Diary of a little startup – today: competition anxiety

Current mood – anxious

The business plan for my little startup covered off competition, but till now it wasn’t something I’d (naively) given a hell of a lot of thought.

I figured I was on to something unique and so was relaxed about competitive threats.

But I’ve now had cause to get anxious and another look at the business plan hasn’t made me feel any better.

The plan notes my startup will be in the media/information industry which of course is fast moving, has low entry costs and lots of clever well-resourced players.

So I was on to competitive threats from the beginning, but as I got more into the detail of the project that awareness seems to have slipped away – deeper and blinder.

Note to self – reread (rewrite) the business plan regularly.

Still anxious though. Maybe that’s what I should have been all along.

#2 post in an occasional series about my little (as in small capital investment; mounting sweat equity) start up.

admin, 5th November 2013 | Filed under: Start ups

Diary of a little startup – mates and the ease of doing business

Current mood – grateful.

We’re world famous in New Zealand for being an easy place to do business.

Unacknowledged in international rankings is how easy it is to get advice and support from Kiwi business people. It seems that receiving invaluable information – for free – to help a new business off to a solid start is only a phone call or a coffee away.

Certainly was for me.

In the last couple of weeks I’ve been grateful to businesspeople who have devoted an hour or more of their time to help my little (as in small capital commitment, but mounting sweat equity) start up on its way.

I choose my advisors carefully, but I was blown away by the level of interest they had in my project, their understanding of its opportunities and challenges, their challenging questions and by the value of their been-there-done-that advice.

You can’t buy this stuff.

So, yeah, thanks everyone. (You know who you are.)

#1 post in an occasional series about my little (and sort of secret) start up.

admin, 30th October 2013 | Filed under: Start ups

Golden years for retail sectors getting shorter. Outlook – messy

In an article on change in the retail industry, consulting firm McKinsey claims these changes are occurring at an ever increasing pace.

“Within the past century, local corner stores gave way to department stores and supermarkets, then to suburban shopping malls, then to discount chains and big-box retailers. Each of these shifts unfolded faster than the one that preceded it, and each elevated new companies over incumbents.”

I did my own research on this and (apologies to McKinsey) I’m not so sure that it’s so simple (at least in New Zealand) because none of the above types of retail outlets has actually “given way” to another. Some have enjoyed periods of ascendancy, but for the last 40 years or so, corner stores, department stores, supermarkets, malls, discount chains and big box have all remained significant parts of the rich tapestry that is modern retail.

But McKinsey’s main point – the pace of business is speeding up – is undeniable. The “golden years” are getting shorter.

Store type Golden years
Corner stores till 1880s
Department stores 1880s-1920s
Chain stores 1920s-1960s
Malls 1960s-1990s
Big Boxes 1990-early 2000s

Who’s ascendant now?

Corner stores have been around since human kind decided to live in one place; the central-city department, riding on the arrival of mass transportation, had their heyday around the turn of the 20th century; low-price chain stores, offering a more nimble alternative to the now stodgy department stores, were ascendant from the 20s; the popularity of cars, and the move to suburbs, created a fertile environment for the mall, however a mall hasn’t been built in the US since 2006; the Global Financial Crisis may have foreshadowed the decline in Big Box development.

The next store type to be on top? On-line? Not yet.

McKinsey says the future is going to be messy with an “ongoing blurring of lines between formats and sectors”.

admin, 25th October 2013 | Filed under: Retail

Retail price wars – who’ll give peace a chance?

Shoppers aren’t fussed; retailers and suppliers simply don’t like ‘em.

So you have to wonder why, based on this story out of Australia, supermarket price wars still figure so strongly on their retail landscape. We’ve not got such a big war here, but the same underpinnings for the question (and answers) will be present in New Zealand.

Kosta Conomos, the head of retail for consumer research agency Nielsen in Australia, says the “key retailer battleground is set to become how to deliver more value”.

And price doesn’t figure all that highly when Australian shoppers are asked to define “good value”. Only 20% rated low prices; fresh seemed to be top of mind for about 30%; private labels for another 27%; and deals and promotions for 23%.

Conomos told last week’s Efficient Consumer Response Australasia conference that only 1% of shoppers felt they were getting better value as the result of price wars.

So consumers are not all that fussed, using promoted products to “supplement their shopping basket as a whole”.

At the same time “neither retailers nor suppliers benefit from this behaviour…”

What they need to do, Conomos said was to work together to offer overall value for consumers, differentiating themselves through a combination of national brands and quality private labels.

admin, 21st October 2013 | Filed under: Retail

“False flat” revisited – economy now on real flat

Three years ago I did a post comparing the-then state of the economy (and the national mindset) with a “false flat” – cycling jargon describing how your eye can fool you about the gradient of a section of road, meaning you are working hard, but you’re not going as fast as you think you should.

