I wonder how many businesses realise that the Valuations Office Agency are starting the process of establishing the rateable values of for the 2010 valuations list for Business Rates. It will be the rents that businesses are paying now that will be used as the basis for the rateable values in two years time.
It must be said that this is the normal cycle for the agency, but isn't it just about right that just at the moment when landlords are likely to be easing rents to retain tenants that the current rents will be enshrined for five years as the basis for taxation. It will be interesting to see how the rateable values in 2010 compare to the rentals at that time - if the rentals fall then it will be worth challenging the valuations. It will be particularly necessary for retailers who, if Sir Stuart Rose is correct, will be at the height of a period of depression and suffering revenue slumps. It does make you wonder if this system is either fair or practical as a tax raising system.
Friday, 25 April 2008
Friday, 18 April 2008
Green speaks great sense!
As a champion of SME retailing it is not often that you will find me agreeing wholeheartedly with Sir Philip Green, but in a piece written by Glynn Davies in the Retail Bulletin he gives advice about keeping ahead in the world of retail. His advice is as pertinent to a smaller operator as it is to one at his level of operations.
Speaking at the World Retail Congress in Barcelona he is quoted “Far too many people are driving down the price route but there will need to be differentiation...with newness and speed to market. Be competitive but also offer something different. To get people to shop in your stores you need to have something different.”
I have said as much in these blogs in earlier postings - it is essential in the economic climate that is developing that margins are maintained - clearly you need to be competitive, but that can be achieved by having that unique sales proposition rather than simply by being cheapest. It is often overlooked in SMEs that retail marketing is not simply advertising and merchandising it is about researching the product, securing a solid supply chain with mutual benefits and ensuring that the product on offer is a 'must have'; It is about having motivated people who understand the product on the shop floor interacting with the customers; it is about value for money, not about cheapness!
Speaking at the World Retail Congress in Barcelona he is quoted “Far too many people are driving down the price route but there will need to be differentiation...with newness and speed to market. Be competitive but also offer something different. To get people to shop in your stores you need to have something different.”
I have said as much in these blogs in earlier postings - it is essential in the economic climate that is developing that margins are maintained - clearly you need to be competitive, but that can be achieved by having that unique sales proposition rather than simply by being cheapest. It is often overlooked in SMEs that retail marketing is not simply advertising and merchandising it is about researching the product, securing a solid supply chain with mutual benefits and ensuring that the product on offer is a 'must have'; It is about having motivated people who understand the product on the shop floor interacting with the customers; it is about value for money, not about cheapness!
Monday, 7 April 2008
BSSA Summer school bursaries
This prestigious school has a fine reputation and those whom I have met who have attended over the years have all been fully signed up to the real advantages that they have gained from their attendance. In my experience the kind of subjects covered are best understood in the residential environment of the Summer school - a real hot-bed of creative thinking and learning.
What is not always recognised is that owner-managers are just as eligible for the busaries that Skillsmart (the sector skills council for retail) award as anyone. So rather than wait for the guys from House of Fraser, Debenhams or other 'names' to swamp the school, why not apply yourself? The problems of the smaller retailer and the skills that they learn can add an interesting and valued contribution to the whole experience - and, of course, the smaller retailer can gain benefit from learning what they do in the bigger stores too!
I see, from reading the Retail Bulletin, that the bursaries are now available; so what's stopping you?
What is not always recognised is that owner-managers are just as eligible for the busaries that Skillsmart (the sector skills council for retail) award as anyone. So rather than wait for the guys from House of Fraser, Debenhams or other 'names' to swamp the school, why not apply yourself? The problems of the smaller retailer and the skills that they learn can add an interesting and valued contribution to the whole experience - and, of course, the smaller retailer can gain benefit from learning what they do in the bigger stores too!
I see, from reading the Retail Bulletin, that the bursaries are now available; so what's stopping you?
Thursday, 3 April 2008
Bad tidings as April gets underway
This blog has been with-held until a decent period had past since the 1st April - just in case anyone confused this worrying message with a form of black humour. Sadly, it is the real thing...
Katie Kilgallen, writing in the 'Retail Week' about the latest ICM poll to be published reflecting the mood of the consumer in the High street. She reports that "Of the 1,050 consumers surveyed, two thirds believe economic turmoil will increase over the next 12 months. Nearly a third fear for their jobs and 42 per cent feel they have less to spend."
