Retailers gouging each other over payment-card fees

For many years the retail industry has battled hard against the banks and card schemes, Visa and MasterCard, to try and reduce the level of fees they are charged on every transaction they accept by payment card.

Transaction fees: Never quite this obvious.

There was a lot of sympathy for their plight - big banks and powerful card schemes versus retailers (many of them very small) never seemed a 100% fair fight. But things have taken a nasty turn as major name retailers increasingly move into financial services.

Part of this move, from the likes of Tesco and Marks & Spencer, involves them becoming big issuers of credit cards (co-branded with Visa or MasterCard). Tesco, for instance, has around a million holders of its payment card. No problems with that you'd think.

But there is an unsavoury aspect to their activities, namely that their cards have a fee of around 1% more (of the value of the goods bought) than other Visa and MasterCard cards.

Every little (extra transaction fee) helps.

This means that when a retailer accepts one of these cards they will be paying substantially more in fees than for most other Visa and MasterCard-branded cards that they accept. And this money is split between the retailer that issued the card (e.g. Tesco or M&S) and the card scheme supporting it.

This is a real kick in the teeth for all retailers and especially those selling big ticket items where a high proportion of their goods are purchased by shoppers using credit cards. The likes of Dixons will certainly be taking a big hit.

And just to put salt into the wounds of Dixons and others like it, the retailers issuing the cards will also be able to see exactly where their cardholders have been shopping so Tesco will be able to see which of its rivals' stores they've visited.

Among retailers taking a hit on card fees.

This information could be used to change shoppers' behaviour by maybe giving them vouchers to lure them away from these competitor shops.

All this chicanery can of course be put down to the straightforward rivalry that exists between retailers and the tough environment that is business.

However, this would be overlooking the fact that the likes of Tesco and M&S have been vociferously arguing against high banking fees for years. And then - would you believe it - when they get a chance to put their snouts in the trough they simply can't help themselves.

It's time for the British Retail Consortium to do something about this trend before there is all out warfare in its ranks.

Food manufacturers to sell-direct-to-shoppers is pie in the sky

Apparently 27% of food and grocery manufacturers would consider building an online store to sell direct to shoppers.

Manufacturers and selling online is not a grey area. 

According to research from grocery experts IGD these manufacturers are recognising the need to engage directly with their shoppers online.

I'm not sure whether this reflects well or badly on the manufacturing community as 100% should be thinking of engaging directly with their shoppers. But flogging goods directly to their customers cannot be the answer so 0% should be considering selling online.

Way back in the early days of the internet (late 1990s to be more precise) there was much talk of retailers being cut out as manufacturers could use this new channel to sell direct.

The middle man: let's cut him out.

It was all bluster, hype and way off the reality of market economics because the thought of buying single lines from multiple operators and having them all delivered to the home (and all the travails that ghoulish task entails) would clearly be a nightmare.

A much better system would be to order foodstuffs from an operation that collates the goods from various manufacturers. Oh, that's a retailer. Mr manufacturer soon recognised that this was a bit of a non-starter. This has, however, not stopped intermittent talk of such activity returning but it is still very hard to see it ever taking off.

But sensibly manufacturers do continue to recognise the need to better engage with their shoppers. This is why they buy shopper data and insight from the likes of Tesco's Dunnhumby and people like Procter & Gamble take stakes in things like Ocado. Anything to learn more about their customers' behaviour.

They ultimately want to have some sort of direct relationship with the consumers of their products. This is something retailers have cultivated and are naturally reluctant to give it away - unless they can charge for it, as la Dunnhumby.

Heinz: has the right idea.

Rather than set up shops manufacturers need to be more innovative and use the online channel and the accompanyinmg social media tools out there to build loyalty-type activities and promotions to get people proactively involved with their brands. The example of Heinz using Facebook to offer limited edition bottles is probably the way to go.

What we don't need is loads of manufacturers setting up online shops. That's a bad idea.

Guest Slot – Recruitment Insider-Nigel Sapsed

It was a big night for some of the smaller operators at the recent Retailers’ Retailer of the Year Awards in London when the efforts of the great and the not-quite-so-great of the industry were voted on by their peers and contemporaries.

