonuses were paid, and each quarter the profits of ABC Inc declined.

“This pay scheme encourages people to create targets and measures for jobs that cannot be measured” thought Joe every time he filed the pay cheques.

As Joe welcomed Danny into his apartment, he remembered what Stanley had said when Jo joined ABC Inc after leaving the Army.

‘Son’ he said ‘as an inventory man and a Vietnam vet you have had a target and been a target all your adult life.  Here at ABC Inc the only target we care about is the customers that we sell to, they are our targets now.  The more customers we have the stronger we will be”

In the background Joe listened to Dylan’s words ‘…Times they are a changing”.