Yes, it is only a small sample, yes it might well be that the particular locations of these people would mean that their view of the world is unlike anything experienced in your High street; but all that does not mean that it is not a reality. Retailers, especially SME retailers, are resourceful and optimisitc creatures usually - but it is those who are pragmatic and plan for resilience against the draughts of recession who are most likely to remain in business.
Of course, these things also offer a glimmer of opportunity too! The flexibility of the SME can really score in times of recession - remember not to buy too much stock and keep a weather eye out for the changes in the market demands and re-stock in small quantities of those things that are selling. Don't discount more than is absolutely essential and trade on quality service and quality product - but at a reasonable price that compares well within the normal market range. Above all, maintain profit levels, reduce costs and ensure that your customer service is second to none! (Remember to train your staff effectively too ... the subject of another blog, I can just feel it coming on)
Katie Kilgallen, writing in the 'Retail Week' about the latest ICM poll to be published reflecting the mood of the consumer in the High street. She reports that "Of the 1,050 consumers surveyed, two thirds believe economic turmoil will increase over the next 12 months. Nearly a third fear for their jobs and 42 per cent feel they have less to spend."
Yes, it is only a small sample, yes it might well be that the particular locations of these people would mean that their view of the world is unlike anything experienced in your High street; but all that does not mean that it is not a reality. Retailers, especially SME retailers, are resourceful and optimisitc creatures usually - but it is those who are pragmatic and plan for resilience against the draughts of recession who are most likely to remain in business.
Of course, these things also offer a glimmer of opportunity too! The flexibility of the SME can really score in times of recession - remember not to buy too much stock and keep a weather eye out for the changes in the market demands and re-stock in small quantities of those things that are selling. Don't discount more than is absolutely essential and trade on quality service and quality product - but at a reasonable price that compares well within the normal market range. Above all, maintain profit levels, reduce costs and ensure that your customer service is second to none! (Remember to train your staff effectively too ... the subject of another blog, I can just feel it coming on)
Tuesday, 18 March 2008
Time for Government and Landlords to think!
The Finance Secretary in the US Administration has warned of grim times ahead in the US economy; Tesco has ordered cost cutting measures; Pre-Easter sales are being unfavourably compared year on year - there do seem to be a number of reasons for all retailers to be intensely aware of their costs.
For smaller retailers the largest costs tend to be staff and property - staffing in SMEs is generally at a higher level (number of staff against pound for pound spent in store) than in larger organisations so this might seem to be an easy step to take in reducing costs - except that in smaller units, a single member of staff is a significant percentage of the whole and can make the difference between making sales, having security, or even just trading for a whole week with adequate cover. Legislation now dictates the maximum number of hours to be worked as well as the minimum pay for that work; this doubles the pressure upon SMEs to limit the number of jobs available for the very people that Government is trying to protect - and it is a case that either the SMEs do impose these limits or else there will be no jobs at all in that sector, something that will do the least well paid members of society absolutely no good at all.
The issues relating to occupancy costs are legend and need not be rehearsed here, but an interesting observation has been reported by Jennifer Creevy in 'Retail Week' and commented upon in an editorial; she reported comments made by William Landale the CEO of Lombok, a furnishing retailer. He is reputed to have said "I hate Landlords"; and can't we all sympathise with Mr Landale for that heart-felt utterance? Of course, Mr Landale was probably not actually sticking pins into a doll version of any particular individual landlord when he was being quoted. Mr Landale was actually commenting that landlords seem to be oblivious to the trading environment of their tenants, and there not being any established mechanism for rents reflecting the levels of trade actually being achieved.
Retail Speak believes that this is a situation that has to be resolved - as the trading conditions deteriorate in this cycle, it would be sensible for agreement to be reached where rental agreements are linked to trade levels - it could offer a fair return for landlords, a more realistic base for the retailers to build their businesses from and level the playing field for the game between the larger and smaller players in what is currently an uneven place indeed.
For smaller retailers the largest costs tend to be staff and property - staffing in SMEs is generally at a higher level (number of staff against pound for pound spent in store) than in larger organisations so this might seem to be an easy step to take in reducing costs - except that in smaller units, a single member of staff is a significant percentage of the whole and can make the difference between making sales, having security, or even just trading for a whole week with adequate cover. Legislation now dictates the maximum number of hours to be worked as well as the minimum pay for that work; this doubles the pressure upon SMEs to limit the number of jobs available for the very people that Government is trying to protect - and it is a case that either the SMEs do impose these limits or else there will be no jobs at all in that sector, something that will do the least well paid members of society absolutely no good at all.
