nickshanagher

We can read lots into Warren Buffett telling CNBC that he made a mistake in investing in Tesco. “I am going to make mistakes,” he said. “But not because I buy businesses that I like as they go down in price but I am just going to be wrong sometimes on the facts.” The interview that we can see does not go on to examine what these facts might be. What I would suggest is that Buffett is saying that Tesco is a well-run business for the world of shopping that used to exist when he bought into Tesco in 2007. The supermarket retail world has changed beyond recognition since then. Morrisons under Dalton Philips claims it will be the first retailer in the world to price match Aldi and Lidl with its Match & More initiative (based on its mid-range own brands, not its value range). If he reads Dieter Brandes' BareEssentials Philips will see this is not the case. History is littered with retailers who have tried to beat Aldi on price and failed. But is the Aldi UK model ...

Online businesses don't pay local taxes, Sainsbury's boss Justin King argues in a big CityAM interview spread. Unlike the web retail businesses, Sainsbury's  "pay business rates at a local level" and "employ people locally" and "pay people locally" and "they spend their earnings locally". "If we are seeing a shift in consumer behaviour towards purchasing online rather than their local store then the government will have to address that the tax system is being usurped by a change in behaviour," he adds.  The point to notice here is that connection of Sainsbury's with "local shop". It is spin. But very effective spin. As any independent retailers who have talked to their MPs about competition from multiples will know, the grocers are very successful at projecting the "local" benefits that they will bring. Perhaps 10 years ago this was true. But supported by a better supply chain, independent...

There is a lot of news about the performance of retailers on the television at the moment. This is positive because it means that there are fewer global disasters, wars, tax rises, scandals and terrible crimes to take up all the airtime. It is negative because it is so broad brush. For example, on the television news they talk about retailers as if they are interchangeable when in reality a food retailer and a white goods retailer operate in different worlds. Shops that sell books and DVDs and CDs face incredible pressure from internet sales. Ones that sell bread and milk do not. Local shops in the news and convenience channel face a very tough trading environment this year, perhaps more so than for some time. One leading wholesaler told me in November that trading was very, very difficult. For him this was a departure from his more usual optimism. I would speculate that the pressure from the multiple operators on the convenience channel, particularly in London and the South East...

In the wake of Morrison's results announcement last week, The Lex column in the Financial Times provided a brief and pithy piece of analysis that is food for thought for businesspeople investing in local shops. Lex says there are two reasons for Morrisons to be wary. First, local shops mainly sell food and this means the margin mix is not as attractive as in a supermarket where you can sell more high margin goods. The Co-op, which I think is a good benchmark for independent retailers to compare themselves to, makes a 3 per cent operating margin in food. Lex contrasts this with Tesco's 5 per cent margin. Second, enthusiasm for the sector could be overdone. While the IGD predicts the local shop sector will grow by 5 per cent a year to 2017, Lex says consumers' love of the high street could be an "austerity-driven blip rather than a long-term trend". Indeed. However, the trend started before austerity and is based on the size of households and the age of the ...

It was the stream of shoppers visiting Steve Archer’s new convenience store in Newcastle-under-Lyme last week that really underlined his point that sometimes local shopkeepers cannot see the opportunity under their noses. He had persuaded the landlord of two small closed shops to let him lease them, knock them together and provide a full convenience offering including off licence. Nearby retailers led a petition of their customers to oppose the off licence and lost. “Local people really like the idea of being able to walk to their shop, rather than travel to the supermarket,” Steve told me. I could see this was true with my eyes. Mr Archer’s message is pretty much the same as the one Justin King, the boss of Sainsbury, told the national media at a City dinner around the same time. Shoppers are going “back to the future”, Mr King said, making more frequent trips and putting fewer items in their baskets. There is a big opportunity, Ed Garner, communications director of Kantar Worldpanel,...

The backdrop to my visit to Paul Cheema and his family at their Costcutter in Coventry last week was a deathly drumbeat from the supermarkets as weak trading conditions continued for another month. "How are you finding things," Paul asked me. I said that during January and February, retailers had been saying sales were very tough. during March and April, independents had been more positive. While the Cheema family is achieving sales growth he advised that the pattern was good week, good week, OK week, very bad week. What he is finding is that shoppers are running out of money, which is why week four is so quiet. While I was at his shop, trading was brisk. What are the supermarkets saying? "I have been doing groceries for 28 years now...and this is the toughest it has ever been for consumers," says Justin King, chief executive of Sainsbury. "If you look forward...we see this persisting for the rest of the year." His like-for-like sales in the first qu...

