Public Procurement and SMEs

Has the time come for a fundamental rethink in the realms of public procurement. I remember a time when small businesses were able to 'bid' for small projects and small supply tenders by representing themselves to the 'buyer'. There was a need to provide evidence of being able to provide value for money, but since, so very often, these small bidders were also local ratepayers there was an inbuilt sense of a need to provide value for money.

It would be naive to believe that simply because someone was local that they were above a bit of 'adding value' to the end accounts, but there were also local remedies and blocks to that happening. Now though, as with so many things in this post-neo-liberal, neo-hysterical world, there now has to be so much regulation that a completely new industry is being born. Doubtless the European Union will be blamed for this shift in attitudes and for the adoption of this new paradigm supposedly protecting public funds - but the British Government are quite likely to be the greatest of sinners in my opinion.

The whole shift seems to have been accelerated by the hysteria whipped up over the scandals of the Members of Parliaments' expenses and the even more scandalous underwriting of the British arms trade that has a full culture of over-runs, over-charging aimed at the curiously complacent British Government whose complimentary culture of over-spend and under-manage has left massive holes in the UK balance sheets. The press eventually begin to wake up to these facts and with customary self-righteous indignation splash near hysterical headlines across their front pages. The reaction by Government - simple; they make it next to impossible for any small business to make a successful bid to any sort of tender. They make the paperwork impenetrable and the hurdles too great for anyone who has not got a trading record dating back to the last century - even though many are well funded and have vast experience.

The latest wheeze though, is the icing on the cake. In the past few weeks I have been inundated by adverts - usually from the Government funded Businesss Links, offering me training courses on how to cope with the paperwork (which confirms the levels that are now in place!). These courses vary in price and location but the cheapest that I have seen is about £75. I wonder how many take up this amazing offer - I must also wonder why it should even be necessary!

No taxation without representation!

It is good to hear that at least one MP has been on his feet in the house telling all that will listen that the current system of business rates is arcane and far beyond its useful life.

I am carrying out a study in a small market town for which an analysis of the rateable values was essential for a number of purposes. I noticed when reviwing the 2010 list that there were some anomalies and rang the Valuations Office Agency to try and discover a explanation.

The anomalies were simple. This is a very small town with one road acting as the primary shopping street with a traditional market place on one side and the remainder of the town's civic and other activities on the other. This shopping street goes through three name changes in the space of less than half a mile, and it is impossible to see, today, why the name changes were imposed at the points that they were. Let us call them Hill Road, Shopping Street and High Street.

Just off of Shopping street is the main pedestrian entrance to the markets and on the opposite side of the street is the most important secondary road which houses the civic offices, post office, the parish church and the cinema. We'll call this Cinema Road.

The busiest approach road into the centre of town is up Hill Road from the river valley below lying just north of the town. Through this valley runs a major trunk road linking two major conurbations. The Hill Road/Shopping Street/High Street route leads circuitously to another important town and Cinema Road leads to the nearest City, about twelve miles away.

The 2010 rates list shows that if your shop happens to be on Hill Road or Shopping Street then your rateable value is likely to have increased by 20%; if on High Street it is likely to have been increased by around 20% if in the first three or four shops closest to Shopping Street. Oher shops in the town have been increased by a staggering 0% - nil! Zilch!. I am quite sure that those retailers in the latter group are quite pleased but, why the level of difference. Why not an area where the average was around say, 10%?

The VOA oficer, with whom I spoke, told me that it was because the valuations of rentals in the area in 2008 were indicating these changes. I questionned him about the reasons that might have existed whereby a property might have had a rental increase of 20% over its immediate neighbour. He was insistent that this data was based upon rental returns and information supplied by landlords and tenants in the area, and that there would have been a factor pertaining in 2008 that would have affected these figures.

I have carried out a reasonably thorough investigation, talking to retailers, commercial agents and local estate agents, talking to the local council and looking through three or four years worth of council and newspaper reports and I can find nothing. There is no evidence that would support this kind of differential. A cynical person might opine that the VOA were guaranteeing themselves a job because of the number of appeals that this kind of differential would generate? Not that I would hold any such thought, but you can see where it might come from!