The issues relating to occupancy costs are legend and need not be rehearsed here, but an interesting observation has been reported by Jennifer Creevy in 'Retail Week' and commented upon in an editorial; she reported comments made by William Landale the CEO of Lombok, a furnishing retailer. He is reputed to have said "I hate Landlords"; and can't we all sympathise with Mr Landale for that heart-felt utterance? Of course, Mr Landale was probably not actually sticking pins into a doll version of any particular individual landlord when he was being quoted. Mr Landale was actually commenting that landlords seem to be oblivious to the trading environment of their tenants, and there not being any established mechanism for rents reflecting the levels of trade actually being achieved.
Retail Speak believes that this is a situation that has to be resolved - as the trading conditions deteriorate in this cycle, it would be sensible for agreement to be reached where rental agreements are linked to trade levels - it could offer a fair return for landlords, a more realistic base for the retailers to build their businesses from and level the playing field for the game between the larger and smaller players in what is currently an uneven place indeed.
Monday, 17 March 2008
Tesco un-nerved?
Goldman Sachs have recommended that investors sell Tesco shares - a move which will probably cause ripples throughout the stock market, especially in the retail sector. Tesco's themselves are reported to be surprised at the note; but should they be?
Certainly there are signs that this, the largest of all UK retailers has been rattled, else why, for instance, would it wish to resort to law to protect its name both here and abroad. The reports from Thailand show how Tesco are sueing two individuals, one of them a former MP and secretary-general of the Thai Chamber of Commerce is being sued for £16 million; his offence it seems was to make speeches that Tesco disapproved of concerning the expansion plans that they have for Thailand and the effect that it would have on the small businesses in their local economy. It is true that both defendants have admitted that they mistakenly suggested that 37% of Tesco's revenues were derived from that country, but surely that cannot have been a good enough reason to issue a writ. Perhaps it was that the speech, Tesco's are reported to claim, insisted that profits of Tesco Lotus are not re-invested in Thailand?
It does seem like a sledgehammer to crack a nut - but then Tesco does seem to have had over six years of problems in Thailand, along with Carrefour, Boots and a number of others. Perhaps their nerve is a bit frayed or perhaps it is wrong in Tesco's eyes to have a different world-view and a different economic model than that favoured by Tesco. Thailand has been selected by Tesco to be their third largest national market - the Thai's are being most unco-operative and disobliging not to mention ungrateful to their would-be benefactors. Not that the Thai debacle is their only foray into legal territory - it seems that a company that the CEO of Tesco has described as being a charitable organisation is doing a strangely uncharitable act by proposing to undercut Tesco's prices to its customers and Tesco have threatened to report Ocado to the Advertising Standards Authority; heaven forfend! Tesco would surely never stoop to such measures as undercutting prices to develop a market? Ethicalcorp.com reported last July that Tesco Lotus had entered the school uniform market in Thailand with prices averaging some 20-30% less than the local market was displaying - I wonder if they could be sued for such practices?
Perhaps the charitable company, Ocado, will be forgiven for not understanding the rules of the game. In the Times (October 4 2006) Tesco claimed that . “We are confident Tesco has brought a lot of benefit to Thai consumers" and presumably they believe this because of the low prices that they attract consumers with; does the same principle not equally apply to consumers in the UK? Perhaps there is another underlying reason for all these jittery nerves?
Is there a nervous reaction to the poor performance of the new venture in the US? Is there a jitter or two because of the non-food performance in the UK? Perhaps the fact that the good burgesses of St Alban's are voting in their local press about whether the local town centre really needs another large Tesco store (the count is in on Tuesday and it's not looking good for Big T); I wonder how they feel about the couple in Solihull who have vowed never to shop at Tesco ever again because of a fiasco, where the couple ordered groceries and after non-delivery were promised a refund - and that was to take over a week to arrive! It could be none of these things, it could be that the leader of the Liberal Democrats, Nick Clegg, according to the Guardian (March 13 2008), is scandalised about the development of eleborate corporate structures for Tesco based in the Cayman Islands to save millions of pounds in stamp duty. It might even be that they are jittery because banking analysts are saying that with rising food prices the profits of food groups are going to be seriously squeezed - the chief economist at Lloyds TSB, Trevor Williams, is reported to have said that if inflation rises above 2.5% then Tesco will be in real trouble. It has to be recorded here that Tesco has an explanation for each of these little issues, whether their explanation is any more or less valid than the originator's claims is a matter for others to decide.
