Friday, 26 September 2008

Myth busting or myth making?

A piece in today's on-line Retail Bulletin is about the current success stories of the growing discounter food retailers. It is written on the premise that the sector is sheathed in a veil of mystery and myth and that the growth of the sector is perceived by some as an aberration. The problem that I have with it is that it may create as many myths as it dispels and those readers without further information may well be misinformed.

There has certainly been a great deal of nonsense in the media concerning predictions within the retail industry and the likely impact of prevailing economic conditions upon the public's buying patterns. Even in the specialist industry press there have been continuous reports that appear to have contradicted similar reports in the same journal only a week before, with a similar change in opinion following on behind. We have heard, for instance, that the John Lewis numbers are up, then down, then up again - to be followed by the inevitable down. With each turn these reports are accompanied by predictions that all is well, then all is woe etc... it is true that the John Lewis Partnership (JLP) are ordinarily a good bellweather for middle England spending and thus of the state of the retail sector in general, but the danger of the media focussing on a single group is that if the majority of a retailer's core customer group is adversely affected by economic or other factors then that retailer may instantly cease to be an effective benchmark.

Where are the real analyses, it certainly was not that described in the Discounter Myth story in Retail Bulletin - it was written by the marketing manager of Netto Foodstores, and it just might be that he has a biased viewpoint. That's not to say that he should not be able to express his own opinion or that of his employer, because he should, but Retail Bulletin ought to balance this with an independent and informed correspondent to provide a wider view that is less influenced by the 'golden rule'. For the uninitiated, the 'golden rule' is 'He who pays the gold makes the rule'; which makes for chauvinistic rather than non-partisan outcomes, whatever the endeavour unless the paymasters are themselves neutral.

It is clear, we have the opinion of no less an authority than the Chancellor of the Exchequer, that this country is moving into recession. It will not be alone - Ireland, Spain, Germany and others will be there too, if that is any comfort to anyone. With this being a fact then the media has a more pronounced responsibility to ensure that its reporting is accurate and that its opinion and prediction is based upon broad based research with good analysis. Short term, knee jerk reporting is potentially harmful, since it may feed a particular viewpoint and not actually address the underlying key issues that actually affect the economy. The danger is that these cock-eyed reports may serve to undermine any recovery when it begins to develop.

I do wish to point out that this blog is NOT a criticism of Retail Bulletin specifically, it just happens that the example that I have happened to choose was in their daily bulletin today. The
criticism is a general one of the specialist and general media and the manner in which 'sound-bite' reporting seems to have become the norm - there are, as ever, exceptions and I hope that these exceptional reporters will be emulated throughout the press.

Friday, 19 September 2008

Climate Change

George MacDonald writing in Retail Week has reported on a letter sent from some notable names in retailing to the Prime Minister urging that the Government raise the target for the reduction in carbon emissions by 2020 from the current target of 20% to a new, higher, target of 30%.

I say well done to Tesco, John Lewis and B&Q for having such a public spirited approach to the needs of the Earth and the people and other organisms living on it. One presumes that this request is accompanied by a plan to ensure that their outlets are only positioned in places where the existing transport infrastructure will cope with the necessary abandonment of the use of private cars to move customers to and from their stores? The next step will doubtless be a commitment to town centres, where rail, tram and bus services already offer the best means of serving the travelling customer's needs without recourse to a private car. The free delivery service for all heavy and bulky purchases in those green vehicles producing nil carbon emissions will complete the package and really demonstrate that these businesses really mean that they are serious about carbon emission reductions.

I look forward with growing interest to the fulfilment of these brave commitments - that's what they are, right?

Saturday, 13 September 2008

The wisdom of Conran

Sir Terence Conran is someone that has achieved a first ranking position in the annals of retailing and it is difficult to imagine the UK high street without his influences - Habitat, Mothercare, BhS and a host of others. A designer with a magical flair for retail marketing he has inspired many within the industry and has provided openings for a not inconsiderable number of well-known names.

In an interview with Retail Week, he has reflected on the past, the current and the future - and the wise will take note. The wise that is from all sizes of business; because Sir Terence (he ought to be Lord - No 10 take note!) has reflected upon what are the essential truths that have underpinned his success in retailing and these truths are of as much relevance to the emergent entrepreneur as they are to established chains.

Without this sounding like an advertisement for Retail Week, this is one that ought to be read, so go and subscribe at

In the meantime, keep a watch on what is written in these blogs because they echo many of Sir Terence's opinions - keep down costs, maintain margins, focus on the product and be aware of the customers needs. This is retailing in a nutshell.