Judging by positive news on the economy out last week, it seems we are at last on a real flat.

But in November 2010 it felt like the NZ economy was stuck in a dispiriting stretch of false flat.

“… the economy’s [false flat] has come after a bugger of a climb – it’s crested the hill and a flat ride into the distance beckons and maybe a downhill around the corner.

“Oh happy days.

“Except not. We’re going faster than before, but not as fast as we think we should be. And as on the bike, you think you’re in the wrong gear, or there’s been an equipment failure (eg. brakes rubbing).

“And all around you, everyone is getting shitty.

“I’m picking the “false flat” our economy is on is part of the international topography. Maybe the bike could be tweaked to go a little bit faster, perhaps we should have taken on more fluids or eaten that energy bar earlier, but basically we are on a shit bit of road.”

Not any more.

admin, 14th October 2013 | Filed under: Uncategorized

‘Red light’ district spectre following legal high stores

Will legal high stores usher in the creation of surrounding ‘red light’ districts?

A likely unintended consequence of legalising the sale psychoactive substances will be significant changes to the character of local shopping areas, with legal high stores driving out neighbouring small independent shop owners who find customers shying away.

As a Hamilton retailer, confronted by a one-time church-run opportunity shop selling legal highs put it, this is “not the look that Hamilton East needs”.

Shops that move in to fill the gap (if they do) may not be considered “respectable”.

The ‘red light’ question was posed (and presumably written) by Local Government New Zealand (LGNZ) in a question and answer section in its latest update for councils on psychoactive products and the powers councils have to specify where stores selling them can be located.

The full question was: “Picking locations could end up creating ‘red light’ districts. Is that in your view a real risk?”

The answer was an equivocal “This is one of the questions each council, and their communities, will have to consider when determining the nature of their Local Approved Product Policies”.

Local Approved Product Policies (or LAPPs) allow councils to identify areas – for example, near schools – where legal high stores cannot operate. Councils can’t ban legal high stores outright.

According to LGNZ, legislation allowing LAPPs to be put in place does not allow councils to enforce them, nor require applicants for a legal high licence to take LAPPs into account.

However it says the Associate Minister of Health has “guaranteed” these issues will be dealt with when regulations supporting the legislation come into force early next year.

Under the yet-to-be-seen regulations, the Psychoactive Substances Regulatory Authority, when considering licence applications, must take into account LAPPs and legal high stores must comply. Where there are breaches, the authority can suspend or cancel a licence.

However, councils will have no right of appeal to the authority.

admin, 11th October 2013 | Filed under: Retail

America’s Cup lost – we can’t afford to lose the story as well

PR’s sometimes seen as being all about key messages, producing a sound bite that resonates and sticks.

That’s okay in politics, but in business key messages are only as good as the proof points that back up the claims in the messages. Unsubstantiated claims only produce blank stares, deaf ears and closed doors.

Compelling and effective key messages, and great proof points, are critical for Kiwi exporters – and particularly technology ones – as, chances are, a potential customer is going to do a double take, thinking “New Zealand technology? I know about your mountains and cows, but…”

To start with, nailing great Kiwi key messages is hard. Distinctive Kiwi innovation – we’re probably no more innovative than a heap of other nations and whether we have a unique (and meaningful) type of innovation is a tough one to prove; thinking outside the box – maybe, but you know, isn’t that risky?; “new thinking” – a nice word play on New Zealand, but ultimately meaningless; can do – for sure, but potentially another hollow business promise; clean and green – well…

A big problem with these key messages is their self-centredness. They are how we see ourselves, not how the world sees us.

Which is where proof points come in. The truly great ones change how the world sees us.

But really we’ve got bugger all of these. We’ve got a heap of that I reckon in the cold hard light of the international business day are weak: Lord Rutherford – so last century; Maurice Wilkins – who?; Richard Pearse –what did he do again?; we invented the disposable syringe etc etc.

It gets better when we drill down into specific industries and countries or localities for these sectors. For example, in IT and in Silicon Valley, there’s Xero and US venture capitalist and entrepreneur Peter Thiel.

But mega proof points? We really we have only got that are two bona fide, international stature, world stage: Weta Digital and the Americas Cup.

Weta Digital is not going anywhere and will remain a great Kiwi story.

Last week, Team New Zealand and the New Zealand marine industry grabbed the world’s attention with the most compelling international showcase of Kiwi technology, innovation, can-do attitude, thinking outside the box, since well…The Lord of the Rings.

