Amazon to buy Ocado - now that would be interesting

What Amazon UK needs to do is buy Ocado as an entry point into making a meaningful mark in the UK food sector.

Ocado in partnership with Amazon.

By recently appointing former Asda director Doug Gurr to operate in a strategic role the potential for such a transaction must have moved significantly closer. There are certainly some sound reasons why such a marriage would work.

Firstly, there is undoubtedly some similarities between the profiles of shoppers at both these retailers. Secondly, the marketing spend that has been particularly onerous for Ocado would fall away with the mighty reach of Amazon.

It's also difficult to see there being too much resistance to the takeover from the Ocado camp, with the co-founders seemingly having varying levels of interest in continuing to spend time within the business.

An addition, City analysts have hardly been positive on the long term prospects for the company as an independent entity and some have been aggressively negative.

As for the big investors in the business, the current share price of 177p (July 28) is virtually unchanged from the July flotation level of 180p so with a bit of a bid premium there would probably be few complaints even from those who bought in on day one.

Could Amazon fit Ocado into its shopping bag?

For those who got in at the 12-month low of 122p this would represent a healthy gain. The current market capitalisation of Ocado is £1 billion, which would be decent bite to swallow for Amazon but it has shown itself to be unafraid of making acquisitions that propel it forward and sate its appetite for building scale.

But the one thing Amazon cares about passionately is cash-flow and Ocado is not overly cash generative. However, it could be a differrent scenario with the Amazon engine installed.

Retailinsider.com is reliably informed that Amazon has looked closely at Ocado but maybe its hesitancy on making a move is based on its belief that Ocado's value will diminish  over time and it can therefore wait.

What could potentially change its mind is Gurr. If he thinks such a deal has legs then maybe he is the man who could convince Amazon founder Jeff Bezos to pull out the cheque book (they still exist). It would certainly make for an interesting UK online grocery sector.

Online retail sales heading for a fall

It has long-since been achnowledged that online sales will continue to show significant growth for some years to come - leaving store sales for dust.

Online sales: not good.

But signs are emerging that this saviour of the retail sector is running out of steam for some retailers. According to the recent Martec International 'IT in Retail Research' report for BT Expedite two retailers admitted that their online sales will go down as a percentage of total turnover over the next year.

In the seven years that the survey has been undertaken this is the first sign that any retailer has indicated a slowdown and it raises the question of whether e-commerce is starting to top-out for some retailers.

The two companies in question are Maplin and Lakeland who admittedly have high non-store sales of 45% and 30% respectively - but it is still nowhere near the 100% of Asos!

Maplin: it's all about stores from now on.

There is no escaping the fact that if these two are experiencing such a slowdown then there must be a few others nearing this point of no return for online growth. Among the other 98 surveyed by Martec eight felt their sales would remain static over the next 12 months.

This must be seen as something of a warning sign for merchants who believe their online sales will continue to offset the declining performance of their store estates.

It highlights the fact that for many retailers the online growth train will hit the buffers at some point in the near future and that they need to prepare themselves for the inevitable.

Punch-up on the cards between Visa and MasterCard

Visa is distancing itself from some of the practices of its great rival MasterCard as both face ongoing accusations that they are over-charging retailers on transaction charges.

Gloves are off between Visa and MasterCard

Over the years they have been accused of working rather monopolistically but not any more as Visa is looking to land a few punches on MasterCard.

Visa executives are becoming vocal about how MasterCard is playing dirty with retailers and how the interchange fee that it charges them on credit cards is higher than that of Visa.

It's complaint is that often the two companies fees are 'blended' together and that it is therefore being tarnished by MasterCard's higher fees in the eyes of regulators and retailers.

Stephen Perry, an executive vice president at Visa Europe, also reckons it is "absoutely wrong" to launch 'upscale credit products' such as the World MasterCard payment card - which have particularly onerous transaction charges for retailers.

World MasterCard: not a pretty sight to Visa.

He even suggests that such payment cards are the "achilees heal of Visa Europe" as they are doing damage to the broad relationship between merchants and the card schemes. It is interesting to see Visa take the high ground and stick the boot into its rival.

This aggression is probably a move by Visa to focus on its debit card business (it handles 94.2% of all such transactions in the UK) and let MasterCard scrabble around for credit card business (it has 60.1% of credit transactions in the UK). [Source: Payments Council - UK Payment Statistics]

This is a canny move because it is credit card fees that are coming in for the most flak from regulators and the EU Commission. And it is a declining market.

Just take a look at the recently released 'Cost of Collection Payment Survey' from the BRC, which showed the proportion of transactions using credit cards fell by a hefty 12.9% in 2010. Meanwhile payments involving debit cards rose from 29% to 34% of all transactions.

