Daughter has a part time job at Next and I had to drop her at the shop for her 6am start on Boxing Day. Shop opens at 6am for their Sale.
Queues were wrapped round the building and apparently when doors opened, everyone rushes in, grabs as much as they can in their size, take it to a corner of the shop, see what they have actually picked up, discard what they don't want and then carry on.
They do this safe in the knowledge that Next will refund all returns
So, here we have a company that
a. employs a load of staff to price all sale items individually (how much cheaper would it be to put up some posters saying all prices half the marked price)
b. has a policy to refund all items even in the sale which must cost a helleuva lot of man hours (why not credit note only for sale items - no legal obligation to refund)
c. do likewise with their online service - you can order 300 items or so and only pay one courier fee even though the courier may be back and forth 100 times (and thats just delivering - courier will come back and pick up all your returns free of charge).
Seems to be an absolute huge waste of money, almost getting the punters to act as holding warehouses. Not sure if all Retailers are the same but surely not the most efficient way to do things?
I daresay it backs up the fact that they must make such a huge mark-up that they can afford all these costs and still be profitable?
|
They dont do it without much research, planning shopping experiences to maximise the returns is a profession in itself.
I suspect ( having never been to such an event ) that the sort of people who go to these things will most likely be less discriminating about what they grab and may spend more overall even if a few bits are returned - they will grab roughly what they want.
Im sure it works or they wouldnt do it.
|
Bobby
You are approaching this from a Supermarket mind set, where thin profit margins and rapid turnover is the order of the day.
Next has Large profit margins, and shelf life is much longer. Sales are the only time they can shift the crap out fast. (and mix it with bought in sale crap which does have short shelf life)
|
|
Next is run by probably the smartest and most savvy person in retailing.
|
>> probably the smartest and most savvy person in retailing. >>
Who be that?
|
>> >> probably the smartest and most savvy person in retailing. >>
>>
>> Who be that?
Simon Wolfson, last time I looked.
|
|
Sir Philip Green - last time I looked!
|
|
Nope Philip green has never had his money grabbing hooks into next.
Last edited by: Zero on Wed 28 Dec 11 at 17:14
|
I was referring to him in connection with this comment.
"probably the smartest and most savvy person in retailing"
|
If you think supermarket gross margins are thin at c 30%, try electricals.
Your point stands though - Next starts off with quite a bit more than that. Staff discount is (or was when I had it) 25%.
Consumers expect a generous refund policy on clothing. In fact, a lot of them see no reason why they can't wear something to a wedding and then return it. Mail order returns are even higher for obvious reasons. People also order 2 or 3 sizes and return the ones that don't fit, if not all of them.
I worked for Next when Directory was launched. Next owned Grattan at the time, so they were expecting 30%-40% returns. In the event, the returns were even higher, probably because they also offered 24 hour delivery. A "customer" could order a £100 dress on Friday, wear it to a special occasion on the Saturday, and return it on Monday. A surprising number came back with food stains on them.
A lot of Next customers only shop there in the sale. So in that respect it is very much a business plan, and has been for a long time.
|
Next has right attitude to sales
Slow sellers............clearance
Bin ends/odd sizes/colours...........clearance
2 weeks later fill shop with new season / full price items...........game on.
Many other retailers are holding on to stock to maximise their profit per item.........in a fast moving clothes shop this is the death
|
Retail markup on clothing is between 100% and 300%
A coat that a supplier sells to a store for £50 will be sold for between £100 and £150, leaving more than enough room for discounting, but remember, the clothes shop has significantly higher overheads per item sold than a supermarket would.
Last edited by: zippy on Tue 27 Dec 11 at 13:55
|
>> Retail markup on clothing is between 100% and 300%
>>
>> A coat that a supplier sells to a store for £50 will be sold for
>> between £100 and £150, leaving more than enough room for discounting, but remember, the clothes
>> shop has significantly higher overheads per item sold than a supermarket would.
>>
Is that all?
