Week ending 18th January 2013

Once again a number of stories and themes to choose from for this week’s article in a week when finally snow arrived in quantities vaguely in line with apocalyptic Daily Mail weather headlines. I shall start with:

Confusion over the Community

Delivery by David Cameron of his long trailed speech on the future of our membership of the EU and a possible referendum was postponed due to the tragic events in Algeria. This was the right thing to do. In the short term at least there are some things that take precedence even over something as significant as our future membership of the EU.

However voters (or this voter anyway) must be completely confused as to where our leaders stand on the EU. Should we be in, should we be out or even, should we be shaking it all about? The referendum issue is making it worse as there are now two arguments going on. The first is about whether or not we should remain in the EU and if so on what terms. The second is about whether we should have a referendum and when. Add in Messrs Milliband and Cable who maintain we must stay in Europe but reform it (and the chances of succeeding on that are ...?) but don’t want a referendum and the confusion is complete.

It’s a bit like watching Morris dancing in the fog. You have been told a troupe of Morris dancers is going to perform. You can see shadowy figures moving about in the gloom and hear the occasional chink of bells and clack of sticks but whether there is any actual dancing going on and what sort of dancing is impossible to tell. Let’s hope that Cameron’s speech makes things clearer when he finally gets to deliver it. However that is more hope than expectation and I suspect on this one he prefers dancing in the fog right now.

Business on the Community

All this confusion worries business leaders because “business does not like uncertainty”. Personally I can’t remember when we last had the sort of certainty in business, the economy and politics that this seems to imply but perhaps others lead a more sheltered life than I do.

Roughly business opinion appears to be split between those that want us in the EU and don’t want to rock the boat with any talk of re-negotiation and those that want to see change and think that if this resulted in us leaving then we could manage very nicely thank you. The first group tends to be people who make things and sell a lot of them to Europe (like the UK MD of Honda) whilst the second don’t (like Simon Wolfson of Next). Further dire warnings come from the financial sector about the consequences for London as a financial centre but are then countered by others who see little or no threat even if we were to leave the EU.

One problem for the pro EU business lobby, especially for those who don’t want the boat rocked is that their warnings are very similar to those used to argue the case for us joining the Euro. As none of those dire consequences came to pass, in fact the opposite, it rather makes you think that an alternative relationship with the EU, including being outside might work in the same way that staying out of the Euro has.

In fact we could make any outcome work for us if (i) we were clear about the outcome we wanted, (ii) we had the will to make it work and (iii) we had the freedom of action to do what was needed to make it work.  Right now we have none of these.

Well burger me!

Sorry but I can’t let the “horsemeat in burgers” debacle go by without comment. Like many my first reaction was surprise that a pack of frozen “value burgers” contained any meat at all. They are not, after all labelled “beef burgers” just “burgers”. Burgers are grey, flat, round things made of mashed up “stuff” held together by God knows what.

What was not a surprise was that Tesco were the main focus of the problem. Other retailers withdrew burger products from their stores as a precautionary measure but Tesco’s value burgers did actually contain horsemeat. You would think that if a retailer puts its own name on a food product then it would have a pretty tight specification on what went into it. It seems this is not the case and that as long as they were “cheap” Tesco didn’t bother to check what they contained. This is just another manifestation of how far the change in culture has to go at Tesco with regards to its perception of what “customer care” really means. Throwing £1bn at the business is no substitute for “caring about your customers”.

It also makes you wonder what all those regulators in Brussels have been doing. They can tell us what light bulbs to buy but appear to have missed the opportunity to bring in “euro burger” regulations. Given all the expensive restaurants in Brussels and Strasbourg that they all eat in at our expense they may well have not come across the “value burger”.

How many channels in “multi-channel”?

More results from retailers last week and more administrations. Invariably the comment on the failures is that they were not quick enough to change (which is right) and did not get into online and multi-channel quickly enough (which is not necessarily right).

I was interested to come across a small chain of Danish homeware stores called Tiger, who added 5 new stores to its UK chain taking their total to 18. It plans to add another 8 in 2013 with demand for its products showing no sign of slowing down. All the shops are profitable. They achieved 55% sales growth during the Christmas period without any online sales at all! Whilst they have a website where you can browse products and find out where the shops are located they have no plans currently to go into online sales.

This makes sense right now because with an average transaction value of around £7 and many items which are bulky and fragile selling online presents more of a problem than a solution for both Tiger and its customers. Tiger concentrates on getting stores in the right locations where the footfall is sufficient to bring high volumes of potential customers into its stores. Then, to quote Managing Director Philip Bier “to be successful now you need to offer good value and a pleasant experience”.

So “good value and a pleasant experience” is this the real “multi-channel”? If you get these two factors right, whether in store, online or from your garden shed then you will win. Online retailing is valid only when it enables you to offer “good value and a pleasant experience”. Tesco, please note, it is both and.

So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good weekend and hope you have a great week this week.