B&M: Fresher and Easier

Looking to clean up in value again....

What do you do after leading one of the world's biggest retailers? Well in Sir Terry Leahy's case, the answer is find yourself another retail venture and change the world again.

Whilst the market awaits B&Ms rumoured £2bn IPO, with Sir Terry as Chairman, the acquisition of German discount chain 
JA Woll Handels (who operate 50 stores under the Jawoll and Hafu fascias) took everyone by surprise. 
Going toe to toe with Aldi in the worlds largest discount market is audacious. What chutzpah!

Why buy? Interestingly some of their advisors believe entering a market through acquisition has more legs than starting from a green-field. You may be forgiven a rye smile. That was a very expensive lesson Sir Terry learned in the USA: Tesco's pain may be B&Ms gain. Certainly  B&Ms approach seems fresher and easier. 

PS You may have picked up on this, but if not...B&M Bargains has 375 stores in the UK and yet say less than 35% of the population live within 10 minutes of a store. That sounds like a declaration of intent. It doesn't need a maths degree to see an ambition to treble their store portfolio and a £2bn war chest post IPO will provide the liquidity to push on. 

Liverpool 1 Everton 2

Allegedly, Tesco boss Phil Clarke had a nightmare and woke suddenly on Saturday morning to the vision of Cilla Black shouting "Surprise, Surprise!"


The real surprise was worse. Philip Green's announcement of BHS muscling in to the food market, with a branded, discount food offering, brought more pressure to the UK retail cauldron, as if any were needed.

On reflection, the move is not so surprising. Grocers have spent a great deal of time breaking into the home-wares market, it is only reasonable to expect some push back and John Lewis Partnership have proved the case for department stores branching into food.

At least Phil Clarke got some respite watching his resurgent Liverpool. Mind you, Everton are doing ok without David Moyes and receive wily business advice from two illustrious supporters of their own: Sir Terry Leahy and Sir Philip Green.

With Leahy due to front the IPO of discount chain B&M, and Green dropping his BHS bombshell, it seems the Evertonian duo are intent on devouring Clarke's scouse by the spoonful..

It's all kicking off. Turns out this isn't business after all; it's not even personal: it's football. And as the late, Bill Shankly famously remarked, "it's more important than life and death".

Retail Revolution: "Shoppers of the world unite, you have nothing to lose but your (retail) chains".

The UK retail industry is in turmoil. With problems at Morrisons and the Coop threatening their survival; Phil Clarke's speech at retail week seeking to make a virtue of freneticism. Change is in the air; a retail revolution even

The revolution is structural, multi-dimensional and polarised. It's not just mobile internet access transforming the way we "search and purch". There is a revolutionary dynamic stretching across Amazon, Groupon, Aldi right through to Poundland and Boohoo.com. Not forgetting B&M coming to market soon with Sir Terry Leahy on board. Discounting is front and centre

Talking of revolutions, last week marked the 127th anniversary of Karl Marx' death. Some of his ideas illuminate the challenges facing established retailers facing the discount onslaught. No really, they do.


Marx saw economics as the prime mover of change.  As economic power disperses, the dominant forces (thesis) are challenged by new participants (antithesis) and the outcome of the clash would be a new, higher order economic status quo (synthesis), with communism the end of history.  Historical Materialism 101, got it?

Successful discounters are anti-establishment value re-setters and all about economics. They combine high quality with unmatched value chains. Whether it was M&S putting shirts and shorts on Britain's backs and bums (by building direct relationships with suppliers and cutting out wholesalers); Jack Cohen's "pile it high, sell it cheap" mantra in 1960s Tesco or Walmart's EDLP philosophy: these were all discounting models. Their success put a good many competitors out of business, creating a new retail establishment.

Discounters also thrive on the structural disadvantage others impose on themselves. In mass retail focus and simplicity are the partners of unmatched value chains.

When advantage is lost, death is inevitable. Kwiksave UK built a business selling a limited number of major branded SKUs, from small basic outlets at cut prices sustained on one advantage: centralised distribution. While Tesco, Sainsbury and Asda were still had suppliers making minimum drops to individual outlets,  Kwiksave were securing full-truck efficiencies, within a lower cost model and passing the savings on.  Once everyone else could match them, all Kwiksave had left were small untidy stores, a limited range of brands and no price advantage. Game over.

Retail value resetting has severe ramifications. The centralised distribution revolution, the first big data enabled shift, saw suppliers remove sales force organisations and focus on national accounts, outsourcing merchandising services to field force agencies. Expect the impact this time to be no less profound, with services like category management being outsourced to specialist providers.

Karl's theories were always more appealing than his solutions. It's probably why ordinary people connected with Marks & Spencer ahead of Marx & Engels. He was wrong about communism and never foresaw consumerism. If he had, he might have reworked his manifesto, urging: "Shoppers of the world unite, you have nothing to lose but your (retail) chains".  He shouldn't be discounted.