Tower Blog

A blog about smart POS software for independent small businesses.

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Do you really have to spend $2,000 to get 10 cents of a litre of fuel from Coles?

Maybe my calculations are wrong but based on my experience with the Coles FlyBys loyalty program, I reckon that, on regular items, one would have to spend over $2,000 to achieve the 1000 points needed to obtain the 10c a litre off voucher being touted in their new advertising blitz. Sure there are bonus points available on some items – I’d say ten items out of thousands in store.

I would then need to spend $30 or more to achieve the 4c a litre off voucher.

This campaign by Coles is an effort to create a perception of savings at their retail and fuel outlets. It’s smoke and mirrors in my view and should be exposed by consumer watchdogs as such.

State governments need to regulate to ensure that consumers are properly informed about such campaigns.

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Coles starts fuel price war. Is it worth it?

14 cents off a litre of fuel the posters claim. It looks fantastic. But then you have to buy this and that and redeem these points and then you get the 14 cents off. The details are here.

This campaign is a perfect example of why the various state governments should introduce regulations requiring disclosure of the real value of each point accrued at the time of purchase so the consumer can know how much their business is valued. My earlier blog post on this is here.

The Coles campaign is enticing but the fine print confusing. How much am I really saving? For example I have to convert 1,000 FlyBys points to get 10 cents off but how much do I have to spend to get the 1,000 FlyBys points? Okay there are some special deals around right now which offer good FlyBys points. But in the main you have to spend plenty to get to 1,000 points. Coles has an obligation to be more transparent with consumers about their campaign.

Small business owners can make ground here with their own campaign about real rewards for real loyalty. Coffee shops, newsagencies, pharmacies – many have in store loyalty campaigns which deliver substantially better value than the Coles deal. But consumers can’t tell because of poor government regulation and because small business owners don’t tell their customers how good their deals are compared to the Coles deal.

I have a great loyalty program in two retail shops I own. I’m planning a better than Coles promotion to underscore the difference between what I offer and the massively promoted Coles offer.

On the software front, we’re going to tweak our loyalty tools to help small business owners better communicate with customers about the real value of each point.

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How do you engage small business owners to be business owners?

At Tower Systems create software for independent retailers. We’ve been doing this for almost 25 years. We serve over 2,000 clients across Australia and New Zealand.

The biggest single challenge we have on a day to day basis getting our clients to use our business management software beyond the most basic cash register replacement type functions.

While many of our clients engage with the software and push it to its design and capacity boundaries, many do not and remain oblivious to what’s actually happening in their businesses. It’s like they enjoy owning the business but don’t want to understand. Some expect the software to understand for them. Others, well I don’t know.

Every day in our business we talk about how we can improve engagement with the technology for the benefit of client businesses. It’s somewhat of a holy grail. We care about it because of our long history in the marketplace. We also care about it because of our affinity with the small business space. We believe in small business and will champion it at every opportunity.

To deepen engagement we have tried free training sessions; newsletters; online forums; trade shows; business performance analysis and face to face visits.

What we have found works best is face to face contact. It’s only through this that we can see whether they are good users or bad and whether they are serious about their business and are prepared to put in the necessary effort. Face to face we can measure how our pro bono effort will be received and valued and this will guide our investment. Of course the option is to ignore all this and just stick with making and shipping software. They may work for Microsoft. In the small business sector it’s all about engagement and that only happens when you are directly in front of the customer.

So, we champion face to face one on one contact. This is where we shine and our customers learn the most. More often than not, through these face to face discussions we see people evolve and become more engaged in using the technology as a partner to drive the business.

Software companies serving small businesses should consider face to face contact as a key part of their customer interface strategy. It pays for itself through referral business without any effort whatsoever. It’s also a point of difference as most software companies won’t have the drive or commitment to make it work. In our case I’d say more than half the growth we’re achieving is as a result of this effort at a better and more personal client relationship.

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Barnaby Joyce on small business

Trawling through Hansard I came across this speech to the Senate on October 11, 2005 by Senator Barnaby Joyce. In the speech Senator Joyce sets out his reasons for his position on the Trade Practices Legislation Amendment Bill (No. 1). It’s a speech which would warm the hearts of any small business owner and it has not been well covered by the press. Too often in these cases the media gets caught up in the politics of the vote and loses sight of the words of people like Barnaby Joyce. He makes sense. He gets the role of business and, in particular, small business.

