Europe’s retailers chase sales boost with Black Friday offers

Shoppers pass a promotional sign for 'Black Friday' sales discounts as they exit a retail store on Oxford Street in London. (AFP)
Updated 24 November 2017
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Europe’s retailers chase sales boost with Black Friday offers

LONDON: Retailers across Europe chased shoppers on “Black Friday” in a test of consumer confidence, particularly in Britain where the spending spree imported from the US has become most popular.
After suffering their biggest decline in sales volumes for four-and-a-half years in October, British retailers are pinning their hopes on discounts to get shoppers, who are being squeezed by inflation and low wage rises, spending again.
Meanwhile, Wednesday’s budget statement from finance minister Philip Hammond did little to address Britons’ falling living standards or purchasing power.
In the UK the annual promotional event, which has historically focused on electrical goods, has been mainly online since 2014 when it was marred by chaos and scuffles in stores.
“I think it will be our busiest trading day of the year,” John Rogers, chief executive of electricals to toys retailer Argos, which is owned by Britain’s second biggest retailer Sainsbury’s, told Reuters on Friday.
Research firm GlobalData forecasts UK spending during the Black Friday period — defined as Monday November 20 to Monday November 27 — will grow by 3.8 percent year on year to £10.1 billion (SR50.18 billion).
But whether retailers make money from the event, which was imported to Britain from the US by online retailer Amazon in 2010, is unclear.
Supporters argue carefully planned, targeted promotions with global suppliers allow them to achieve a sales boost, while still maintaining profit margins.
But critics say the discounts suck forward Christmas sales that retailers would otherwise have made at full price and can dampen business in subsequent weeks.
Rogers said the Argos Black Friday event kicked off at 2100 GMT on Thursday, with its website recording over 800,000 visits in the first hour. Some 85 percent of those visits were from mobile devices.
Rogers said he expected a record 12 million visits to the website for the entire day.
Like last year, retailers including Amazon, Dixons Carphone and market leader Tesco are stretching promotions over one to two weeks, hoping to smooth out demand and reduce pressure on supply and distribution networks.
Black Friday, the day after the US Thanksgiving holiday, was so named because spending would surge and retailers would traditionally begin to turn a profit for the year, moving from the red into the black.
In Germany sales promotions on Black Friday and Cyber Monday are expected to add around €1.7 billion to retailers’ revenues, about on par with 2016, a survey by trade body HDE found.
It said 16 percent of German consumers took advantage of Black Friday discounts last year, spending an average of just over €170 each.
About 8 million France-based consumers are expected to shop from Friday to Monday, translating into expected revenue of around €945 million, according to a study conducted by Kantar TNS for USe-commerce firm eBay.


Nestle streamlines R&D to speed up product innovation

Updated 13 min 50 sec ago
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Nestle streamlines R&D to speed up product innovation

LONDON: Food giant Nestle plans to combine its scientific research operations into a single unit in an attempt to speed up development of new products at a time when competition from smaller rivals is intensifying.
The world’s biggest packaged food maker, with brands including Nescafe coffee and Perrier water, has been struggling with slowing sales growth for years. Now it is also under pressure from activist shareholder Daniel Loeb to increase investor returns.
To better compete, the Swiss company told Reuters it would merge its Nestle Research Center and Nestle Institute of Health Sciences (NIHS) into one organization called Nestle Research.
The new entity, to be announced later on Thursday, will continue to be based in Lausanne, Switzerland and will employ around 800 people.
The reorganization, effective July 1, will not involve job cuts or the closure of facilities, a spokesman said.
By linking the “blue-sky” research done at NIHS with the more commercially focused Research Center, it hopes to accelerate the translation of scientific discoveries into marketable products.
It also hopes this will help it compete with smaller, nimbler rivals who have been eating away at the market share of Nestle and other big firms like Danone, Unilever, Kraft Heinz and Kellogg.
Nestle Chief Technology Officer Stefan Palzer acknowledged earlier this month that his company had to keep pace with rising demand for goods that are organic, gluten-free or vegan.
“Big trends are embraced by smaller companies a bit more actively than the big companies,” Palzer told Reuters before Nestle’s streamlining plans had been finalized.
“We are adjusting our portfolio, doing many innovations and renovations to make the portfolio more relevant and to address those trends, but smaller companies are more agile.”
In the US — the world’s biggest packaged food market — small challenger brands could account for 15 percent of a $464 billion sector in a decade’s time, up from about 5 percent last year, Bernstein Research predicted last year.
The combination of research units is the latest move by Palzer aimed at speeding up development and ensuring research efforts are commercially viable.
Palzer, who took over Nestle’s innovation and research and development operations in January, is also supplementing long-term research projects with incremental product launches made faster by experimenting with new ideas more quickly.
Last month, for example, Palzer and colleagues got the idea for a vegetarian or vegan food product while on a business trip.
“Thursday we had an idea, Friday we returned to Switzerland and Monday evening I was able to taste the first prototype,” Palzer said. “Wednesday, this prototype was shown to the executive board, and Friday it was in the global pipeline.”
He declined to give more details of the product, except to say it is currently being assessed by the operations team to see how long it will take to produce and on what machinery.
Other steps include efforts to apply specific developments to more products, such as Nestle’s recent designer sugar crystals launched in low-sugar Milkybars in March, which will go into other products in the future.
The importance of agility was underlined by Nestle’s recent struggle to capitalize on resurgent demand for frozen foods.
The company says it reformulates one third of its product portfolio every year.
Nestle spent 1.72 billion Swiss francs ($1.73 billion) on R&D last year, down slightly from 2016 but up 22 percent from 2012. The company’s sales fell 2.6 percent over the same period.
As a percentage of sales, its expenditure has fluctuated only a little, but demands on the unit have increased.
Wells Fargo analyst John Baumgartner said that across 10 large publicly traded US food companies, median expenses for R&D and advertising have declined 20 percent over the past five years.
“As voids of ideas and marketing have emerged, start-ups have been more responsive to consumer needs, won the culture and created the emotional connections that drive sales,” he said in a recent note.
Palzer said some industry peers had been outsourcing innovation to cut costs, relying on acquisitions of small brands or partnerships with suppliers.
But he said it was critical for Nestle to maintain scientific expertise in-house to keep its own portfolio fresh and to be an attractive partner for collaboration with others. Nestle does R&D around the world, involving around 5,000 people.
Fundamental scientific research will remain key at Nestle, Palzer said, but he also highlighted the value of external partnerships and acquisitions that can bring in new research or capabilities more easily.
Scientific research and innovation itself is not necessarily the reason why big breakthroughs tend to be rare for multinational companies, said Shaun Browne, investment banker at Houlihan Lokey, who advises food companies on deals.
“They often don’t have the patience or passion that is really required,” Browne said. “Often these things are one individual who is just totally determined and passionate about their product and sees it through.”