The fact that a system that is based on rentals; rentals that are themselves often artifically inflated by upward only rent reviews; and that these rentals are measured in a time of significant boom, only to have the resultant valuations implemented during a period that is dominated by a long and deep recession a couple of years later, is careless at best. This is an issue where the size of your business is not a determinant of your opinion about the system - retailers believe this to be an iniquitous system - members of parliament believe this to be an iniquitous system. Who is it, I wonder, that believes this to be a good system? The Chancellor I must presume, and the Prime Minister - but who else?

The time has come for root and branch reform. Let us question the validity of the basis of the valuation; let us question the concept of setting a universal business rate; let us investigate the formal relationships between business and government, at all levels, in terms of taxation and representation; most importantly, let us free up the system so that local needs are met by local decision-making, supported by regional strategies developed in concert between locally elected bodies. Whatever system is adopted it must be fair and equitable to all sizes of business and not with the current need to employ professional intermediaries to argue the case with a central government department - the current system has an in-built bias towards those businesses who can afford that professional input and is especially bad news for SME businesses who are consequently disadvantaged..

Customer Service

It has been a while since my last posting, mainly because, like everyone else at this time, I've been out there chasing ever less business opportunities. Which is why I was surprised to read in an article in the Retail Bulletin this morning about the number of businessses who have indicated in a survey that they intend to cut customer service training and also customer facing staff.

If there was ever evidence that the accountants rule, then this is it! It is easy to trim away at non-revenue bearing costs with an entirely clear conscience. But then it is also easy to claim to be a retail expert when things are good and it is a customer boom time. Then things start to go wrong; things begin to get harder and then... Well, in short the real experts come to the fore; they are the retailers who know how to get the best from their staff and who in turn are able to coax the best from their customers - money and goodwill! Retailing is a people activity, on both sides of the counter, notwithstanding the e-tail phenomenon which, incidentally, relies on many of the on-line customers being aware of products seen and demonstrated in-store.

How does customer service affect my sales and bottom line - well let me give you two examples of my own experience in the past week (I have written to the CEOs of both organisations!)
In one store of a large group I was approached by staff but then offered so much unnecessary advice that I felt harangued; the staff member concerned had even continued to pile benefit upon benefit and providing personal anecdotal examples of the benefits even when I had expressly told him that a buying decision had been made. To make matters infinitely worse, he was actually with other customers for the last onslaught of advice and cut across their enquiry in doing so. But the service of this store ought not to be judged by the one over-eager member of staff; so we'll get to the point where my wife and I had reached the check-out and were making purchases. My wife offered her debit card and it was not accepted; the cashier quietly explained that it had been declined but then, to judge by the gormless expression, apparently it was over to the customer. Not, as my staff would have done, ask if we had an alternative means of payment, so as not to lose the sale. It got worse!

Having made the purchase, we moved, as one does, out of the checkout area by moving towards the door on the windowside. The congestion of dump-bins and offers piled high was such that the route to the door was seriously restricted; but to cap it all the most obvious route was blocked by a 'supervisor'. When I commented that the exit was not clear she retorted that customers normally 'go the other way', which would entail re-entering into the main body of the store complete with carrier bags past a range of gondola ends and lots of easy targets for shop-lifters - completely ignoring the fact that it was also considerably further for the customer to travel. I challenged her by asking what would have happened had I been in a wheel-chair; her reply was terse, they too would need to go back. To achieve this the wheelchair user would literally have had to reverse (presumably past a waiting queue) and then change direction to make an exit. It got worse!