This passage from the speech is particularly stirring:

The purpose of the economy is not to produce the lowest priced product for the end consumer. That may be a consequence of a good economy but it is not the purpose of the economy. The purpose of the economy is to create the greater nexus between the wealth of the nation and its people, and it generally does that through small business. Our job in this parliament is to maintain the management of that, to make sure that small business prevails and gets a fair go, to make sure that small business can start from the ground up, that a person can start from the ground up and attain their goal and that freedom that they get from small business.

We have had so many instances where it has looked like that might be slipping away. Newsagents, some of the horticultural producers, pharmacies and a lot of small retail shops in regional towns or in suburbs feel that they are over a barrel. They feel threatened and do not feel that they have the ability to go on in the manner in which their parents or grandparents probably went on before them. Our job in this parliament is not only to say we support that but also to publicly show we support that and to do it in such a forum as this, the elected body in this Senate chamber they have sent us to. Why do we believe in this freedom to go into business? The freedom to go into business is a mechanism that gives us our own personal freedom. In politics, we have to allow the greatest freedom for the individual that does not impose upon the freedom of others. That is the aspiration within politics.

One of the key freedoms you can have is the freedom to start your own business, build it up, see it progress and hand it on as a legacy to your children. That is a key aspiration we hold. Some people talk about their future within a company. Some people like to have their own future managing their own affairs, their own future that they determine. I side with those people and I want to support them. I believe the birth of a new business gives birth to an aspiration that you can pursue. It also allows the development of new products, new ideas and new managerial techniques. It gives the whole economy a greater breadth, a breadth to go forward. On the conservative side of politics—and, I suppose, even on the Labor side of politics—it is a fundamental good that we try to encourage.

Currently, with 77 per cent of the retail market controlled by two organisations, we would have to say that freedom is slipping away somewhat. The ‘national champion’ argument pays little regard to the ‘freedom of Australians to be in business’ argument. Mergers and acquisitions are the stepping stones by participants in the market to a position of centralisation that inhibits this freedom. As such, Senator Boswell was instrumental in including the provision that you cannot have a merger that is likely to have the effect of lessening competition in the market. The ACCC works under this auspice. As such, it is something that should be maintained in its current form. Currently the ACCC approves 98 per cent of mergers. The other two per cent do not pass, and they do not pass for a very good reason.

I especially like his comments about aspirations. It is important that we encourage entrepreneurship. For this to happen we need economic circumstances which respect small business owners. As Joyce suggests, the circumstances are slipping away.

It may sound somewhat twee but I found his speech encouraging.

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Once burned twice shy

I think that’s how the saying goes, once burned twice shy. A significant chunk of our business this year has come from small businesses switching from other computer systems to us and while we’re thrilled to win these customers, there are challenges involved. The most complex challenge is how they feel about computer companies in general after a bad experience elsewhere. If you do not navigate it well they shift some of their feelings for their old computer supplier to your company even before they have put the new system in. This can be frustrating when it happens which is, thankfully, not all the time. Now that we are aware that some customers can have this syndrome – caused by consistent bad service/experiences – we anticipate and help eliminate it before we start. This approach is working well and we get a good clean slate to deal with.

There are some poor quality IT companies out there serving small businesses and they are damaging the reputations of rest of us through their dealings.

It’s hard to let go of impressions burned through pain so we try for a completely different experience from the outset so comparisons are hard.

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Self help group for new small business owners

We get pretty involved with our clients, especially those new to business. Often they find themselves in difficulties they never imagined in the afterglow of deciding to become self employed. Too many major suppliers to these small businesses bully the new business owners to gain preferential payment treatment. This de-motivates the owners and speeds up problems for the business. Not enough of the larger suppliers I observe step back and genuinely work with a small business in trouble – and often these larger suppliers have caused cash flow and other problems through accounting mistakes and over/under supply.

One solution I see is a self help group of new owners with experienced peer support and this is what we are establishing for our new owner clients. We are connecting new owners with some more experienced operators to check in with each other twice a week until the peer support person as certain that the new owner has a good grasp of all the pitfalls. We’ll support the group with free business analysis and regular phone and in person check ups to ensure that the business is in good hands.