Tesco have a 30% share of the UK food market and above 30% in Thailand, I wonder why it is that they are quite so un-nerved by small retailer competition and the opinions of people who are trying to champion the cause of SME retailers? It makes interesting reading, but what does the future hold? It may be that the solidity of these mega-retailers that local authorities set so much store by are not quite as safe as was imagined. I speculate that with the worsening global credit situation, the rise in food and fuel prices accelerating the inflation rate in the UK and the predicted squeeze on profits that one probable outcome would be the closure of poorly performing stores in the UK. Which stores would be targetted - those which are in areas populated by the lowest income groups because they will not attract a high enough revenue or create a demand for a wide enough range of products. In short the stores that would be the first to go, would be those where the lcoal businesses have long since been forced out - the creation of new food deserts in our urban centres.
Certainly there are signs that this, the largest of all UK retailers has been rattled, else why, for instance, would it wish to resort to law to protect its name both here and abroad. The reports from Thailand show how Tesco are sueing two individuals, one of them a former MP and secretary-general of the Thai Chamber of Commerce is being sued for £16 million; his offence it seems was to make speeches that Tesco disapproved of concerning the expansion plans that they have for Thailand and the effect that it would have on the small businesses in their local economy. It is true that both defendants have admitted that they mistakenly suggested that 37% of Tesco's revenues were derived from that country, but surely that cannot have been a good enough reason to issue a writ. Perhaps it was that the speech, Tesco's are reported to claim, insisted that profits of Tesco Lotus are not re-invested in Thailand?
It does seem like a sledgehammer to crack a nut - but then Tesco does seem to have had over six years of problems in Thailand, along with Carrefour, Boots and a number of others. Perhaps their nerve is a bit frayed or perhaps it is wrong in Tesco's eyes to have a different world-view and a different economic model than that favoured by Tesco. Thailand has been selected by Tesco to be their third largest national market - the Thai's are being most unco-operative and disobliging not to mention ungrateful to their would-be benefactors. Not that the Thai debacle is their only foray into legal territory - it seems that a company that the CEO of Tesco has described as being a charitable organisation is doing a strangely uncharitable act by proposing to undercut Tesco's prices to its customers and Tesco have threatened to report Ocado to the Advertising Standards Authority; heaven forfend! Tesco would surely never stoop to such measures as undercutting prices to develop a market? Ethicalcorp.com reported last July that Tesco Lotus had entered the school uniform market in Thailand with prices averaging some 20-30% less than the local market was displaying - I wonder if they could be sued for such practices?
Perhaps the charitable company, Ocado, will be forgiven for not understanding the rules of the game. In the Times (October 4 2006) Tesco claimed that . “We are confident Tesco has brought a lot of benefit to Thai consumers" and presumably they believe this because of the low prices that they attract consumers with; does the same principle not equally apply to consumers in the UK? Perhaps there is another underlying reason for all these jittery nerves?
Is there a nervous reaction to the poor performance of the new venture in the US? Is there a jitter or two because of the non-food performance in the UK? Perhaps the fact that the good burgesses of St Alban's are voting in their local press about whether the local town centre really needs another large Tesco store (the count is in on Tuesday and it's not looking good for Big T); I wonder how they feel about the couple in Solihull who have vowed never to shop at Tesco ever again because of a fiasco, where the couple ordered groceries and after non-delivery were promised a refund - and that was to take over a week to arrive! It could be none of these things, it could be that the leader of the Liberal Democrats, Nick Clegg, according to the Guardian (March 13 2008), is scandalised about the development of eleborate corporate structures for Tesco based in the Cayman Islands to save millions of pounds in stamp duty. It might even be that they are jittery because banking analysts are saying that with rising food prices the profits of food groups are going to be seriously squeezed - the chief economist at Lloyds TSB, Trevor Williams, is reported to have said that if inflation rises above 2.5% then Tesco will be in real trouble. It has to be recorded here that Tesco has an explanation for each of these little issues, whether their explanation is any more or less valid than the originator's claims is a matter for others to decide.