Two identical products that I purchased were faulty - something that would have made me, as a retailer, concerned immediately. When I returned the items on a following day the staff member who dealt with the query assured herself that they were faulty and then, she assured herself that I had in fact actually paid for the items. All of which is good practice and the staff member to be applauded. However, to be regarded as good customer service the staff member needed to engage with the customer, to smile occasionally, deal with the customer with good humour (especially when refusing something). Instead, in this case, I might not have existed, she was head down and was very soon completing the process for a refund. No offer of an alternative, no apology for the inconvenience, no engagement whatsoever. Then, as I was trying to engage her with a question and statement about the product, another member of staff, who had apparently been dealing with the cashier's previous customer with a specialist product, strode into view and immediately began talking about the previous customer and her query to the cashier who was supposed to be concentrating on me. This was bad enough, but the cashier, without any reference to my presence; without acknowledgement of the fact that I had been mid-sentence speaking to her; completely without thought, she responded to her colleague and turned her attention entirely over to a problem that had occured with their EPOS data and ticketing during the previous transaction. Eventually she turned to me and off-handedly asked me to sign a couple of slips and the transaction was over. It was a thoroughly bad experience and one which will influence my spend in that store in the future. I will add that whilst I have never rated the service in this chaain as great, the other local stores have never produced such a consistently poor showing over two successive visits.

By contrast I visited a 'local' branch of a major food chain and was really surprised by the attention to customers, which is in itself unusual in these convenience stores. I entered the store and began to look for inspiration for dinner along the aisle that was furthest from the checkout. I quickly made a decision and set about gathering the products that I wanted and started to make my way towards the checkout. I had been aware that staff were busily milling about, filling shelves and productively talking with each other. As I went along my aisle I was conscious of a member of their team quietly singing as she pushed a trolley with goods along the neighbouring parallel aisle to mine and in the same direction. As we were travelling at a similar speed it was not a surprise to find that we exited at the same time, but as I was turning towards her direction she immediately stopped, smiled, said "you go first sir" and let me through without a moments thought. This, I have to tell you, is one of my main criticisms of supermarkets trading through 24 hours - when the staff are filling they very seldom pay any real attention to the needs of the passing customer. Anyway, back to this 'local'; I went to the checkout and there was already a gentleman waiting with a newspaper to pay. I heard a comment of "oh sorry!" behind us and a member of staff rushed to the checkout, apologising as she went that she had not noticed us before - she had been shelf-filling. She immediately started serving the other man and simultaneously pushed the help button to summon another member of the team. This new team member appeared immediately also apologising for any delay as she went, even though the 'wait' was far less than I experience in the convenience stores that are slightly more local to me than this one.

She chatted amiably but was clearly focussed on her work, she was clear in her language and extremely friendly. I left that store feeling that if I have to use a 'local' then I would happily go there again. Strangely, there is a branch of the same 'local' about the same distance from me in another direction and there I have never felt any sense of pride in the work of the staff, nor much friendliness. I think one of the morals to be drawn from the experiences that I have outlined here, is that the mission statements and intentions of head offices and chief executives are not consistently met on the shop floor. This says clearly to me that now is the time to improve the customer relationship, to improve staff training and to stop looking at cost cutting based upon theoretical notions of good accountancy practice - cash flow is king and happy customers provide that cash!

Local Retail Trades Associations

This week there was an attempt by a local politician in a southern coastal city to try and drum up support for the formation of a local traders association formed from amongst the SME retailers in the area. Why would this be sufficient reason for me to comment? Simple! It was of immense importance and serves to highlight a problem which, if not resolved, will continue to hamper the effective promotion of vitality in our town centres and will mean that Government (both local and national) will continue to fail in the delivery of well meant ideas and strategies.
In itself the meeting was not a particularly spectacular event; low key and poorly attended – in short quite typical for the type of meeting that was being envisaged by its sponsor, a local ward councillor. I know this particular councillor and fully recognise that she is personally committed to the regeneration of the subject area which is the rump of what has been, economically and socially, an enormously important part of the historic city of which it forms a part. The irony is that the prime reason for the dereliction of the area has been because of the planning decisions made by previous generations of councillors, all of whom one supposes were acting in what they regarded as the best interests of the area and of the wider city centre. What is equally clear though is that the very people upon whom the long-term down-sides would fall were not consulted effectively and decisions were made that have undoubtedly blighted the area and paved the way for it to be ‘zoned out’ of the city centre permanently with the attendant drop in local authority expenditure that accompanies that status.