The four business owners already in the self help group are going well, two have turned the corner and have new energy for their businesses.

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What’s happened to creativity in supermarket advertising?

I received three brochures in my letterbox this weekend. Dollar dazzlers from Coles, Dollar deals from Safeway and Dollar days from IGA. Maybe it’s not that big a deal and they are only supermarket brochures after all but it would be good to see some variation in the value proposition as reflected in the title.

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Workchoices: is this type of industrial relations reform necessary?

I have owned my small business for 25 years. Across I employ over 50 people. Most full time and some casual. I see no reason for workplace reform of their extent bring brought in and am concerned that the changes will force me to act in ways I am not comfortable with.

I would have liked the government to consult more with small business as I know I am not alone in thinking these changes are bad for the community and bad for small business. This is not socially responsible legislation.

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Experimentation

We’re a few weeks away from releasing a new software update while will ship to well over 1,000 small businesses. We’re been running various versions of this update in our two retail outlets and finessing it based on the learnings. Even though we’ve been doing this for almost ten years, the experience always amazes me as there are significant enhancements we make as a result of using the software ourselves. In the small business marketplace this level of hands on experience is essential if you want to lead in a market niche.

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Loyalty marketing

I’ve got the rules on my desk for ten difference loyalty schemes from major retailers and all are poor at best in terms of rewards. I’ve compared these ten schemes with ten from local small businesses and the small business loyalty programs are better by far. It is like comparing chalk with cheese. The small business schemes are simple to use and quick to reward. The national chain schemes require you to complete details and always use their plastic card with your purchase. (Of course this so they can find out your purchasing patterns.) The small business schemes like the newsagency magazine club card, the coffee shop card, the card shop card and the bakery buy 5 and get the 6th free are all about genuine reward.

I would like to see the state governments introduce regulations requiring disclosure of the real value of each point accrued at the time of purchase so the consumer can know how much their business is valued.

I know that if I spend $100 at one major department store I will accrue around 50 cents value in points for the sale. I know that if I spend the same amount on coffee I’ll get $15.00 worth of free coffees. If I spend $100 on magazines at my own retail business I’ll get to choose two magazines to the value of $10.00 each – that’s $20.00 value from a $100 spend.

The lack of regulation is allowing the bigger businesses to get away with what I’d call loyalty theft. Small business groups ought to consider campaigns around how much better value of their loyalty programs.

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Customer lines

I was in an Australia Post shop yesterday and waited five minutes to purchase $10.00 worth of stationery. At lunch I waited 2 minutes to be served at Subway. At the bank I waited 5 minutes to do some banking. In the morning I watched the counter at my small retail business and checked to see the average wait time before customers were served. In each case it was one minute or less – for large and small transactions – and in two out of ten cases customers were grumpy for waiting that long.

I’m curious as to why people will wait in a post office for five minutes to put a pack of paperclips but get grumpy in my newsagents when waiting a minute for to purchase the same product.

I think a key difference is that at the Post Office they organise their line whereas at my shop and many small businesses we do not have a regulated line. I suspect that our lack of regulation makes people feel we are not taking the next customer and the next and so or whereas at the Post Office that always happens so there is some certainty.

It’s the same here at my software business with help desk calls. People want to know that they are being dealt with in a linear fashion. Hopefully our CRM solution will provide the transparency they want so they can see that we do take them in order of arrival and not just pick off favorites.

In some respects I wish the Post Office customer mentality was available for small business customers – where people accept delays and public service like service. But then I don’t want their behind the counter arrogance. Not at all.

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Another crack at Jetstar

When I flew with them on Monday I arrived at the airport two hours before the flight. I was congratulated on being so early. Smiles all round. I was told I was in the blue boarding group, the second in line in the run for your life seat grab since they have no allocated seats. I asked why I was not in orange, the first group which gets the best seats and they said it was because that’s for anyone with children and those who pay a higher price for their tickets. So, families with kids can arrive just before cut off and they get the seats of their choice.