Debit cards and cash - that's where the action is.

It's clearly a sensible move by Visa to distance itself from the extortionate credit card fees and instead focus on protecting its debit card business. It currently has an attraction to putting its money into things like contactless and mobile payments.

And expect it to turn up the heat even further on MasterCard as it is looking for ways to incentivise sales assistants in retailers to proactively ask customers for Visa rather than MasterCard plastic.

It is highly unlikely that it will be able to pull this one off but what it has definitely pulled off are the boxing gloves and it is MasterCard that is its punch bag.

Guest Slot – Recruitment Insider-Nigel Sapsed

Baking is exciting. Not the tired old-school bakers that once littered the high street which have gradually been consigned to the dustbin along with other outdated retail offers. No, I mean the artisan bakers whose delicacies might be priced at the top-end but they are selling high quality products.

Gail's: one of a batch of high-end bakers proving themselves.

The interesting thing is that people will pay for this quality. They want to surround themselves with good products in an appealing environment and receive top-notch service. They might not always want to pay-up for a full £5 loaf (£10 if it’s Poilâne) but maybe they’ll buy a pastry or an individual cake.

This is part of an increasing move away from manufactured, over-processed products towards more genuine, honest – with a perception of home-made – goods crafted from quality ingredients.

Sunblest white-sliced loaves have their place but the artisan market is where we are seeing the real growth. This is something entrepreneur Luke Johnson has spotted and he has been a consolidator of London-based bakers with Gail’s, Patisserie Valerie, Konditer & Cook, and Baker & Spice now in his expanding stable of bakery chains.

While these sorts of outfits produce quality products the environment and service also have to be spot on if the goods are to ultimately fly off the shelf. It is a lack of flight that has possibly caused some difficulties at the Paul chain of bakery shops.

Paul: purveyor of quality goods I think.

The France-based business has found it tough translating to the fast pace of service necessary in London, which I reckon is probably half the speed of that in France. People have been slinking off when they’ve seen any sort of queue because servicing each customer can take a minute or so.

Despite the pace issue there is no doubt that the Paul staff clearly love the product. To PY Gerbeau (of Millennium Dome fame/infamy) this is critical. I recall him telling me that you had to pull the product out of the shops and let customers walk around it, but above all else the key was to get the team in the shop to sell it.

Take a look at the Sourced Market in St Pancras train station and this engagement between customer, staff and products is evident. This symbiotic relationship is exactly what people now want to be associated with.

Come on in, the cakes are fine.

The shop floor team have to know how the products are made, what the ingredients are, and when the items were baked, otherwise there will be question marks over how they can convince people to pay that little bit extra for quality and goodness.

Ensuring employees know the products and engage with customers is a challenge for all retailers. Pret A Manger has historically sent every potential employee to work in one of its units for a day before they are taken on. At the end of their shift the rest of the team vote on whether they should be given the job.

The more ingenious a retailer’s methods of identifying the right people for their brand/products then the greater the chance they have of selling the products. This is the same regardless of whether you are selling high-end buns, guns or cummerbunds.

Nigel Sapsed is director of executive search specialist Sapsed Stevens

Real group buying makes a return

Groupon, LivingSocial and a host of other such businesses have been masquerading as group-buying sites but this is wrong as they are nothing more than deliverers of Daily Deals.

Group buying should be about consumers combining their purchases to cut a deal on a volume basis with manufacturers and suppliers. The more buyers there are then the greater the price cut that can be negotiated.

Are you old enough to remember this?

Arguably we've not really had a fully-fledged group buying business since LetsBuyIt.com back in the dotcom boom days.

But hold on, even this wasn't the real thing. This I can say for sure because the man who owned the business between 2002 and 2004, Gideon Lask, says it was really a conventional retailer that held its own stock in warehouses and wasn't negotiating volume deals with suppliers.

But ex-HMV.com man Lask is back and this time he has a real group buying business, BuyaPowa.com, that has just raised £1 million and will launch shortly. It has the snappy strapline 'Prices drop as people shop' and will have eight to 10 'co-buys' per day with 100 products available in each one.

BuyaPowa: a chimp not a chump.

With 25 buyers, an item could go for £80, and with 80 potential purchasers it could be nearer £60 for something that might have a full retail price of £150.

This sort of differential could add yet another nail into the coffin of traditional store-based retailing if such group buying really does prove to be the latest new model on the shopping block.

But the proposition has failed in the past so why is it going to rock the boat a second time around? The big difference is that we are now in a social media oriented world where you could say the viral element is especially virulent.

When you combine the viral aspects of Facebook and Twitter with the financial vested interest people have in getting friends/mates/anybody to join them in buying a product then group buying could be about to come of age.