Let us cut to the chase; there is a pressing need for effective communications between planners, decision makers, service providers and all stakeholders representing one part of the community or another. This blog is concentrating on the SME retailer community, if community is aptly applied to this diverse and often disharmonious group. I am not intending to relate the importance of SME retailers to the local economy here, because those arguments have been well rehearsed elsewhere, on this blog site and far beyond. Let us, for the purposes of this note assume their importance. Let us also ask the question about how they are communicated with? They ought to be able to communicate with representative groups – retail trades associations; but they mostly are unable to because they do not exist, or are not active.

Over the years I have frequently heard local authority officers expressing real unfeigned exasperation when attempting to gather real feedback from local businesses about things that were very likely to affect them. I have also known when that exasperation became too much to bear and they simply chose one of two options – they simply did not consult, or they ‘consulted’ with a self-elected person who was neither representative of, nor even aware of the opinions of the neighbouring businesses. I can sympathise with the officers, who having fixed time frames for reporting back to members choose the line of least resistance – the social infrastructures rarely exist in towns for these small, often micro-businesses, to be part of an effective group; they cost in terms of money or of time, or perhaps of both – and whereas there is often a willing horse to carry the immediate burden that comes with trying to disseminate information to these diverse and geographically well spread businesses, that horse will become jaded and less willing when the inevitable happens and the other traders begin the process of shooting the messenger when bad news is disseminated. Changes of bus routes, closure of roads, planning issues and a whole myriad of details that the local authority are responsible for and which will have an impact upon those small businesses.

There are, I know, many organisations who claim to be representative of SME retailers, the problem is that they are usually unable or unwilling to be useful at a local level. There are still many local retail trades associations covering discrete geographic areas, however, these tend to be under-funded and reliant therefore on the goodwill of otherwise busy activist members who invest a great deal of time and resource into ensuring that the area is well served. Where these exist, they can be very good, but they are sporadic, very often they are limited simply because of the time constraints of the activists and the breadth of their knowledge of the workings of the local authorities, of place marketing, of town centre management or of other serious matters that are outside of the normal scope of activities that it would be reasonable of an ordinary shopkeeper.

There are then those organisations that exist to support retailers of which I have counted, so far, over seventy. Of these there are several that claim to be both representative and the most effective. The question is, effective at what. Analysing my list I find that most fall into a small number of categories – those that represent retailers at national level, such as the British retail Consortium, but with a membership fee of over £3000 and with most of the major retailers playing significant roles in the management and strategic directing of the organisation they are very unlikely ever to really be truly representative of the SME sector. There are those who are at the national level representing specific sectors of retailing such as the Toy Retailers Association or the British Shops and Stores Association (recently merged with the British Hardware Federation) or the Association of Convenience Stores; then there are those who represent a smaller geographic (but still wide area) but who are also sector specific such as the Scottish Grocers Association or the very lively Northern Ireland Independent Retail Trade Association. There are those organisations who are not even retail specific, and do not have a retail specific sub-group within their structures, the Federation for Small Business and the Forum for Private Business are two well known examples. This is not to say that they do not carry out very worthwhile work which SME retailers will benefit from, but they won’t help with the local marketing, or the Christmas lights. Unfortunately, local Chambers of Commerce also have too broad a brief in representing their members and this can often lead to conflicts of interest. Many retailers join organisations for specific benefits – for maintaining their knowledge base in their specialist skill area; for obtaining specific and advantageous terms in banking, legal aid or insurance; for keeping up to date with industry trends and developments and for finding new sources of supply. Local trade associations probably would not be any use in providing any of these things, but they would have advantage in having local knowledge, in having a mutual interest in promoting the area and improving its facilities, there would be advantage in many eyes and ears monitoring local events, including planning applications; there is certainly advantage in having a representative voice that acts as a focal point for the local authority and other organisations that impact upon the traders’ area.