Read through Sainsbury's annual report and you can find some good statistics to use in checking how your shop or shops is/are doing. One figure I like is measuring sales per square foot. For Sainsbury in 2010/11 it was £20.04 (including VAT, for which is has made adjustments). If you have a 400 square foot shop, then you would need to be selling just more than £8,000 a week to match them. A thousand square feet and it is just more than £20,000. But Sainsbury also publishes its figures for the past five years that show it has moved from £19.30 up to a peak of £20.42 in 2009/10. Meaning its sales fell by 1.9 per cent in the latest year but are up by 5.8 per cent across five years. But remember, this is an average across 934 outlets in the latest year and 788 five years ago so its best shops will be doing much better. And its worst...perhaps they will be on the market? At the same time its sales area has risen by 21.6 per cent to just more than 19.1 million square feet. Obviou...

 The new Little Waitrose in Shrewsbury  The John Lewis Partnership has parked this Little Waitrose convenience store, which opened last Thursday, just across the road from Marks & Spencer in the centre of Shrewsbury. On the one hand, this shows that the big retailers in town centres are thinking about competing head-to-head and they assume that their competitors have sites with the best footfall. This may be helpful for independent retailers as they are left unscathed in areas where footfall does not meet the multiples' requirement. On the other, it shows that the big retailers are deadly serious about competing for a bigger stake of the convenience market. Their intent grows. Justin King, head of Sainsbury, has announced that he will take responsibility for its convenience business, which will be one of the areas where it will grow strongly in the future. Mr King told the City last week that consumers were "managing their household budgets wisely and well" an...

Last month's quarterly sales numbers for Sainsbury's provide an uncomfortable benchmark for local retailers - shoppers are not spending as much as they used to. Justin King, the managing director who has been built up as the saviour of Sainsbury's over the past few years, is starting to get negative press. City analysts are lining up to say sell. Clive Black of Shore Capital noted that "Sainsbury has done more to confirm the magnitude of the deceleration in consumer activity than any other recent update". In plain English, shoppers are spending less at a faster rate than expected. Or as Mr King said: "The change has been quite dramatic. The surprise is just how sudden that is." And how long. Shoppers stopped spending in January and were still not back in March. Like-for-like sales in his shops were down 0.8 per cent year-on-year. Shoppers were, on average, putting one less item in their basket when they did the weekly shop and buying it later on a ...

Fresh Kitchen is a stand-alone sandwich shop under the Sainsbury brand that the FT says is ear-marked for an "agressive roll-out" into the UK if the first site, opened in London's Fleet Street last month, is successful. The paper says that the supermarket chain could open 200 of these outlets, pitching it headlong with Pret-a-Manger and, by extension, with fast food chains like McDonalds. Waitrose, it notes, is already selling sandwiches in some Boots shops and ran its slide rule over the Eat, a coffee and sandwich chain. "Takeaway foods is likely to be the next battleground between the big supermarkets," the paper says. Of course, most local shops with a convenience offer are already aware of the opportunity for food-to-go. This story is further validation of their strategy. While it may be unwelcome to have fresh competition from Sainsbury and others, who are already attacking the c-store market hard, it is still further confirmation that the local gro...

Independent retailers who shop at cash and carry wholesale depots are often characterised as less disciplined business people than their peers who stick to the delivered wholesale route. However, hard times are resulting in price wars between suppliers in some areas and this provides some opportunities. One London retailer I spoke to this week says he is selling bottles of a leading soft drink for 99p, compared to £1.19 in the multiples. The cheapest buying price he can find from a delivered wholesaler is 89p, which would lose him 6.5p on every bottle sold at a 99p price point, due to sales tax. But a new cash and carry depot next to two others near his shop means he can buy the product at 69p, which makes the price point achieveable and he is shifting volume at a 19.5 per cent mark up. He welcomes the battle between cash and carry companies to win his business but also reflects that if they can afford to sell it to him for 69p, then the big supermarkets are probably buy...

Planning for his speech at the Independent Achievers Academy last week, Theo Paphitis asked an assistant to buy a basket of six essentials from a Tesco, a Londis (independent operator in a symbol group) and a One Stop (Tesco's CTN/convenience chain). Tesco was cheapest by a big margin. Second came Londis. The most expensive was One Stop. Mr Paphitis understands the power of the supermarkets and he says the way to counter them is to focus on how to make the experience of shopping with you more relevant to shoppers or more enjoyable for them. John Heynan, sales director of Molson Coors, told Retail Newsagent at about the same time that occasional beer buyers will pay 13 per cent more for their beer in an independent convenience store, provided the retailer targets them appropriately. Tesco has carved itself out this 13 per cent head start. Looking at pricing, if Tesco is 100, then Tesco Express is 108, One Stop is 112, a good symbol group is 115 and non-affiliated independents ...