I expected upwards of 600%.
|
No, a "normal" multiplier is anywhere between 2.5 x cost and 3 x cost. So for example a £100 item will have cost the retailer somewhere between £33 and £40 + VAT. They then have to add their margin and of course 20% retail VAT. Seems good but if you bear in mind that at least 30% of stock will be sold at no or negative profit in the "big" sales / promotions and at least a further 30% will be sold with a lesser discount in mid-season promotional activity, the net margin is actually quite tight. Some returns can be re-processed back to full price but by far the majority become sale fodder despite there being nothing wrong with them other than destroyed packaging. That doesn't sound too hard to fix other than that the original packaging has usually been applied at source ( often China these days ) so the costs/hassle of re-packaging actually outweigh those of marking the product down.
So, in simple terms, even with a successful product line of which a store originally stocked ten pieces, only 4 of them are likely to sell at full price, three at some sort of discount and a further three at no profit or indeed a loss. Take away the costs of presenting it for sale in a chain of large premises with a head office and all the people costs and there isn't a lot left.
These sorts of businesses therefore have to rely on large volumes of sales to drive their cashflow which is a sort of Catch 22 as they have to use price incentives to force the volumes...and so it goes round.
Good game though. Fun when it goes well.
Last edited by: Humph D'Bout on Tue 27 Dec 11 at 14:53
|
>> If you think supermarket gross margins are thin at c 30%, try electricals.
>>
>> Your point stands though - Next starts off with quite a bit more than that.
>> Staff discount is (or was when I had it) 25%.
Tesco gross profit margin for 2011 was 5.4%
|
>> >> If you think supermarket gross margins are thin at c 30%, try electricals.
>> >>
>> >> Your point stands though - Next starts off with quite a bit more than
>> that.
>> >> Staff discount is (or was when I had it) 25%.
>>
>> Tesco gross profit margin for 2011 was 5.4%
>>
Tesco's reported Gross Profit margin isn't gross margin as set out by Humph above though - it's after staff, store and distribution costs. Comparing like with like their actual gross margin on product - what they sell if for minus what they pay for it - is nearer 40%...
|
>> Tesco's reported Gross Profit margin isn't gross margin as set out by Humph above though
>> - it's after staff, store and distribution costs.
You cant ignore your fixed costs. They are always there and have to be taken into account.
Last edited by: VxFan on Wed 28 Dec 11 at 00:39
|
|
I realise that, just pointing out that you're not comparing like with like.
|
>> Tesco gross profit margin for 2011 was 5.4%
Wrong, sorry.
Tesco's net margin is 5%-6%.
Gross is harder to divine without inside information. Even if "cost of sales" is clean and doesn't include any store costs, distribution or overheads, there will be all sorts of other income for promotion/advertising support which is really supplier discount.
I doubt the true gross (difference between buying and selling price) is less materially than 30%, and it could be higher.
Last edited by: Manatee on Tue 27 Dec 11 at 18:22
|
Definition of gross profit:
"A company's revenue minus its cost of goods sold. Gross profit is a company's residual profit after selling a product or service and deducting the cost associated with its production and sale."
Tesco Group
2010 revenue £62.5bn
2010 profit 3.4bn
5.44% GROSS Profit
Last edited by: Zero on Tue 27 Dec 11 at 18:36
|
Stick to IT, Zero, I'll happily defer to you on that.
If Tesco's gross profit was 5% it would have been bust years ago.
|
|
You cant argue with the above factual statement taken from the 2010 Tesco statement of accounts.
|
>> You cant argue with the above factual statement taken from the 2010 Tesco statement of
>> accounts.
Not sure which statement you mean, but I doubt if Tesco has ever said its gross margin is 5.4%, given its net margin is about that.
Most retail people would probably say that gross margin stated without any other qualification is the gross margin value/revenue, where gross margin value is the simple difference between what you pay for the stock and what you sell it for, and the revenue usually excluding VAT. That £ figure will not usually appear in the published accounts of a big retailer because they don't want it to - they will lump in some "direct" cost, without specifying exactly what, and call it "gross profit", which will be much lower.