I’ve flown with Virgin Blue and while their model is different to Jetstar, they are both budget airlines. The Virgin Blue experience is delivered with some more panache and fun than that of Jetstar. At least with Virgin there is certainty about your seat allocation and for regular travelers this is important.

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Jetstar and their fuel secret

I took my first Jetstar flights this week and have discovered how they can sell tickets for so little.

They encourage families with young noisy children onto their flights and somehow manage to channel the energy released from their long and loud screams through the flight to feed the engines. Sure saves on fuel. These kids are releasing pure energy in flight.

On each of my 2 hour 20 minute flights I was surrounded by these small monsters and they screamed from takeoff to landing.

Well done Jetstar for such a scientific breakthrough.

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The sloppy hamburger eater

I was talking socially yesterday with someone who was a sales prospect in around 1992/93. (I hope he doesn’t mind me recounting the story.)

Over lunch I was told the story of a visit from one of my sales people in 1992/93 with this gentleman, seeking to interest him in our computer system. Our sales person turned up with the remnants of a hamburger on his shirt. This is what the story teller recounted yesterday, how the sales guy looked. He had one comment about the software but that was incidental. It was the burger on the shirt which was “the” story. It was the second time I heard this story from this person in the last six months.

Once I was over being annoyed that something small like food slops from thirteen years ago was worth recalling today, especially in front of other prospects, I realised how first impressions really matter and how some people will hang onto those and forever (almost) judge one’s business by those first impressions.

Sure, this chap should let go of the 13 year old memory and concentrate on what software from my company can do for his business compared to what his current software (chosen 13 years ago) does. But then he’d lose a good anecdote. It is timely that I am reminded about the importance of how we look – especially in this era of casual dress in business.

I am confident that I am not the only person this burger story has been recounted to (twice) and that in itself has a cost of my business. Running the business as if every contact today will be recounted in 13 years is a challenge. It means exceptional service every time. It means focusing as much on the look as substance. It means, too, finding a way to erase these thirteen year old memories so that we and our prospects can move on.

Starting today I’m banning burgers for sales people. In fact, all food during the work day. And drink. No point in taking the risk.

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Woolworths / Safeway and their smile TV campaign

It’s interesting to see the latest Woolworths / Safeway supermarket campaign here in Australia. While there is a pitch about price, it’s really a feel good campaign about great service. Lots of smiling.

It’s a great TV commercial. Breezy, upbeat. It sets high expectations which, if not met each time you visit one of their stores, invite harsh criticism.

I don’t think people choose a supermarket based on a TV commercial focusing on great customer service or smiling. Those features are best demonstrated in store as that’s where I’ll lock the experience away to encourage the repeat visits. If you have to advertise that you do what should be basic retailing service then something’s wrong.

Small businesses would do well to take this TV campaign as a reminder to focus on exceptional service. It’s true that exceptional service and a great shopping environment allows you flexibility on pricing.

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On the trail of employee theft

We spend a lot of time gathering evidence of employee theft in client businesses. We’ve developed some processes and rules of thumb which police in several states have found useful. The post recent case is in Queensland. In fact, one of our senior employees is out of the office for the next two days giving evidence at a committal hearing.

What frustrates me about this case and so many like it is that our client had the tools available to see this happening and did nothing to mitigate his losses until they had mounted to a more noticeable level.

The end result is more money stolen and us spending considerably more time helping the police and, now, the prosecutor.

Frustration all round.

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Advertising screen overload

The retail world has gone advertising screen crazy. They are everywhere and in all manner of shops. There was a time when they were confined to supermarket checkouts, now they are deep within the store. Some are just visual, others have sound. Each is a flashy bouncy ‘come on’ enticing you to spend.

I wonder whether retailers are going overboard. Small businesses are under pressure to bring more into their stores and that means that we as a software provider to small business are being asked to link into these screens and provide sales related visuals.

I’m all for intelligent use of IT to drive sales. However, I wonder is small business could differentiate by providing a calm environment. An oasis if you will from the usual noise of retail. If a small business is noticeably more calm than a competitor will customer stay longer and spend more? I am sure that the marketing experts will disagree, in part because they need to be pushing the next big thing to justify their existence and in part because light and colour is more interesting than stillness.