Recent Governmental strategies that are intended to make the country work more effectively and to make local communities more responsive and therefore encourage people to take ownership of their area have highlighted a real need to have effective lines of communication open to these small businesses. How, I ask, will the ambitions in the Leitch report ever be realised if SME retailers (and other small businesses) are not fully on board with the idea of training and up-skilling the people who work within the industry? How will local authorities ever achieve what is now their legal responsibility under section 5 of the Sustainable Communities Act 2007 in consulting with representative groups, if when it comes to matters affecting retail trading areas the SME retailers are not ‘grouped’ together. I believe that there is good reason to believe that local authorities should fund local traders associations in the same way that many fund local residents associations. The costs will be small but the returns ought to be immense – democracy amongst the retailers with the costs of communications covered by the LA. The idea of retailers groups ought to be fundamental to any regeneration or renaissance scheme involving retail development, make them compulsory. It’s just an idea, but one which needs to be explored and costed effectively.

Let’s hear from the Councils, what do they think?

Workplace Parking Levy

There has been a great deal of debate on this issue during the past week and it prompted me to go and have a look at the proposals in Nottingham before deciding whether to add my name to a petition to have the idea stopped in its tracks (if such a thing were possible!)

There is, as there always is in matters such as this, a great deal of emotive language being employed by the detractors and I wanted to see if they were right in their assertions. Such phrases as 'stealth tax on firms' have been bandied about. Immediately I knew something was up, because clearly a local authority who says in brightly coloured leaflets that "we are going to charge ever increasing amounts of money for those car parking spaces that you have at the back of your premises until it reaches a zenith in charge terms in 2015" is not doing anything that might be regarded as stealthy - it is up-front and quite in-your-face. So clearly the headlines were inaccurate, but then I'm not surprised since they so often are!

Looking at the facts, it becomes more apparent that here is a local authority who intends to make full use of legislation to bolster their income and, ostensibly at least, to enhance their green credentials. So are they wrong and who will this hit?

Without doing a formal study it would be impossible to come to absolute conclusions; indeed just reading the publicity material and the reaction from employers' organisations it would be impossible to gauge the actual impacts that may occur - what I predict however, is that whatever either side of the argument are saying there will be good and reasonable arguments for and against and there will certainly be unintended consequences that quite possibly someone in council circles has already realised but has not bothered mentioning in the blurb!

From the perspective of Nottingham City Council I can see no fault in having an ambition to reduce the congestion in the city, to make better use of the public transport system (PTS) into which they have so heavily invested with success, or to find new ways of legitimately raising ring-fenced funds for improving public transport still further. I would criticise them if they had not already established a good track record in PTS in the city and I would be extremely vocal if it transpired that the funds were not then ring-fenced but were used by a change in political leadership for subsidising general funds or other areas of the City's expenditure - but let's give the city council the benefit of the doubt at the start. So what about the vexed problems of exemptions, of establishing the number of spaces and the monitoring of the whole scheme?

These are areas in which I believe the city council is very brave to venture in - for a start I would want to know how they intend to deal with their own staff car parking? Is there a council that does not offer car parking space to a large number of staff who DO NOT need their cars for use on council business? There are literally hundreds of teachers who arrive at school each day and their cars sit on the former playground before being used to go home again in the evening - will the school budgets be hit by the WPL, and if so have the school managers and governors been warned to make provision in their budgets? There are also literally hundreds of non-eesential car users in civic offices - will the city council be charging itself for these spaces? Then there is the central government civil servants in Job Centres, Tax Offcies etc - will Westminster be paying the levy to Nottingham.