The Americas Cup may have been lost, but we can’t afford to lose the story.

admin, 30th September 2013 | Filed under: Exports, Kiwi growth

What’s in store for smaller retailers under Auckland Unitary Plan?

Is Auckland’s Unitary Plan going to be bad for the city’s small, independent retailers?

John Long, Master Planning and Architecture Director of property specialists, architects and designers RCG  suggests this may be the case. If he’s right, the little guys in Auckland not only have consumer trends conspiring against them as covered in the previous post, but Auckland Council.

Long says “…we would have thought they would want to make it easier for retailers, particularly for start-up and small retail. Unfortunately it appears that the plan will make it more difficult where it is most needed – at the local level.”

On the other hand RCG earlier this year reckoned the plan will be great for the big guys. “The Unitary Plan does more than Foodstuffs and Progressive ever could to entrench the supermarket duopoly.”

Under the plan supermarkets are permitted only in the metropolitan and town centres.

“Are we serious?” asks Long. “Nosh, Farro and other emerging boutique operators can enhance the local convenience retail environment, provide entry level jobs, create a community hub, and reduce driving long distances etc.”

The earlier RCG piece on the plan says “It seems that the council only wants cafes, boutiques and artisan food stores in the neighbourhood. Westfield probably loves it – bring on the multi-level mall renovations…”

Planning is a complex and costly process to get involved in, says Long. “The bigger operators are fully engaged and they then involve professionals such as RCG. There is a clear ‘voice’ at that level.”

However, small independent, community-focused retailers, who don’t have the big budgets of national or global chains, “aren’t into the planning process. They hope the council will look after them, and the council should, if it wants real and sustainable economic development such as jobs at the individual, small scale level where most of the opportunity is.”

Long is supportive of the plan’s focus on intensification and its “centres based” approach.

In the city centre and metropolitan zones “it will be business as usual and we might get some quality outcomes. The constrained supply of space and growing population will drive up land values and occupancy costs will rise, but life will go on. Already iconic developments in Newmarket and the CBD are being designed.”

But for the little guys, who make up the vast bulk of retail businesses, there will be real challenges for Auckland to provide for the sustainable development of retail facilities throughout the city, unless the plan is modified further.

admin, 26th September 2013 | Filed under: Retail

Nailing it – nail bar boom highlights changing retail scene

By my count there are at least 13 nail bars on, or near, Queen Street Auckland.

Pretty much any medium-sized town or shopping centre in New Zealand will have at least one.

As an occasional user of this beauty treatment, told me – “Who’d have thought we’d pay $30 to have our nails done?”

But increasing numbers of women and teens do go for this “affordable luxury”, sparking a nail bar boom that’s highlighting the changing nature of our high streets.

I can’t find any New Zealand statistics giving hard evidence of this boom, but it’s there to see on our streets and in our malls.

The rise of nail services is part of a well-established trend in the US, European and UK markets, and not always a welcome one.

In the UK nail bars are seen as epitomising the decay of the traditional British high street, turning these streets into unappealing, low-rent, no-go shopping areas. Old-style retailers selling stuff – meat, fruit, shoes, books – are shutting down and being replaced a new wave of service sellers offering beauty (hair, skin and nails) treatments, betting and mobile phone top ups.

Fast-food outlets and second-hand clothing are the exceptions to this stuff-to-services trend.

Between 2009 and 2011 nail bars made up 16.5 per cent of new outlets opened in the UK.

Traditionalists believe the UK’s town centres and high streets are now at a “critical point”.

In the US, where it all started, the market is ticking along, though probably somewhat slower than the 374 percent growth in nail bars (in the US ‘salons’) Nails Magazine reckoned occurred in the 10 years up to 2003.

This has not been remarked upon as anything other than a good thing. Americans are seemingly less things-ain’t-what-they-used-to-be types than the Brits.

If you are of a mind to see nail bars as bad, you’ll possibly see them as the cause of the “problem” when what is happening is a fundamental shift in the retailing sector. Nail bars are the symptom not the cause.

Also they’re more than a fashion trend and, judging by their longevity and global spread, they’re not just a recession thing with women looking for low-cost pick me ups.

“The end of stuff” may be a huge exaggeration, but modern consumers are becoming less interested in buying stuff and more keen on buying experiences and nail bars are a classic example of experiential retailing.

For $30 you get a chance to relax, be the centre of attention, feel good about yourself and draw admiring glances.

This you can’t buy online; books and shoes you can. As well as not having to fight off online services, nail bars don’t have to compete with supermarkets, the other threat to traditional high street stuff sellers.