In Tesco's case they seem to include just about everything outside the Head Office, which results in a gross profit figure quite close to net profit. Consequently it tells you nothing about the mark up, or its close relative gross margin, at all (and I thought that was what we were talking about).
I'm not really interested in winning an argument, suffice to say if your Tesco bill is £100, what they will have paid for the stuff in your trolley is c.£70, not c. £95.
|
>>
>> I'm not really interested in winning an argument, suffice to say if your Tesco bill
>> is £100, what they will have paid for the stuff in your trolley is c.£70,
>> not c. £95.
the Tesco Group as a whole is making £5.44 on each of your 100 quid trolleys. The accounts say so, you cant argue that fact, its printed in black and white on their statement of accounts.
I will say no more, I made a very simple and very factual statement above that stands as it is.
It needs no defence, no explanation no clarification, its simply a matter of published fact.
Look it up.
Last edited by: Zero on Tue 27 Dec 11 at 20:08
|
|
Apart from the small fact that it's not called Gross Profit...
|
|
Check the tesco accounts and tell me what they call the 3.4 million pound profiit
|
Operating Profit declared as £3.457m
:-)
|
Ooops.. should of course be £3.457bn
Gross Profit reported as £4.6bn
PBT reported as £3.2bn
Profit for the Year £2.3bn
Thus providing the accountants answer of "well, what would you like the profit to be ;-)"
:-)
|
sorry posted before your second one
|
|
Ok even your BIGGEST one whats the percentage profit on that?
|
£4.6bn on £60bn is just over 7%. But that's not Gross Margin. Its the Gross Profit %...
Just as £3.4bn isn't Gross Profit ;-)
|
>> Thats not the accounts.
>>
Quoted from the full Annual Report and Accounts. Not the abridged version...
|
>> Check the tesco accounts and tell me what they call the 3.4 million pound profiit
>>
If you're talking about 3.4 billion in 2010, they call it operating profit.
There's a figure of 4.6bn they call gross profit, but that tells you nothing about mark-up/margin either because they include nearly all costs in GP.
The "profit before tax is" 3.176bn or about 5.6% on sales.
There is no clue in the accounts (allowing that I am not about to read all 162 pages) as to what they actually paid for the goods they sold, which is what I thought the original discussion was about.
Page 98 of the pdf -
ar2011.tescoplc.com/pdfs/tesco_annual_report_2011.pdf
|
>> There is no clue in the accounts (allowing that I am not about to read
>> all 162 pages) as to what they actually paid for the goods they sold, which
>> is what I thought the original discussion was about.
It morphed into making profit. No make profit no around for very long. That's what counts, what you pay for the goods and what you sell them for has to take into account every other part of the cost of running your business. Its where people fail.
talking of tesco generally, they are on a cusp. With (ok anywhere between 5.4 and 6.4% profit on income, they need to keep increasing sales volume to make that work. That volume is peaking in the UK, probably peaked.
So they are left with
1/ expand abroad - The states operation has bombed, western europe is saturated, china and the far east is not known at this point.
2/ Cut costs
3/ Increase prices (not good in a supermarket price war)
4/ cut the price paid to suppliers. They are already wafer thin.
As i said, the supermarket game is all about thin profits, large volume and short shelf lifes. When we used to sell IT to Safeway, they always used to say "do you know how many extra tins of beans we have to sell to buy that"
|
All true, and it's where ASDA, globally has the edge - they're about 4 times as large as Tesco who, in the UK at least, are facing extremely sticky times.
The low cost supermarkets manage on lower gross margins (!) because they don't have the huge legacy costs of the likes of Tesco
|
>> As i said, the supermarket game is all about thin profits, large volume and short
>> shelf lifes. When we used to sell IT to Safeway, they always used to say
>> "do you know how many extra tins of beans we have to sell to buy
>> that"
Or more accuratley the supermarket game is all about volume, highish gross margins, tight control of operating (store) costs to a defined % of turnover, minimising waste and controlling overheads
Didn't Safeway effectively go bust though - not sure if was because of or despite its IT systems though ;-)
|
No they didn't go bust they were profitable when bought at large cost by morrisons
You don't know the supermarket game at all no idea what's so ever
Last edited by: Zero on Tue 27 Dec 11 at 21:27
|
Safeway had very advanced IT in its day and part of its downfall was its attention to the wrong detail (as well as the mad Argie who became CEO).