My point is that businesses contemplating these advertising screens need to consider what retail environment they really want to provide before copying the bug boys into the razzle dazzle.

Maybe there is room for calm.

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Workplace reform frustration

I wonder how many other small business owners are frustrated with the Federal Government’s workplace reform changes. While I have not been able to escape the advertising blitz of the last month, I am yet to receive anything from the government, as a business owner and employer, which explains the changes.

I’d much rather the government focus its attention on the challenges of small business in competition with big business as this poses a greater risk to employment in this country.

Yeah I’m not happy with some aspects of our current industrial relations laws but there is no reason to strip away basic rights as these changes seem set to do.

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Despair at small business and the lack of interest in business

I despair sometimes whether small business has any hope at all against big business competitors. Not only in terms of operational costs (lease, labour and cost of goods sold) but also in terms of advertising buying power and brand discipline.

The independence of small business, while admired by many, kills small businesses. The cost of reinventing the wheel in thousands of businesses even in the same sector daily makes of a debilitating overhead.

My biggest concern relates to decision-making. Whereas national and international companies centralise decision making and base it on accurate and timely data, small businesses rely more on gut feel and while this may win on some situations in many it does not.

I am concerned about this today because of another client on the phone and in trouble. While we will do everything possible to help them, the problem was evident six months ago in two or three crucial management reports available through our software. When asked by they don’t even look at such basic reports the response was “if I wanted to look at reports I would have stayed working for someone else”. I have looked at their data from six months ago as represented in these three reports and I can see falling traffic, the categories affected and even why the sales are falling.

Now it may be too late because they have let one thing pile on another to the extent that they are in default with several suppliers. This business is their only source of income and it is backed by all of their assets.

As I said, we will help them in every way possible. In the meantime, a question we have for ourselves is what could we do to have alerted them about the problem and if we had done whatever that is, would they have acted sooner? We have considered alters in the software and a range of other measures. However, it comes back to one key point – whether people using the software are businesspeople. Not even using some basic reporting tools is like driving a car while not looking at the road.

We figure the best next step to encourage engagement is to tell stories like this one to our clients – to encourage engagement.

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The Apple iTunes / Coles deal still rankles

Big businesses move in circles many in small business cannot comprehend. Deals are interlocked favors which build layer upon layer and in a way which cuts out all other players.

National and global corporation relationships are such that small business has no hope in achieving a level playing field.

I’m not writing this to be critical of big business but to acknowledge the reality of the game. On the iTunes deal announced last week, Apple wants to sell more iPods, Coles has the retail network so it is logical that they enter into a mutually beneficial deal. Small businesses, like newsagents, never had a hope because Apple wouldn’t seem them on the radar as relevant. While newsagents have more stores than Coles, they lack the one think which Coles leverages exceptionally well our of their head office – market power.

The only way small businesses and, specifically, newsagents, will be able to leverage in a way similar to Coles will be for them to create and or control products and services exclusive to their channel. It may be that the focus is on premium service, for example – service so good that customers rave about it. If newsagents can deliver that and have customers talking up the line that they prefer to deal with newsagents then suppliers will want to tap into the goodwill built through such service.

I appreciate that this is less tangible than an exclusive product as such. However, it is something which newsagents and, indeed, all small businesses, can own today. But it’s a chicken and egg situation. You need great traffic to be able to serve enough well so they rave about you and you only get the traffic if you have good current product and right now you’re only getting this if you’re a big business mate and doing a reciprocal deal.

Hmmm…

Apple has tainted its image by doing a deal with Coles Myer and hopefully consumers will see it that way and not purchase recharge at Coles stores.

In the meantime it would be good if our politicians researched deals like this from a policy perspective and assessed whether they are in the best interests of the consumer. The last time parliament research anything like this was in the late 1990s. Small business is not on their radar it seems.

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Coles Myer, Apple and the social responsibility of cutting out small business

Coles Myer and Apple have done a deal giving Coles group stores exclusive access to selling a prepaid card consumers will use for purchases at the new Australian iTunes store. They are using technology provided by Bill Express to manage the transactions.

Newsagents have 50% more Bill Express prepaid outlets than Coles yet they are not part of the equation. Okay, that’s business. Deals between companies are done every day so why is this one different?