Empty properties and business rates.

Another 'In brief' in Retail Week tells us of the fact that Asda is demolishing a property to avoid the payment of rates on an empty property.

This change in the rules that has been in force this year has all the hallmarks of another classic 'good idea' by an ill-informed civil servant that has the potential for so many unintended consequences that the Government ought to be embarrassed.

I can fully understand why Asda would take such a step, but as a large company they had the benefit of owning the whole kit and kaboodle of the building without there being any hint of residential accommodation being associated with it. In my experience SMEs, where they own property, often have leases (so are not the ultimate owner) thereby in in a position to demolish. They will also frequently have residential accommodation in some form associated with the premises - this means that planning permission would be needed in order to demolish and that that would probably not be granted where the building is seen to be perfectly serviceable.

It is to be expected then that those who can demolish, will; probably wasting perfectly good buildings with all the attendant detriment that the process will have to the environment and the Government's green credentials. It will also be expected that those least able to do anything to ameliorate the effects of paying a heavy tax on an unearning property will be the smaller business.

Many might argue that the best way to avoid paying rates on an empty property would be to occupy it and to trade from it - but that flies in the face of the market reality as it currently is. Hey ho, how many times must it be said that this country would benefit from having a period when fewer laws, regulations and rules are introduced - because that way those that do make it to the statute books might be workable, fair and actually achieve their intended outcome without dire consequences that the authors have not considered.

Business Rate revaluations

In April I wrote a blog about the start of the process of revaluation for the 2010 ratings list by the Valuations Office Agency (VOA); at that time I warned of the recessionary signs that were developing and hoped that the revaluations would reflect the reality of the economy. Welbeck as ever is ahead of the game.

I note that this week the Retail Week has reported 'in brief' that the British Retail Consortium (BRC) has warned retailers of a 16 per cent average increase but also that research from two property experts GL Hearn and Investment Property Databank shows a much smaller increase for offices at 3.1 per cent.

I think it was the landlords representatives in the recent continuing discourse on rent reviews who argued that "if we can only negotiate new rates every 5 to ten years then we must be able to introduce a level at the start that will give a fair return at the end of that period". On that basis, and some of the BRC members are also landlords, so it is pertinent to introduce this line of argument, 16% seems quite realistic - recent fuel charges for heating and lighting has risen by over 30% in one hike, with more to come? But I am not condoning the rise given that it is introduced arbitarily .This arcane system of taxation is based upon notional rental values in a concise area. Given that landlords are notoriously slow in reducing rentals even when areas suffer loss of markets because of new developments or other factors, there can easily be a delay in reflecting the loss of trade in the rateable value. This is especially true at times such as this where these developments come late in the 5 yearly cycle and revaluations are already set for the next ratings list - a valuation established in 2008 will apply to a property from 2010 to 2015.

It is, of course true, that retailers can appeal the rateable value by making a proposition to change it, and I am sure the VOA would tell us so. However, I carried out some research in Southampton last year and discovered some really strange anomalies and also some evidence to suggest that the VOA is not fair in the way that it carries out valuations and that smaller businesses fair far worse than larger ones. This seems to be primarily because of a lack of understanding and expertise on their part of this arcane system rather than any ill will on the part of the VOA, but I will note that 2005 revaluations saw increases of above 100% for some small retail businesses in that City - they'll think themselves well pleased if the increase were constrained to 16%. I will not labour the point since it has been made in a paper that is to be published in the new year and I do not wish to get ahead of myself, but it would be good to subscribe to the 'Journal of Place Management' and to read the paper there.

Wednesday, 10 September 2008

Recession coming - let's plan for it

I read a report somewhere the other day that I hoped was not true. It said that a well known and normally quite sane business organization in the UK was criticizing someone else for "talking us into a recession". My immediate reaction was simply that the remark undermined the credibility of the organization uttering such nonsense rather than besmirched the character of the person being criticized.

It did make me wonder though! I suppose when an economy has reached a point where it could go either way, then a few negative comments about trends might feed into a general feeling of uncertainty which just might create the right conditions to cause investors to retract, or to intensify the feeling of confidence in the minds of the public who reasonably might then retrench their own financial plans - but how likely is it that a negative comment will really create the right conditions for a recession in a national economy? In my opinion, it is extremely unlikely.