We had a huge huge focus on Stockloss and had a wonderful IT system that would tell you how much your store bought something for, how much you sold it for, therefore profit on that product.
But then they took it a stage too far when they introduced all their "Gonzales" deals.
So walkers Crisps 6 pack was on sale for 39p. Depot sent you the product the day before the deal started so that you had enough to display. Except the price at that point was 99p so you bought them in at 99p and sold them for 39p so made a loss. After each week's promotion they then ran a sweep up to "credit" each store with the difference.
But meanwhile although the depot had charged you that, they hadn't in fact paid Walkers anything for it at that stage so the stockloss was all imaginary. And this then spiralled further and further out of control.
Then Morrisons came in and took us over - they did not do inventory, they had old fashioned order pads and pens and you input your order and polled it. It was like going back twenty years but out of the two, there is only one remaining!
|
Tesco is looking to emerging geographical markets for sure. And new product areas.
What irks me is the subsidy that the big supermarkets get from planning. They just kill local businesses. Leighton Buzzard is now a dump, with an expanded Tesco at one end, a fairly carp Morrisons at the other and Waitrose in the middle. The coup de grace was the 99p shop in the former Woolworths.
Of course they claim that it's what customers want, or they wouldn't be so successful. But frankly that's cobblers. Tesco saw the light 30+ years ago with flat free car parks around their stores, the biggest single factor in their success, that in many cases have actually replaced municipal ones. With limited and/or chargeable parking for the high street and a free car park at Tescburys on the edge of town, it's no contest - it only takes 20%-30% of shoppers to defect to kill most of the alternatives.
Then it's not consumer choice any longer, is it? It's all very well to point to competition between the top 4 or 5, but competition actually takes place locally, where the choice might be 3,2, or even 1.
|
>> There is no clue in the accounts (allowing that I am not about to read
>> all 162 pages) as to what they actually paid for the goods they sold, which
>> is what I thought the original discussion was about.
>>
>> Page 98 of the pdf -
>>
>> ar2011.tescoplc.com/pdfs/tesco_annual_report_2011.pdf
>>
Indeed, but I'm not sure the penny's dropped... ;-)
|
|
No you are still missing it
|
>> I doubt the true gross (difference between buying and selling price) is less materially than
>> 30%, and it could be higher.
>>
As above, in Tesco's case it's nearer 40% at the true gross margin level.
|
|
You seem to love to ignore the fixed costs and the cost of sales peter. There lies the road to rack and ruin.
|
I'm not ignoring them. They're just not part of the industry standard measure of gross margin ;-)
Perhaps worth pointing out at this point that your calculation confuses gross profit with gross margin - two entirely different things! What you've calculated above is their net margin...
|
>> You seem to love to ignore the fixed costs and the cost of sales peter.
>> There lies the road to rack and ruin.
Cost of [Goods] Sold is precisely what I am including - but then that's how you calculate gross margin...
|
|
Come on Zeddo, Game on, go for the throat.
|
margin counts for nowt. Let me explain
I sell spuds. I buy spuds at £10 pounds per 100 kilos. I sell 100 kilos a week at 10 pounds per kilo.
So I have turnover of £1000 per week, a profit of £990 pounds. That's my cashflow. Sounds great.
I pay my cashier 100 pounds a week, I pay my warehouse boy 100 pounds a week
I am 790 pounds up. Pay the cleaner 50 quid a week and the security guard (thats a lot of cash) 100 quid a week
I am 640 pounds up
Electric light 100 quid a week - I am 540 pounds up. Still good
So good in in fact I am building a spud store in the next town. Cant loose. I am borowing money form the bank to build it. The interest on the loan is 340 quid still never mind I am still 200 quid up.
Except I forgot to tell you I borrowed the money to buy the first spud store by using the store to borrow the money - It costs spud store inc 220 quid a week to service the loan.
