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ETN: Evolution – Thumbs Up or Down?

The greatest misconception of evolution is that it adheres to a plan. We largely believe that opposable thumbs occurred because they were a good idea. It’s hogwash: it was actually via a series of accidents and mutations over countless generations that they ever existed. The fact they then proved to be advantageous kept them in the gene pool while countless other, less successful, thumb configurations were forgotten. Generally, because the timescales and variations involved are difficult to conceive, we prefer to employ the notion that evolution is a pre-ordained process as a kind of metaphor – and then forget it’s a metaphor and start using the term “designed”.

The same is true of anything that can be said to have evolved – and it’s largely the way a supply chain works. We may think we’ve designed it, rationally and earnestly but in reality, we’ve only really done more of the things that gave a good return and less of the things that threatened our existence.

T Rex
“I’ll threaten your existence if you think all primitive life is ill-adapted” Photo: Paul Bentham

It always used to fascinate me how many pairs of hands a product went through from factory floor to the consumer’s door, each adding a layer of margin but reducing affordability and competitiveness along the way. Each (opposable) thumb in the pie claims to “add value” but is that always the case or is there a lot of money for old rope being paid? And, according to the ‘law of the jungle’, for how long will that remain to be the case?

Here’s my basic summary of the traditional supply chain:

  • Manufacturer: Owns factory, makes stuff. Production requires that volumes are huge. Often more obsessed with improving the product than finding a route to market for it. Historically tended to be the ‘brand owner’.
  • Wholesaler: Owns warehouse, professional ‘go-between’. Sees promising products and buys in bulk, to offer to a roster of retailers. Justifies ‘middleman’ cut by offering exclusivity and/or continuity of supply by investing in large quantities, stocking it “so the retailer doesn’t have to”.
  • Retailer: Owns shop, cultivates goodwill with local clientele. Needs broad range of competitively-priced items that local clientele demands/will tolerate. Accepts Wholesaler’s higher price for small-volume supply flexibility with implicit promise that no-one else uses their lower cost prices to engage directly with ‘their’ end user.

Yes, the landscape has become complicated over time, with the addition of Distributors, Agents, Buying Co-operatives, Marketplaces, Franchisees and Affiliates (did I forget anyone?) but still, you can’t make stuff economically without great depth of units and you can’t be the place to go shopping for very long without a great breadth of range. The Wholesaler always was – and usually still is – the solution to this Depth-to-Breadth conundrum, explaining why there are three or four lots of profit margin on the same item between creation and consumption.

Here comes the “but”: …but the supply chain as we recognise it today is not a product of immutable parameters. It merely evolved as an adaptation to limitations on communications and the logistical solution to production in great depth and re-selling in great breadth.

There have always been temptations to miss someone out and pocket their margin as well as your own. Retailers have been at it for years, doing supply deals with manufacturers when MOQs allow, much to the chagrin of Wholesalers. Then again, Wholesalers haven’t always played a straight bat, occasionally offering price reductions they wouldn’t tolerate of their stockists or (gasp) “going direct”. As in the evolution of life itself, much of the last epoch has seen one type of life-form or another attempting to assert its dominance over the whole ecosystem.

Evolutionary theory also warns us to expect, eventually, an extinction event, an inevitable occurrence that becomes a game-changer. It’s believed the Chicxulub asteroid wiped out the dinosaurs at the end of the Cretaceous period (thus creating opportunity for the dominance of mammals) and it’s worth considering what the next asteroid-scale event might look like. Having scanned the skies, I wonder if I might have found it. It’s a bit scary and Retailers in particular may wish to make sure they’re sitting down at this point.

Some American retail analysts now predict a quarter of all consumer ‘retail’ spend will take place online within six years (perhaps 30% in the UK) in an online space that will be 40% controlled by the combined might of Amazon, eBay and Alibaba. In addition to current trends, the growing ‘internet of things’ (if that’s a new phrase to you, Google it!) will offer a multitude of self-ordered replacement items with shoppers merely ‘signing off’ auto-suggested purchases rather than actively shopping.

Better, cheaper communications (social media, email, apps, digital ads) have strengthened direct engagement for all; the part of the equation that was traditionally the brands’ biggest weakness – plus the virtual nature of shopping means that breadth of offering isn’t as vital as it always was. With the gloves off and everyone approaching the punter, the brands can now circumvent the distribution network and communicate their message to the end user without the distortive prism of stockists and distributors. Brands may already fulfill orders directly to their “customer” so they’re increasingly less reliant on the old-fashioned retailer for shifting the units. There’s even a belief that surviving retail stores in future won’t be places to physically procure products any more but to simply ‘experience the brand’. 4.6 million people work in retail in the US and their long-term career advice is to find another sector before they’re replaced by Amazon-style automated stores.

If you’re frantically clutching your chest at this point, it may help to point out that we’re not in the most cutting-edge of industries – and that’s probably a good thing. Remember, sixty million years ago, while 75% of the planet’s fauna was being wiped out, only the most durable species, able to live on the most meagre of diets (notably, sharks and crocodiles) survived – and continue to thrive today. The ability of the equestrian industry to make a living in an environment most others would regard as infertile may yet see it outlive the real dinosaurs of mainstream retail.