Drake & Morgan (four units) and Grand Union Group (12 units) both took awards as they were feted for their next-generation pub/bars/restaurants that have both been sufficiently successful to put them on the expansion trail.

Drake & Morgan: It looks like a classy canteen & people love it.

Watching them collect their awards got me wondering whether they are such a big deal – after all, they are currently only running a handful of outlets between them.

In the US you don’t even get called a brand until you’ve literally opened thousands of units across the country. Are we really hyping these small operators just a little too much before they have really proven themselves to have the staying power for the long-term – in effect developing into tomorrow’s Pizza Expresses?

I’d argue that these smaller players are concepts rather than proper brands. But what you can’t argue with is the fact that they represent the future. On that basis, maybe I shouldn’t view them with too much of a critical eye.

You could also argue that these are halcyon days for smaller operators as the big guns in the industry are struggling and this is fuelling an upsurge in young entrepreneurial types striking out on their own.

In some cases these people almost look too young to be area managers at the large companies but the recession has provided them with an opportunity. Firstly, the likes of Punch, Enterprise and myriad other leisure companies have been willing to offload multiple leaseholds as they desperately seek to raise cash to shore up their balance sheets. It’s exactly same in the retail sector.

It's a familiar story around the country.

Secondly, these young Turks have found themselves stuck in these large organisations that have been stagnating. This has been holding them back from moving their careers on to the next level.

Take a look inside Mitchells & Butlers (that operates chains like Harvester, Vintage Inns and All Bar One) and you’ll find glass ceilings throughout the business. And this is far from unusual in the industry.

Whatever you want to call it, it's bad news.

The steps between moving from area manager to regional operations director and then on to divisional director are simply huge. The result is that in M&B – and many other similar companies in the industry - you’ve got regional directors who have been in their roles for many years.

This is stultifying for young go-getters with fire in their bellies and the result is that they are taking their experience, developing a decent concept, securing modest backing, and doing a deal with one of the big operators to lease them a couple of units. And off they go.

So what does the consumer think about all this? I suspect many of them are finding a gradual reduction in the appeal of the offers from the big organisations that are stagnating inside – which ultimately results in them losing their edge and ability to change their propositions.

Discerning consumers are instead searching out more interesting outlets that reflect today’s tastes. Just like those run by the likes of Drake & Morgan and Grand Union I suspect.

Nigel Sapsed is director of executive search specialist Sapsed Stevens

Simple brands stand out

You may recall the brouhaha earlier in the year over Starbucks changing its logo to a simplified, less cluttered version. Out went its name and the word 'coffee' from its famous green mermaid-like logo.

The evolution of a brand from cluttered to clean.

Much of the fuss was over the question of whether people would still recognise its branding. Early resistance to the change was pretty strong, with comments on Facebook and Starbucks.com showing more than 10 to 1 against the re-design.

Despite this negative backdrop Starbucks knew it was the right thing to do because it is a path well-trodden by many companies that have over their lifetimes continously stripped down their logos to the very basics.

Nike, McDonald's and Shell are just a small number of major names whose logos look very different to their early days and in many cases no longer include their actual name.

Clearly sucess and clean-looking uncluttered logos go hand in hand, which leads me to the question of why so many companies insist on having over complicated branding. Why go for less, when you can go for more seems to be the flawed thinking of many organisations.

Otley: Logos do not come much simpler than this.

The beer industry is just as guilty of too many over-complicated logos, even among the newer brewers on the block. You'd think the sensible route would be to start simple rather than spending loads of money on doing it much further down the line when the company has become rich and famous.

But the major benefit of simplicity is that it gives these new brewers standout on the bar and on the shelves of supermarkets and delis. Such is the high level of boring, me-too, and fussy designs of brewers logos and labels on bottles that those with clean lines really do look massively differentiated and are more likely to be singled out by the consumer for purchasing.

Camden Town: Logo is bang on target.

Some of the better examples to my mind are Otley Brewing Company of Wales, Kernel Brewery of South London and Camden Town Brewery of North London. They are also very contemporary in their styling.

The interesting aspect to the Camden Town logo is that it wasn't the cheapest bit of designing ever. Jaspar Cuppaidge, owner of the brewery, admitted to having had four design companies (as well as members of his family) working on the logo at different times.