Ah I am 20 quid down the swaney.
So here are two lessons for you.
1/ leverage buyouts by loading the debt on the company dont and never will work. nearly every one has or is folding.
2/ dont ignore *all* the other costs -
|
The supermarkets buy and sell their food lines for very low margins, however you calculate it.
One of the reasons they moved into other household goods such as clothing and electricals is because they can buy and sell those for higher margins.
I suppose food must still be the core business, but some of the bigger Tescos look to me to have almost as much floor space - if not more - devoted to non-food.
|
|
I guess that's the reason Aldi have all that tat in the centre of their shops rather than expanding the range of food they sell
|
Aldi's unsold tat will be returned to the warehouse and brought again later- even as much as twelve months later!
ALDI UK, a few weeks ago, had the identical electric foot warmers as I bought in Spain last year!
(Yes - I know electric foot warmers are very "Grandpa-ish!)
|
|
Turn 'em up high Roger and you might be able to give yon Michael Flatley a run for his money !
|
Bliss, on a cold day, is me stretched out on our sofa, covered with a throw, foot-warmers on setting 1 or 2, while I take a nice siesta!
I do LOVE a siesta!
Last edited by: Roger on Wed 28 Dec 11 at 13:06
|
Fair enough. Each to their own etc.
I take a different view and limit my sleep to a maximum of 6 hours a night. I just can't help thinking I'll have all eternity to lie down with my eyes shut soon enough and I'd be better using this life for something else if that makes any kind of sense?
:-)
|
|
You sound like the character Dunbar in Catch 22 who has committed himself to making his life seem longer by any means possible , in particular the cultivation of boredom.
Last edited by: CGNorwich on Wed 28 Dec 11 at 14:23
|
Most supermarket's overall markup is quite thin. However, the average markup figure is quite misleading because on many items they make slight loss and on other they make heavy profit. They manipulate hundreds of thousands of items daily so that when consumers think they are getting a good deal on one set of items, they are actually over paying on something else. It is a continuous cat and mouse game between supermarkets and savvy shoppers.
Big supermarkets win by their massive volume. Many deals are actually funded by suppliers rather then themselves.
In many countries (especially Asian ones), manufacturers sell goods directly to consumers. But in UK (and most developed world) retailers are more powerful because of supermarket culture. On most clothing lines, retail price is almost 5 times the manufacturing cost and often sold at 50% markup (when bought at full price) after all the logistics like supply-chain, storage, distribution etc.
Electricals are bit different. Unlike food, people don't buy electricals too often and they are more expensive. Profit margin on most electrical items is very low. That's why retailers how try to sell more service items like extended warranty etc.
Sales in Next or similar stores is well calculated decision. Most products have a standard life-cycle like introduction - growth - maturity and decline (search for product life cycle in Wikipedia). Once clothes are out of fashion, they are a liability due to unsold inventories. So boxing day sales is a good way to offload them even if they make loss at some end of line items. Clothes are often impulse buys at that prices so it helps clear the warehouse.
|
|
Charity shops are full of virtually unused impulse buys - according to my mean son.. A Debenhams woollen jumper with Jasper Conran label lretailing at £30+ - worn once £4.50...
Last edited by: madf on Wed 28 Dec 11 at 16:09
|
|
A £25 saving on a £30 sweater sounds more sensible than mean to me
|
>> One of the reasons they moved into other household goods such as clothing and electricals
>> is because they can buy and sell those for higher margins.
Clothing yes, also household goods, electricals no. That's why you'll only find them in the bigger stores, often on a mezzanine level where space is less valuable.
Food has roughly double the gross margin of large electrical appliances (difference between buying price and selling price, not some Mickey Mouse definition). Less of a difference on kettles, irons, toasters.
The expanded ranges are about saturation in food and sales growth, not better margins, at least as far as electricals go. Tesco does very nicely out of food.
|
>> Tesco does very nicely out of food.
Only if the quantity is high enough. No idea where you are getting these high margins out of food, they simply dont exist.
|
I don't call a net margin of 6% tight. That's where it counts.