The EU has announced that in common with Germany and Spain, the UK is entering a recessionary phase in its economy. I believe that the seeds were sown many years ago; the reduction of this country's ability to manufacture, the reduction in its heavy industries and the diminution of other industries such as fisheries have all led to the point where the economy was less resilient to outside pressures. For any nation that has fully embraced a deregulated ideal in a global neo-liberal model economy it must be prepared for the cold winds that may come from unexpected quarters by ensuring that its domestic economy is robust and based upon solid capital production. In the UK the nation's economy has been increasingly reliant upon the financial markets - weren't we one of the premier markets of the World, up there with the US and Japan; weren't we a major node in the global capital networks? Well, yes, we were. The fault lines in the London markets became all to apparent this week when traders were unable to trade because of the extended 'down-time' of the vastly expensive technology that enables the global trading that is supposed to take place at London Stock Exchange. The consequence of this appalling flaw in their continuity planning? Loss of market share to other newer Bourses that exist because of the EU's policy to open up the markets; another jolt to the confidence within the UK. I wonder what the commentators in the business organizations will think of that one?

What, you may ask is all this doing in a blog that is written exclusively to promote SME retailers in the UK? Well it is a lesson to be learned, and learned fast. Just because you are a SME retailer does not make you any more likely to succeed or to fail simply because of the arrival of a recession. Indeed it is reasonable to argue that the very flexibility of a SME retailer actually lends itself to a greater expectation of survival than a much larger organization dependent upon impressing investors in the markets. What will affect your business is debt and a lack of planning. Some wise sage once said that the absence of any plan to succeed is by default a plan to fail. Just because you are a small business is not a reason not to plan and it is impossible to plan unless you have a full grasp of what your business is doing, how it is doing it and how it could be improved. Planning demands, as a stable mate, essential bench-marking and the ability to track the progress of the plan - it is really no different than planning a hike into the hills - you must know your destination, understand the capabilities of the participants and the equipment available to you and you must then plan a route accordingly. With a primary plan in place the wise expeditioner will ensure that escape routes and survival strategies are plentiful and cater for the hazards that you will have considered in your risk assessments along the way.

A small to medium sized enterprise is by definition a small to medium sized organization and s with any organization its state of development will determine its complexity. If yours is a relatively small and simple organization, take advantage of that fact by getting to understand every aspect of how your business functions and the systems and processes by which it earns its living actually work. The entrepreneur that does this will not simply survive a recession but will, in fact, be well placed to emerge as a strong player in their particular field of expertise and trade.

Thursday, 4 September 2008


I notice that M&S are reported to have sacked the employee who passed details of the company's plans, to reduce redundancy payments to a large number of head office staff by some 25%, to the press.

It is interesting to speculate how the proposals contained in the new Equality Bill would impact upon this apparently heavy handed decision. The bill contains measures including a ban on gagging clauses in contracts which would enable employees to compare wages and to challenge any employer who is unlawfully underpaying them. Since minimum redundancy payments are set down in statute one has to hope that discussing redundancy payments will also fall within the ambit of this new piece of legislation.

I am unable to comment upon the details of the M&S case which has been broadcast widely but without substantive detail, because I am not privy to all of the facts; however, I would hope that M&S has acted fairly and legally and that the legal minima are to be paid to their employees shortly to be out of work. If not then the act of dismissal takes on a whole new complexion.

Wednesday, 3 September 2008

Out of town v Town centres

The Retail Bulletin (3rd Sept 2008) tells us of a report by Malcolm Pinkerton, senior analyst at the much respected Verdict Rearch group in which he outlines what he sees as the probable future relationship between town centre retailing areas and their out of town counterparts.

I am always interested in opinions from this particular source since they are extremely well placed to obtain current intelligence, and their analysis is founded upon good research methodology, but today I have to question at least in part, the conclusions reached in this report.

I have not read the original Verdict Research paper and so it is impossible for me to comment beyond given in the Retail Bulletin, but whilst a number of Mr Pinkerton's conclusions must surely be proven correct it is equally clear that a large amount of crystal ball gazing must have been employed in order to reach any conclusion. In my humble opinion the report has been produced to early in the current economic cycle and too early in the current down-turn phase meaning that a number of possible challenges may yet arise that cannot have been taken into consideration - what was it that Donald Rumsfeldt had to say about unknowns?

What does seem certain to be right in the Retail Bulletin report is that there has been, and perhaps continues to be, a glut of new un-needed retail development and the danger for town centres especially is that their historic cores are altered by partially complete schemes that will permanently throw the town centre dynamic out of kilter and give rise to the potential for marginalised traders to be further disadvantaged. Retail development tends not, any longer, to be piecemeal and that can be a good thing from the perspective of planning schemes; unfortunately it also means that organic growth in a retail centre is also more difficult to obtain - but organic growth is really what we should all be striving for since this tends to be more sustainable.