Amazingly, despite this amount of input it still remains a beacon of clarity. He wouldn't, however, reveal how much the design work cost him.

The Kernel Brewery: no expense spent.

In contrast, the logo and labelling for The Kernel Brewery undoubtedly cost its owner and brewer Evin O'Riordain very little indeed. To this most artisan of artisan brewers I suspect any expense on logos would have been regarded as a tad unnecessary. Taking this stance has helped create as basic (and visually appealing) a label as you are likely to see on any bottle of beer.

And isn't this level of standout what it is all about.

Tour around the St Pancras Renaissance Hotel

There have been many articles written and photos published of the almost newly-restored hotel at London's St Pancras station in recent weeks but they do little justice to the building once you actually get inside it.

It might be a big building but it's all about the small details.

Compared with all other leisure-related buildings - hotels, restaurants, shops and shopping centres - that I've encountered it beats the lot by some way. If it's not a massive success then I'd be very surprised.

I admit this topic is a slight diversion from the usual fayre you'll find on Retailinsider.com but since I was fortunate enough to be taken on a personal tour of the hotel by its owner Harry Handelsman I thought it worth sharing some insights. [Apologies at this stage for the quality of the photos - I'm a writer not a photographer].

Handelsman has been the driving force behind the restoration of the Victorian gothic building that dates back to 1869 and which is close to being brought fully back to life as a hotel again.

Harry Handelsman: the man behind the restoration of the St Pancras hotel. 

He has been involved with the building since 1998 and between then and now has had to ride the property rollercoaster, with prices crashing and banks unwilling to help finance the restoration that has cost him a total of £200 million.

Much of this has been spent on bringing back to life the original features of the impressive building. The place is packed full of details that architrect George Gilbert Scott put into the original works at a total of £438,000. The equivalent today would be around £750 million. A fair sum for a hotel.

The grandest rooms in the hotel - that is being run by Marriott under its Renaissance umbrella - are the 50 suites in the original old building. (The other 194 are in a new wing). Each suite is very different from the others as Handelsman has taken advantage of their unique structural features.

The Victorian's built for tall people with high hats.

Among the various suites is the premier room - the Gilbert Scott suite - that is a full restoration of the original room.

Gilbert Scott suite: the room with the £47,000 wallpaper.

All guests in these rooms have access to their own designated area 'The Club' that has its own lounge area on the ground floor alongside a barbers that has master barber and wet shave wizard Carmelo Guastella in charge of the sharp things.

The Club area for guests residing in the suites.

The public areas are equally grand with the old booking office housing a bar/restaurant - 80 covers inside and the same number on the station concourse. This will open from 6:30am and likely stay open until 1am - although it has a rare 24 hour alcohol license so all bets are on.

Please turn on the lights in the Booking Office Bar/Restaurant.

The main restaurant - to be run by acclaimed chef Marcus Wareing - has an adjoining bar that will be accessible from the Euston Road and is currently being fitted out.

Work still being done to the main dining room.

It's a similar story with the kitchen ahead of the April 4 opening of the restaurant.

Marcus Wareing's kitchen being kitted out.

The kitchen has a chef's table seating up to eight or 10 people, which uniquely will also be bookable by individuals or couples who will share it with other diners.

The chef's table will be somewhere around here.

There are also various function rooms with the piece de resistance being the Ladies' Smoking Room that is one of the many rooms that have staggeringly detailed ceilings. it also has floor-to-ceiling doors that open onto an outside balcony.

Ladies' Smoking Room almost set for its first dinner.

There is little disguising the enthusiasm and love for the building that Handelsman has as his grand project heads towards completion. He speaks of budgets having "shot up and shot up" as hundreds of craftsmen have handpainted 2,000 fleur de lys on the walls, and recreated the original carpets that even have a 'worn effect' incorporated into them.

The whole experience of walking around the hotel provides a great antidote to the blandness of so many other buildings that the public have to put up with when eating and shopping etcetera.

This is clearly a unique building but you have to question just how many other publicly-used buildings today are constructed with unique characteristics that will stand the test of time.

Thanks to George Gilbert Scott for creating this unique structure in the nineteenth centurty and for Harry Handelsman for bringing it back to life in the 21st century.

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