The other reason nail bars have boomed is they offer a cheap service.

A study into the $9 billion US nail services market found the bars required small amounts of capital, had few licensing barriers, staff needed little English or training and the bars were “very lucrative”. As an aside, the nail salon industry was kicked off by Vietnamese immigrants who today still number about half the US industry’s workforce.

Their business model, based on fast customer turnaround, means a nail job is no longer the preserve of wealthy matrons, but a mass market phenomenon.

admin, 24th September 2013 | Filed under: Retail, Trends

Supermarket regulation – back to normal transmission, for now

Where’s the evidence that New Zealand supermarkets are making “super” profits by overcharging shoppers for food?

It’s not clear that Labour’s big three – Leader David Cunliffe, Grant Robertson and Shane Jones – knew the answer when they agreed that the next Labour-led government would review and if necessary regulate our two supermarket chains, Progressive Enterprises and Foodstuffs.

They have now belatedly conceded that there’s probably no evidence – “it’s not about prices being controlled” – and have shifted the focus of their supermarket attack back to where it was before the Labour leadership contest – concern over wages not keeping up with prices and supermarkets using their buying power to gouge suppliers.

The latter has been Greens’ territory. With Labour joining them in this space, it’s now highly likely a Labour-Greens government will investigate the Progressive-Foodstuffs duopoly.

On the food price front, Labour has backtracked. And for good reason.

In the three and a half years (that’s 14 quarters) covered by the consumer price index (CPI) this decade, only in four quarters have food prices risen faster than the overall annual rate of inflation – two times by small amounts. Three times food prices dropped over the previous 12 months.

Quarter (% yr on yr) Food group All groups
June 2013 0.2% 0.7%
March 0.1 0.9
Dec 2012 -0.5 0.9
Sept -0.9 0.8
June -0.4 1.0
March 0.6 1.6
Dec 2011 1.7 1.8
Sept 6.2 4.6
June 7.0 5.3
March 4.8 4.5
Dec 2010 4.6 4
Sept 0.1 1.5
June 0.7 1.7
March 1.2 2

Remember Jones’ original promise to review, and possibly regulate, came from concern over food being priced above the means of the average New Zealander. His commitment was to review and “if it’s necessary, to regulate [supermarkets] to bring the cost of food down…”

Supermarkets, he said were the “brown shirts of the food industry”.

To be fair to Robertson, he has admitted he wasn’t sure there is a problem, but “if there is behaviour by this [Progressive-Foodstuffs] duopoly that is against the interests of consumers we have to look out for it”.

Cunliffe says much the same thing.

This lack of evidence of any price gouging, in recent times at least, is probably why Opposition politicians haven’t attacked supermarkets or the Government on food prices. As mentioned in the previous post, supermarket prices have become a dead or ‘no go’ area for Opposition politicians.

When attempting to tap into public concern about rising food prices, Labour and the Greens have chosen to attack the Government for failing to ensure wages keep up with prices, not the people who put the price stickers on.

The Greens also have a track record of coming in to bat for food suppliers unhappy with the prices they receive from supermarkets, a space Labour now appears to be willing to join them in.

So after a bit of excitement caused by playing to the Labour Party audience, it’ll back to politics as usual on the supermarket front (at least till the election).

Jones, in a clarifier on his original stance, suggests concern for supermarket suppliers was where it all started – a worry founded in his experience in the New Zealand fishing industry supplying fish to Australian supermarkets.

“Everyone that I know who supplies to supermarkets complains about how gouged they are by the supermarkets.”

He’d like to see a New Zealand inquiry following Australia’s example with their Productivity Commission’s investigation into the retail industry and the Australian Competition and Consumer Commission’s (ACCC) current investigation into the balance of power between suppliers and supermarkets.

Jones apparently doesn’t want the ACCC’s Kiwi counterpart, the Commerce Commission, to do the inquiry. He says wants to “get a couple of professional people onto that task. I have two people in mind”.

The ACCC has declared the Australian supermarket sector one of its two priority areas. Its counterpart here in New Zealand, the Commerce Commission, rarely mentions supermarkets.

One interesting idea that the ACCC is considering is the introduction of a legally enforceable supermarket and grocery industry code of conduct.

As an aside, it is possible Jones got his review and regulate idea from Radio Live journalist Duncan Garner who, ahead of Jones’ ‘brownshirt’ statement, said: “If I was a Labour leader I would be calling for an immediate inquiry into supermarket pricing.”

The whole saga has the look of made-up policy.

admin, 17th September 2013 | Filed under: Retail