Itwill be interesting to see the exemptions applied - I note that NHS premises will be exempted, surely this cannot be right? I agree that a doctor on call, a visiting nurse or midwife, an ambulance or even an ambulance car driven by a volunteer should be exempted - quite right too, but there are dentists who do not use their cars except for commuting, the admin staff, should these be exempted, I can see no reason for it. So that will be a real hard one to tackle. What about undertakers - they have a real problem too, will the hearses and limousines be exempted, or at least their parking spaces? If not, what happens when the staff use the spaces when the hearse is not present? It says in the NCC leaflet to businesses that the emergency services will be exempted - again I'd ask why?
There is a small Police station near me where a fair number of support staff, permanently based on the premises arrive in their cars and park throughout their shifts - why should the spaces that they occupy be exempt, indeed in most areas officers can travel free on public transport and in consequence help with the policing of those very services, so they would have no need for the spaces anyway. I can understand exempting spaces for marked vehicles, and for those being used by plain clothes officers during their working day - but for the so-called 'civilian' staff who man the front desk or carry out other functions (with the possible exception of those whose shifts are in the middle of the night , but then that would apply equally to plumbers, printers, underground train drivers etc) - surely the space that they occupy needs to be charged.

It will be interesting to seek information under the Freedom of Information Act when this scheme has been up and running for a while to see how much the Council does collect from governmental departments, whether local or national. Just as it will be interesting to see how the council intend to accurately establish how many parking spaces are to be levied. Surely those spaces outside the Managing Directors' office are for the customers? Those cars belong to shoppers - they'll be somewhere arounds town! Is this where the council has to employ more investigators and CCTV cameras to spy on the business population to see whether they are cheating?

Any self-respecting business is going to blank out the car parking bays and leave it to chance - so how is the city council going to deal with that?

Oh yes, this is a story to watch; it is essentially a perfectly laudable idea - but then so was the originally envisaged Poll Tax and we all know what happened then!

Upward only?

The Irish Government has announced that it will be banning upward only rent reviews from next month. An unusual and, frankly, brave decision by a government whose country which has an economy that has been all about massive, unprecedented, growth for a lengthy period and which has now stalled. Certainly from this side of the Irish Sea it will be interesting to watch what happens in the Republic.

As for the UK and its upward only rent debate, what will happen next is that the retail sector will bring out the big guns again to argue the case that in these economic times there has to be a modicum of give and take in any contractual relationship, especially where this impacts upon the bottom line of businesses who are otherwise struggling for trade for reasons beyond their control. In response to this the property sector will engage with counter-arguments that these contracts are set down for relatively long periods and the charges set out are fixed for that period - "how would retailers feel if they had to set prices for five years not knowing what will happen in that period to their own costs?"

This last argument seems to have been taken as the stronger by British governments who are less courageous, perhaps, than their Irish counterparts because the Westminster government has seen fit not to outlaw this archaic practice and in consequence the SME retailers has borne the brunt of yet still further increases whilst their most major competitors who operate in the rented sector are often in a far stronger position to exercise negotiating power. The fact that very often, even these chains are unable to negotiate confirms the inappropriateness and ineffectiveness of the system in a so-called market economy.

So, do the property owners and agents have a point? I believe that they do! In just one very specific area, they have a point. I believe that if you are creating a product, or are the first line of marketing of a newly created product then you are likely to adding something to the economy by the process of creating. In the case where a new building is created then this would, to my mind, qualify for being able to recover the costs and achieve an equitable profit as with any new product. Rarely in these cases is there any significant research and development costs (I do not see land searches as R&D!) so the profits that would be fair and equitable should be in line with established products from any manufacturer - albeit the period over which this profit might be attained could be over a longer life cycle than say a loaf of bread.

Fair enough then, the builder, the developer and the owner all look to make a profit over the design and build. From that point on though, the profit is made from the recycling of an existing product - second hand indeed! In what other market do second hand goods gain, unquestioningly, a guaranteed increase in returns year after year with the power of the law to protect that interest? It beggars belief that the Thatcher and Major Governments did not see off this idea - is it not the very type of regulation that the neo-liberal economic theorists abhor? Perhaps the influence of vested interests prevailed, who knows? But it is very odd!