And to be clear - when we look at the difference between the selling price and the buying price as a %age of sales, supermarkets have significantly lower margins than clothing and furniture, but rather higher margins than in electricals. It depends where you start from.
What do you think Tesco on average pays for a food item that it sells for £2? (no VAT on food). And let's not muddy the pool with rent and wages.
Last edited by: Manatee on Wed 28 Dec 11 at 18:38
|
I call 6% VERY tight
Depends on the food item you cant say Any item at 2 quid costs them a quid, because it vary widely. Tesco has a poor shopper profile, few if any impulse buys, Take bread and milk. They are running at a 10% margin on those.
Have you got any idea of how they have to invest in procurement and tweak it to try and keep margins up? t Have you any idea of the lengths they go to to stop shrinkage - Sweet thearting and grazing mostly they can kill a food departments profit. . Do you know why tesco had to expand out of the UK?
Margins on food are crap end of. Tescos results prove it
|
Much of Tesco's success is due to screwing it's suppliers, by all accounts. I only know 1 personally, a Dutch flower importer, who is told what to supply and what he will be paid for it. If he fails to deliver then he's off the supplier list. So he supplies at a loss when necessary.
btw I've heard that many businesses which generate cash but pay their suppliers much later use that money for speculation in other places. One of the well known computer companies was reputed to have made it's entire targets for the year on a flukey set of currency deals in the first few days of it's financial year.
|
Most retailers (including Sainsburys) would kill for 6% net profit on sales.
Of course I know that Tesco is extremely effective and efficient, the best at most of what it does. Your condescending tone does you no credit.
I asked you for an average because it varies - I infer that you have no idea; as usual you have been stating your opinions and guesswork as facts.
My guess is £1.44.
Perhaps Bobby will be brave enough to adjudicate.
|
>> Depends on the food item you cant say Any item at 2 quid costs them
>> a quid, because it vary widely. Tesco has a poor shopper profile, few if any
>> impulse buys, Take bread and milk. They are running at a 10% margin on those.
I've no idea where you get the idea they make 10% margin (Gross? Operating?). They pay 30ppl - that's info in the public domain:
www.farmersguardian.com/home/latest-news/tesco-raises-milk-price-to-3021ppl/41843.article
Waitrose charge around 90p for a 1 litre carton, and £1.30ish for 2 I think. Even if Tesco charge £1 for 2 litres, that's a 20p/litre gross margin...
|
>>
>> >> Tesco does very nicely out of food.
>>
>> Only if the quantity is high enough. No idea where you are getting these high
>> margins out of food, they simply dont exist.
>>
Well, my info comes from some of the largest suppliers of fresh food to Tesco - that covers the most of the produce and chilled aisles...
Starting with a 40% gross margin requirement:
Tesco turned over £61 billion last year, give or take. Per it's accounts, total staff costs were £6.8 billion - that's around 11% of revenue
Rent/Rates could easily be the same again
Head office apportioned costs could be another 5%
In store waste on fresh food runs at about 3%
So at the store level, taking into acount some cavalier rounding of numbers and allowing for a bit of shrinkage, that's a return of around 9% to deliver what Tesco reports to the outside world as it's Gross Profit.
Now add what look like about £2 billion of expenses and finance costs (3%) per their accounts, and you're down to 6 or 7% or so PBT. That's not a bad result
That's why retailers focus so heavily on Gross Margin - they squeeze suppliers to drive this up and flex their next biggest cost (staff), as the next lever to control store profit. Which is why the service at Tesco gets worse and worse; staffing levels are cut (and self serve checkout numbers increase) to try and drive up store profits.
Of course, it's all a volume game, and at 40% gross margin additional market share/sales has a dispropotionate impact on the bottom line, which is great for the consumer as they fight it out for incremental shoppers. But don't be fooled into thinking they make no money on food - that's what they want you to think!!
Peter
|
>> Well, my info comes from some of the largest suppliers of fresh food to Tesco
>> - that covers the most of the produce and chilled aisles...