Tesco have a 30% share of the UK food market and above 30% in Thailand, I wonder why it is that they are quite so un-nerved by small retailer competition and the opinions of people who are trying to champion the cause of SME retailers? It makes interesting reading, but what does the future hold? It may be that the solidity of these mega-retailers that local authorities set so much store by are not quite as safe as was imagined. I speculate that with the worsening global credit situation, the rise in food and fuel prices accelerating the inflation rate in the UK and the predicted squeeze on profits that one probable outcome would be the closure of poorly performing stores in the UK. Which stores would be targetted - those which are in areas populated by the lowest income groups because they will not attract a high enough revenue or create a demand for a wide enough range of products. In short the stores that would be the first to go, would be those where the lcoal businesses have long since been forced out - the creation of new food deserts in our urban centres.
Tuesday, 11 March 2008
Downturn in retailing - an opportunity?
The worry on the street is that there is a two-pronged attack on the strength of retailing in the UK; the global credit crunch has yet to fully impact on these shores - but surely will, and the the latest KPMG/BRC figures indicate a slowing spend in February.
Ordinarily I share the concern of others when viewing these sorts of single month statistics, but they do seem to be indicative of worrying trends spread over a greater period, and especially for SMEs. Given the trends of the past few years with the growth of the big food groups, there are considerably fewer SME retailers in the food and drinks sector - and this appears to be the only sector in real growth currently. There were other statistics out last week that indicated a change in the spread of spend giving the discounters and value stores a larger market share which complements the signals in other sectors that without discounting many people simply are not spending, and certainly not in sectors such as clothing. This may mean that SMEs are more vulnerable, but it may also provide a series of opportunities for partnerships with centre owners and local authorities to secure 'nursery' areas in town and city centres with advantageous terms to help establish new businesses which will bring a real economic benefit for the local area.
Jennifer Creevy in 'Retail Week' is saying that there is a glut of new space coming onto the market in new retail schemes in centres. Sir Stuart Rose is saying that he expects the latest retail downturn to last until 2011. It is reasonable to expect then that many firms who might have been expected by landlords to take space in these new schemes will not be doing so. That poses a threat to the viability of the schemes and to the town or city centres in which they are placed. There are new entrepreneurs coming to the market all the time, who are not in a position to take space in these new centres - but what could be worse for a landlord - reduced rentals to support new retailers for a fixed period, or no tenant at all? What could be worse for the local authority - reduced business rates or the thought of no rates from active retail businesses at all?
Time to take stock and have contingency plans in place for town centres and shopping malls - create the nurseries to provide the much needed nuturing grounds for the next generation of entrepreneurs.
Ordinarily I share the concern of others when viewing these sorts of single month statistics, but they do seem to be indicative of worrying trends spread over a greater period, and especially for SMEs. Given the trends of the past few years with the growth of the big food groups, there are considerably fewer SME retailers in the food and drinks sector - and this appears to be the only sector in real growth currently. There were other statistics out last week that indicated a change in the spread of spend giving the discounters and value stores a larger market share which complements the signals in other sectors that without discounting many people simply are not spending, and certainly not in sectors such as clothing. This may mean that SMEs are more vulnerable, but it may also provide a series of opportunities for partnerships with centre owners and local authorities to secure 'nursery' areas in town and city centres with advantageous terms to help establish new businesses which will bring a real economic benefit for the local area.
Jennifer Creevy in 'Retail Week' is saying that there is a glut of new space coming onto the market in new retail schemes in centres. Sir Stuart Rose is saying that he expects the latest retail downturn to last until 2011. It is reasonable to expect then that many firms who might have been expected by landlords to take space in these new schemes will not be doing so. That poses a threat to the viability of the schemes and to the town or city centres in which they are placed. There are new entrepreneurs coming to the market all the time, who are not in a position to take space in these new centres - but what could be worse for a landlord - reduced rentals to support new retailers for a fixed period, or no tenant at all? What could be worse for the local authority - reduced business rates or the thought of no rates from active retail businesses at all?
Time to take stock and have contingency plans in place for town centres and shopping malls - create the nurseries to provide the much needed nuturing grounds for the next generation of entrepreneurs.
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