Clearly the answer is Tesco and Sainsbury, who are leading a big increase in investment in new stores and extensions to existing stores, according to building industry analyst Glenigan. It has tracked £350 million of investment in 60 projects by major supermarket groups in the first quarter, more than double the £150m of contracts awarded in the same quarter in 2009. Almost all of these projects will come into the market over the next 18 months - suggesting the supermarkets are banking on a recovery in shopper sentiment in 2011, suggests Allan Wilen, economic director of Glenigan. What is clear is that they are backing themselves to be successful. The really interesting question is whether they are going to be slugging for share against each other as Nielsen data for 2009 and the first quarter of 2010 shows that convenience stores are out-growing the supermarkets. A good time for optimists armed with a good business strategy.

"After a while the crud kept rising. We not only had dirt, we had dirty dirt." This is a famous quote from a former A&P manager who was telling Jim Collins about why his company, which had been the leading supermarket chain in the US for most of the 20th Century failed. When shoppers no longer wanted cheap, its management simply refused to change what they did. It was not that the managers did not know that something was wrong. In fact, they set up a new store that told them what shoppers wanted. Clean stores, more choice, easy parking. But when they saw the solution meant change they simply chose to ignore it. If you are reading this column, ask yourself if this kind of thinking could affect you. Ask yourself how good your shop is. Be honest. Earlier this month, I visited 10 newspaper sellers (one a multiple) unannounced in one town centre. Only two of the shops were in pristine condition and one of these, a gift shop, did not sell newspapers. The other eight were tired...

Humans can't live without salt, but most Americans could do with far less of it, says the latest issue of Time magazine. As local retailers know, the regulators have prepared foods firmly in their sights. It costs the US $24 billion a year in health care costs and 150,000 lives. These statistics, as we know from efforts to stamp out tobacco use, will be hammered into the public arena again and again. (Surely that $24 billion includes lots of jobs in hospitals and medical centres and lots of profits for big pharmaceutical companies!) Back to Time, it helpfully notes that salt "often lurks where you don't expect it. A dollop of cottage cheese, for instance, can pack twice as much of the mineral as a palmful of salted peanuts." And this takes us back to the discussion about portion sizes and disclosure. How big is your dollop? Talking about disclosure, I am looking at a Sainsbury's museli packet that invites consumers to recycle the cardboard and simultaneously claim...

In the last quarter Sainsbury's sales rose by 1.7% year on year, compared to 3.7% in the previous six months. For local shopkeepers in the UK, this is a useful figure to benchmark your sales against. If you have been tracking 2% in the first three months of this year, then you have been doing better than one of the big four supermarkets. A big chunk of the fall is because food inflation has dropped to 1%. The second reason is because shoppers have less money to spend. At the same time, Sainsbury's reports that it had increased its weekly transactions from 18 million to 19 million year on year, which is a 5.6% increase. In the last quarter, all sales, including those from new sites, were up 4.4%. This means that the average spend is falling. However, new shops include 51 convenience stores out of 102 new and extended sites, so perhaps that explains it. Even so, as the VAT rate, which is included in the sales figures, has returned to 17.5% in the latest quarter, you can see that ...

Earlier this week Sainsbury published some great sales results but chief executive Justin King was quick to add on a warning that "what is going to happen in 2010 is the reality that people feared in 2009". This is consistent with his comments we previously noted in September. What we don't know is why he is talking down the future - because he is planning for lower sales or because it will make his company's performance look better. On the balance of probabilities, it is likely that shoppers will have less money to spend and how they spend it will be important for local shops. For many shoppers, the problem with the big weekly shop is that they buy too much stuff and throw away food. The obvious solution to this is for the shopper to plan ahead and do a better shopping list and stick to it. The alternative is the local convenience store and top up shopping, which requires less planning by the shopper. If you believe you have a good opportunity to pick up sales from t...

In my business, we have started our 2010 budget process and no-one is happy about having to put words and numbers on what they think will happen next year - and still do their day jobs! As a publishing company that serves independent retailers, our success is linked to two things: the need for local shopkeepers to find out what is going on and to act on it; and the willingness of major suppliers to invest in the independent channel. At some point, both depend on the willingness of shoppers to visit their local shops and spend money. Therefore I am always keen to read what the major groups are saying about the future and two leaders of major UK quoted companies were offering their thoughts last week. Obviously, they are talking up their current performance and warning of trouble ahead because the indicators for the UK economy are still weighted to the down side rather than the up side. Justin King of Sainsbury says that today's shopper is "coming out of their shell a bit...