>>
>> Starting with a 40% gross margin requirement:
There isnt one supplier that covers most of tescos produce and chiller cabinets. Pop down there and have look.
|
>> There isnt one supplier that covers most of tescos produce and chiller cabinets. Pop down
>> there and have look.
>>
That's why I used the plural ;-)
|
|
We have 2 Tesco Extra stores within 4 miles of us which have used for most of our shopping for the last few years. However, they have both gone down hill over the last year, they are frequently are out of stock of several "run of the mill" items we want and there seem to be a noticable amount of empty spaces on the shelves.
|
I dont shop there because I hate their business ethics and morals. managed to keep Tesco spend down to £150 for the year.
And now I shall depart the thread.
|
Off to drink your Benedictine nightcap?
Not bought at Tesco.
Luvly stuff with a drop of hot water.
|
I think to have a more accurate idea of profitability of food sales in general, it would be better to look at Morrisons stats and figures rather than Tesco.
Morrisons have no clothing range, very limited electricals and concentrate firmly on food and fresh food in particular.
I have no idea what their figures are but I do know they have a very tight operation when it comes to wastage. Don't know if they still have fresh food prep depts but they used to do well taking end of shelf like food and reusing it!
Also, the customer Cafe is a good source of maximising money for some items reaching the end of their shelf life especially breakfast products and eggs. You can guarantee all loose eggs will end up there. Similarly with the staff canteen.
|
Within 2 miles of my house I have a huge Tesco Extra, Morrisons, Asda, Aldi, Lidl x2 and soon to be Sainsburys!
But I still buy my chicken fillets from Makro in a bulk 5kg pack. And my mince in a 3kg pack.
|
>>Also, the customer Cafe
I wouldn't recommend their coffee.
|
Less difference thatn you'd think % terms. Morrisons Turnover for 2010 was £16.5bn. Their reported Gross Profit (not gross margin...) was £1.15bn, so 7%. Their reported Operating Profit was £600m, so 5.5%, and PBT £874m, or 5.3%. As they are only a quarter of the size of Tesco (or a third of the size in grocery only), I think scale has more to do with the difference than the difference in margins on food/non food.
What really helps on non food is that the ticket prices are higher, so the cash margin/unit is greater. 20p on a litre of milk is all well and good, but there's no more effort to sell a £20 mixer or £200 TV, and if the infrastructure, staff and customers are already there then it's 'easy' incremental cash.
Morrisons also have some of their own factories and, as you say, prep stuff in store too. So, given that, on the whole they should be able to offer lower prices (fewer people taking a sliceof proft along the way) to deliver the same return to shareholders. In reailty I don't think that that's immediately obvious, so there must be some inefficiencies somewhere!
Mind you, their systems are widely recognised as being behind the other big supermarkets (I'm not qualified to comment as to whether that's a good or bad thing); and they don't have an online offering or any loyalty schemes either.
|
I think Ken Morrison conceded the Safeway takeover took them years to sort out.
Speaking of Mr M, he used to take his Saturday lunch regularly in the cafe of his branch on the outskirts of Harrogate.
It became an eating destination for those 'in the know', who assumed the food must be a cut above due the presence of the gaffer.
|
And his wife used to do all her shopping in Sainsburys!!
Once met Ken on a shop visit when we were converting the Safeway shops to Morrisons and he didn't have a clue what was going on. Figurehead at that stage, most of the decsions being made by others.
Kind of made me think of Prince Philip at the time, nodding and shaking hands and occasionally making comments but other than that didn't really know what was going on.
Part of the issue with the Morrisons takeover was they did not see any good in Safeway, there was no attempt to take the best bits from both businesses, instead it was their way or no way.
They also were predominantly an English company with no shops in Scotland and I think, very few shops in the SE which were both heavily populated with Safeways.
I will always remember the day the planograms came out to show that we had to cut back space on the shelves for Irn Bru and give more space to Dandelion & Burdock. Thats when we knew for definite they didn't fully grasp Scotland!
|
"Next" Sales & Business Plan - Stuu
