This guest post comes from Velocity Europe Conference attendee and Expo exhibitor James Butcher, CEO of Solutions for Retail Brands (S4RB)
Velocity Europe held this past week in Lisbon Portugal had some tremendous private brand presentations – just as we’ve come to expect from Velocity – and I particularly liked the session from Paulo Peereboom, CEO Makro Netherland. His presentation was humorous and filled with frank truths about retail and the importance of team engagement. which is the core of what we do at S4RB.
Paulo’s presentation was specifically about the turnaround plans at Makro Netherland and the role of private brand. He is an expert on this with a very successful track record. In his own words, “currently 4 and 0” with a successful track record including Pick n Pay (South Africa), Ahold (Netherlands), and ICA.
What was interesting was how he described the same downward spiral many retailers take. The need for turnaround comes the same way. The performance is down. The retailer decides that the ‘grass is greener’ and tries something new (informed by an MBA with a spreadsheet focused solely on EBIT). They invest elsewhere and as a result, under-invest in the core business. And with under-investment, the core loses relevance with customers. It loses more money. So they cut costs/people. Service and relevance fall further. They fight with all that is left – price – and surprise, surprise, the grass was never greener, but now a full recovery program is needed. Retailers win on relevance, service, and price, and all three are now wrong.
It is surprising how many retailers make this same mistake. Specifically, when it comes to relevance, which was a key theme for many speakers.
Paulo explained how this was true of Makro. Relevance disappeared as the Makro Loyalty Card, which had previously been a ‘badge of honor’ for members, became unclear. No one knew what Makro stood for.
This is Paulo’s fifth turnaround scenario, and he observed that, like all previous cases, the turnaround plan had already been written by the previous management. But it was too technical and ignored the people. There is a need for big goals. But small steps. And top-to-bottom the team needed to be engaged. Collaboration is key. Makro’s clear vision is now to be #1 Wholesaler in the Netherlands; the best wholesaler nearby. And this will only work if it is relevant.
- The whole team must understand the customer.
- Private brand products must be relevant to their customers.
- Products must be designed for business.
- Products must be relevant and essential to foodservice.
- The team must understand the vision and work to this fulfill it.
For example, Makro has taken private brand sauces from cans and into larger resealable packs, which are more sustainable and more appropriate for commercial customers. Decisions on the range are informed by the ingredients customers use in professional kitchens or food service because it impacts how loyal customers will retain Makro as a supplier.
Importantly Makro was happy to invest in engagement with their team. Investment in the time to understand and to answer their questions and to contribute to the vision. To close the head office for two-days to explain and engage the team. The process will now be repeated with teams across the stores.
I am an advocate for engagement and collaboration. And in the case of private brand it must be both internal and external. It must include suppliers — improved communications, transparency, and support. Retailers need a management team who understands that the private brand team and suppliers must work together.
Private brand retailers – Ignore this at your peril.
CEO at Solutions for Retail Brands (S4RB)
James Butcher is CEO at Solutions for Retail Brands (S4RB) and is an experienced director and entrepreneur with over 25 years’ experience in retail, as well as manufacturing and packaging for retail.
With an engineering background, James helped to transform retail barcode labeling for grocery retail at Prestek and then Markem and went on to revolutionize date and lot traceability coding for grocery packaging with Markem and then Videojet.
In the intervening years, James was the founding director of Claricom, which progressed to world market leader for Packaging Coding Management software and consulted to major retailers on barcodes, artwork management, and best practice coding and traceability It was during this time that James worked with several world-leading private brand retailers to develop best practice.