Newsagents are a better fit with the typical iTunes consumer. Newsagents are better socially connected than Coles and this should sit well with Apple.

Just as businesses have an obligation to buy Australian, so too should there be an obligation to seek out small business partnerships. Otherwise the big will get bigger and the small will cease to exist.

I’m not proposing a free kick for newsagents from Apple. Rather, a commercial and more valuable arrangement than with Coles. Newsagents offer more outlets than Coles, equal compliance (through Bill Express) and a better consumer connect i this space.

Newsagents have committed to $25K in hardware infrastructure to support the Bill Express network and to lose a logical fit such as with Apple must make many wonder about the value of the investment.

I would like to see Government place an obligation on big business to somehow work with appropriate small business networks on deals like this in the future.

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Australian government small business policy

Why is the government demanding that Telstra compete in an open marketplace while it protects the best stores in the Australia Post retail network from open competition?

Why has the government allowed Australia Post to aggressively pursue product lines sold by small business newsagents?

Why has the government demanded that newsagents deregulate (in 1999) yet refused to open the sale of postage stamps to the same retail competition?

Is the government prepared to compete with all small business sectors or will it restrict its enterprises to competing with newsagents?

How does the government feel when its employees visit small business newsagencies, note retail prices for items and return to their PostShop and adjust sales prices?

Does the government have a small business policy which is pro small business?

Why will the government not set a policy of selling off the PostShop retail businesses to local small business people?

Footnote: This is a repeat of what I have posted at my newsagency blog. I have posted them here because they relate to the small business issues I cover here. The two faced approach of the government on small business needs an explanation.

The government operates 863 PostShop retail businesses. These businesses are increasingly competing with newsagents for general stationery, greeting card and related business. The old post office has become a retail chain and it is trading off exclusive postal products to grab sales which would otherwise have gone to small business.

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Offer of collusion spurned

A few months ago a competitor approached me about the support fees we charge, suggesting I might consider reaching an “accommodation” on support fees. His suggestion was that we both increase fees and stop trying to take customers off each other. I refused to even consider the suggestion, knowing it to be illegal. His response was along the lines of no one will find out.

I’d forgotten about the brief exchange until reminded today when talking with some folks about the Trade Practices Act. Thinking back to the suggestion of a few months ago I wondered how many such collusive arrangements go unnoticed.

Small business is tough enough. While I’m not about to dob in the competitor I am wary of everything they do because their suggestion demonstrated the lengths they would go to for revenue.

I’ve taken the opportunity to remind my sales team members to be careful about what they promise and to be even more careful about any conversation with a competitor.

While I was never going to agree to anything which disadvantaged my clients and prospects, just being invited to consider it makes me feel somewhat dirty.

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The Wal-Mart you don’t know

This Fast Company article from December 2003 documents some of the practices of Wal-Mart and its negotiations with suppliers.

Small business often focuses on how a major competitor like Wal-Mart in the US or Woolworths, Coles, Harvey Norman or Bunnings etc in Australia might have on their business. As the Fast Company article outlines, the impact can be felt way down deep in the supply chain. Small businesses are not as tough in negotiations in part because they are not as powerful. Therefore they carry themselves the financial pain inflicted by big competitors on suppliers.

Maybe this is why newsagents get 5% commission for selling Vodafone recharge compared to the 16% paid to a major supermarket chain. Who knows? The greed of some of these giant companies inflicts a pain which is felt not only by suppliers and the sooner the broader community understands that their discounts are not as beneficial as the TV commercials make out.

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Is there no end to fuel discounting?

At the supermarket today they are offering 14 cents a litre off fuel. Certainly that’s what the signs were screaming at me. However, upon reading the fine print I have to buy certain products, post the receipt, my details and 50 cents postage fee and wait for a bonus fuel voucher to be sent. It’s all too hard. I’d prefer better prices at the checkout. Every time. But then they cannot bounce me to their company owned fuel outlet from where they would bounce me back to the supermarket.

The range of fuel discount offers is an opportunity for independent retailers. Ignore the hype. Provide discounts at the register and put real money back into consumers’ pockets. Not this hypes up cents a litre off which, in real terms (if you shop around for fuel), is probably not worth as much as they suggest.

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