 

 

 

ETN: Do You Know Enough About Your Trade Association?

It should be safe for me to assume that you have some idea of the existence of BETA. It may be something of a leap to expect that, as a consequence, you’re reading this as a representative of a BETA Member company. I hope you are but you may not be. You may not even know, one way or the other. Whether member or not, do you feel confident that you know enough about the body that represents your industry?

I sat on the BETA Council for over twelve years and, to me, it’s a quintessentially British institution that manages to combine world-leading expertise and professionalism with a noble, amateur ethos. Like Schrödinger’s cat, it exists simultaneously in a competitive environment and the realm beyond mere commerce. It’s a benefit-laden private members’ club, an upholder of safety standards and a powerful lobbying force for an entire industry. It stands up for the interests of the retailer and also those who would supply them, even when the two positions can seem incompatible. BETA is, in many ways, a litany of contradictions that defy simple definition. For all of these reasons, it seems that it has an unrivalled capacity to polarise opinion, “damned if it does and damned if it doesn’t”.

BETA_only_colourI’ve met non-members who’ve claimed it’s an ineffectual body that’s happy to charge for membership but offers little value and questioned if they’d done enough research to justify that position. I’ve also encountered staunch members who were frustrated at the limits of BETA’s influence or what they deem to be its over-inclusivity and wondered if they think they’re paying to be part of a cartel. Like the BBC, BETA only seems able to demonstrate its impartiality by displaying an uncanny ability to court equal dissatisfaction from all sides – which, when you think about it, takes some doing.

To me, it’s a telling comparison because there are lots of similarities between the two institutions. I love the BBC but I’m well aware that there are many who do not. I’ll be the first to admit the Beeb is not perfect but I wish it wouldn’t spend so much time justifying itself to those who happen to dislike paying for it. Of all the taxes I’ve ever paid, my ongoing contribution to maintaining it is the one I make the most gladly. Having done so, I still accept that merely buying a TV licence gives me no divine right to complain the second the schedules include something I might not want to watch, however expensively-produced. The BBC is consistently included in independently-compiled lists of the world’s most-trusted brands and it seems to command a level of affection overseas that’s wholly disproportionate to its reach and appeal. Does any of this sound familiar?

There’s also the issue of ‘mission creep’ in a changing world. Yes it’s important to have a clear vision of one’s raison d’être from the outset but robust self-definition can be a hampering factor when changes occur that the writers of the constitution couldn’t possibly have foreseen. The BBC’s website has undergone several culls of material since deemed ‘non-core’ to its Reithian principles in order to demonstrate value and retain overall relevance. Equally, BETA has had to exercise some re-enlightenment from time to time to accommodate an explosion in the number of forms of selling. Both institutions must also tailor their offering to a changing demographic, continually challenging all the safe assumptions of the past. In the case of ‘Auntie’, it’s all about ensuring minority communities are commensurately given a voice. Similarly, today’s less stereotyped horse world must be more effectively understood and represented. I remember one particular late-night debate at which I argued about the dangers of BETA aligning itself too closely with the pro-hunting lobby simply because that’s what it had always done.

And then there’s the issue of what BETA doesn’t do. When commercial disagreements occur between parties, I’m afraid “it’s business”, governed ultimately by the law of the land. There’s obviously a limit to what BETA can do in such disputes. It can advise its members but don’t expect it to stand in binding arbitration. BETA can’t enact any level of direct enforcement beyond rescinding a membership – and even then only where clear infractions have occurred.

I suppose the most easily-thrown hand grenade is the belief that BETA is somehow a secret club, more interested in its own self-enrichment than fulfilling any greater purpose. Again, just like the BBC, BETA’s stakeholders are entitled to regular disclosure of all the finances, something that, oddly, most conspiracy theorists seem not to have taken the trouble to establish. When I was first invited onto the Retail Committee by BETA’s founding father, Antony Wakeham, he promised me no benefit from my involvement beyond “altruism” and, I have to say, he was true to his word. For each meeting attendance, I was able to claim the princely sum of £35 in expenses – if you think that’s a sign of a gravy train, try getting from Wigan to London and back for that amount!

We live in an age where information has never been more freely available so there’s really no excuse for not knowing more about BETA and what it can do for you. As this is an opinion column, I’ll end by giving you mine: BETA is run by a dedicated team of talented, knowledgeable people, led for almost twenty years by, Claire Williams, who, I assure you, is nothing less than an absolute star. It is guided by a broad selection of highly-experienced, poorly-rewarded Council and Committee members who, above all else, care deeply about the future of your industry – perhaps occasionally, a little too much. BETA may not be perfect, it may cost a little more than you’d prefer and it won’t ever be a panacea to cure all ills but it’s what we have – and, I might add, it’s an asset much-envied by those in many other industries. Please don’t ever take it for granted.