Thursday, 9 September 2010

One thing which really is beginning to puss me off with Norway is something I thought I had become accustomed to long ago. Choice. Lack of it.

I used to shake my head at the lack of choice of wares in supermarkets compared to the UK, all from fruit to beers, but soon got used to it . Actually I rather like the quicker shop possible in the Kiwi Rema type set up, and get hacked off by Meny's high prices and variety. Bread at least here, is very fresh baked and usually in a perfusion of types in even a mid sized shop (read TINY if you are a Yank)

But then recently when I went to invest in a new mountain bike, at prices under 2000 usd/ 1200 Euro there were the chains' own brands: Knackeredmura, Merida and the cheekily stolen name "hard rock". Scotts were on offer from one chain, but as with the others the spec often left a lot to be desired: a good back derailuer coupled to some fairly crappy lower end drive chain, own label chain set and the compulsory cheap bouncy forks.

Cheap and nasty as it turns out, as my new steed flung me off on a mild load up and locked front wheel.What drew me into buying the bike was the Deore name and the 150€ "discount" but in fact this bike is definetly part of the great norsk marketing promotions con, which I will come back to.

What I mean to say out loud now is that the various channels want to sell you WHAT they want, not what you want. In bike shops and on the whole REMA 1000 principle ( which is a great idea for a country so logistically challenged with long distances, fjords and mountains as Norway is) they want to sell you a range where they can define the margins and hold stocking costs down.

That is to say, for the bike chains, pardon the pun, they want to buy fewer things from fewer suppliers and in bikes, reach back up the supply chain to those wry Taiwanese companies who did contract manufacture for the likes of Specialised and Saracen 20 years ago.

With production by virtual slave labour in China,the situation is that costs are lower while in addition, one layer of margin is taken out of the supply chain, which was previously owned by the big brands. Unfortunetly, there are only so many bikes a chain wants to product-manage, so in fact the choice is also taken out.

They want to make serious margin on mid priced bikes rather than stocking some
quality bikes at these price points and then making up on the cross sell to equipment and clothing. I have to admit though, that before Giant's entry to the EU market, bike suppliers had shops where they wanted them and shops pretty much well had to accept declinging margins on mid range bikes.

However as a consumer we didn't care back then in the 80s and 90s, because you could get a single group set bike to say 500€ (600 now I guess) which was good enough to get started in racing and then do as a trustworthy training bike for many years. No doubtful hidden components or poor part bins shifters. The unwritten franchise with the punter then was that the shop would enjoy your patronage for parts, upgrades, clothes and paraphinalia.

For the chainstores in Norway, in being limited in choice and blurring the quality of the product, they shoot themselves in the foot, because I am in no way shop loyal now: I will shop around and buy stuff on the internet. I take myself as just a consumer, a mere buyer. In other words the most important spot hire manager the company has when my wallet is needing emptied.

The same applies to cameras: Is there a death of independent, quality shops now as a whole on a western world basis? Due to lack of choice, dreradfully slow staff, poor basic personal service and lack of any true interest and expertise in cameras to be found in the chains here, I shop on the internet : there is one or two cameras max at each price point and they want to sell you the packages which they have bulk ordered to a higher margin.

They don't even have a good range of accessories: blow brushes, air cans, filters etc: they want to sell you a narrow choice of system and support only that with other non system peripherals being mediocre or over priced, worse both. Sytem peripherals themselves are
often over price at POS but luckily there are enough actors on the internet to make deals possible.

Now consumers will be drifting away completely from their franchise to previous sources of information; the shop! They will find the poor choice and service frustrating and rely on other consumers on the internet for advice on purchases and cheapest deals. The same is true of home electronics, where the POS info is so poor that you may as well use the internet. In future, as generation X moves into family modus, consumer electronics will be handled physically more by the Post Office here than the chain stores.

More seriously though, the same applies to the housing market unfortunetly. Developers get more margin by selling more individual units, or so goes the formula some business analysis from ten, fifteen years ago. So in Oslo there are masses of expensive, one bedroom housing and a total lack of affordable family "rekkehus" with three small bedrooms.

Here, it means that if you want any building activity and investment, then you have to follow the same model: small, "quality", expensive. And what has happened? We have a glutt of luxury flats which are not actual for families, while potential first family homes are too expensive and left for the local council to either buy or fund by renting for social clients.

Developers have gone down the marketing high school path of "focusing on those higher value consumers who will provide higher ROI" . They know the demographics of the population as a whole, but they do so really want to make maximum margin on their units that they are blind to the overall saturation of these rather small niches. Yuppies, Dinkies, gay boys and rich pensioners are not in ever lasting supply or even a big enough group to be called a segment. Home owners want kids here.

This view on controlling the channels for large margin is fatally flawed: it leaves the punter pissed off. This makes the opportunity open for real entrepreneurs to come in with internet offering, or central shops in Oslo which can maybe grow to franchises eventually, offering true choice even just better value and service.

Housing is more pressing for us : the local authority is gagged and bagged : they more or less have to do what the developers say or there will be no development and the local trades people are a force to be reckoned with here.

The other big deal here which is the elephant in the living room, is false discounting. I am sure my bike is false discounted: on sale at full price only on paper for a matter of days, maybe just in the internet shop, and then when rolled out, hey presto, a massive 1500Kr off. The bike seems to be reasonable for the price but no way should it be a 5000 kr bike without a much better group set mix.

The same goes for training shoes: they want to sell you a 1000 krone set of shoes, and there is little choice at say 450 for the none idiot shopper who knows they cost $20 usd to make and
ship - max. So they tell you what a wonderful deal you are getting on a really, really high quality set of shoes. Now in shoes it is easy to get round the law by taking in an initial stocking and then punting them out as an also ran a while before actually actively selling them
at the desired margin/volume target: It is a steady up trade technique.

I feel squeezed out as a consumer. My last visits to camera shops have been met with uninterested staff, too busy with customers wanting prints and not being able to self service them. I mean I went in once with a credit card half way out the wallet and could have been sold round to a Nikon or Canon "thousand" range bin sale, even though I wanted an PEN EP1. But no, I got no service at all really.

Shops have to offer friendly, informed service and products are price-quality trade points which can match consumers needs. Also they need to be able to offer a range of products at the key price points from different manufacturers which each have something unique or offer slightly better value. The current Norwegian chain store model of "discounting" on sale-only wares ( products only in reality to be sold at the discounted price) will only drive consumers to seek better value and the one place this is going to happen more is on the internet.