Landlords might argue that they invest and re-invest in their properties and this needs to be reflected in the costs. Of course it must, but that surely is the basis of negotiation, these factors are all taken into consideration and if the parties involved cannot agree then arbitration should be sought. What should not be allowed is for notional repairs and upgrades, or even real upgrades whose values are grossly exagerrated, to be used as justification for raising rents without evidence of the facts.

You have only to walk down any British High Street to see that there is a real malady. The prime shopping areas have achieved serious rentals (which then directly affects the valuations for business rates) that never go down under this strange system - this in turn prevents new or newer businesses from setting up in that area meaning that the local economy is forced to rely on major national and international organisations to occupy these spots. Nothing intrinsicly wrong with them being there, but they do not, indeed cannot, be as significantly beneficial to the local economy as locally owned businesses. When the bigger chains catch a cold elsewhere, they pull out of the local prime area leaving a hole that it is incredbly difficult to fill. This hits the local economy with a triple whammy - loss of local jobs (the large organisation will usually have employed local staff), loss of the continuity and visual amenity in the key shopping street (very often a factor that reduces footfall with the attendant knock-on effects on remaining businesses), and still no opportunity for new local businesses to get a foothold.

Land banking v local trade

The Retail Bulletin has today drawn our attention to a piece in the Observer (28.06.09) that adds weight to my own suspicions that those who have the capability will milk the downturn to the long-term detriment of local economies right across the nation. It is a matter that all those who understand the importance of encouraging local trade must be concerned with.

Governments and increasingly, large business, utter a mantra about sustainable development without, it would seem, actually understanding what that phrase encompasses or means. In most cases it is vaguely related to 'going green', or in ensuring fair trade with less developed nations. Perhaps it is about making sure that wood from which has been constructed the latest garden patio set is sourced from 'sustainable plantation'. All of these things are quite laudable in their own way but the problem is not simply complex, being global, relating to climate, human impact and a whole host of other inter-connected issues not least of which being tran-national corporations and supra-national regulatory frameworks - it is also considerably closer to home in economic meaning.

The Observer, or specifically Nick Mathiason, has highlighted the opportunistic land grab that is currently being undertaken by the 'big four' supermarket chains. They are targetting 'distressed' locations and buying the properties for future use, and given past performance, to ensure that rivals are excluded from the area. The impact of this will directly affect the price of property locally - any 'sale' will determine a 'renewed confidence' and push prices up; it will remain unutilised as a shop because the chain concerned had not actually planned this particular expansion into its development plan - consequently because of the Government's richly stupid policy to have empty shops pay full business rates it is likely that a large proportion of these recently acquired premises will be demolished pending the eventual gathering together of the neighbouring plots to enable a 'viable' megastore or 'local convenience' store to be developed successfully.

The premises will no longer be available for local businesses, the local authority will not benefit from rates income, the rival major chains will be excluded (thus killing off any real competition arguments) and when the great day does arrive and the major chain sets up shop, they are likely to employ tactics to undercut the local stores to such an extent that they simply cease to be. Local areas do not benefit directly from large chains in the same way that they do directly benefit from locally own stores (even local chains!). The benefits do acrrue from the salaries that are paid to locally based staff, but the likelihood is that these are the lowest paid employees. The local economy does benefit from the business rates paid into the local authority's coffers - but these are based upon space occupied and a similar pot would have accrued in the event that smaller businesses occupied the sites in larger numbers. It is arguable that the local retail economy benefits where these stores have opened because they draw people in from further afield who might otherwise have been attracted elsewhere, but this is usually at the cost of the local specialist and non-specialist alike who is in direct competition, so it is only those stores not in direct competition with the supermarket who benefit - and that's only until the supermarket adds a new string to its bow and expands into non-traditional areas. In contrast, locally owned stores and chains ensure that even the profits and dividends from these enterprises get back into the local economy.

The long term effect will be the withering of the retail offer on the vine of local shopping towns. Market towns have traditionally served as places of public socialising as much as market activity and the advent of the one shop town is diminishing that; the idea of public space is undermined and the town centre loses its importance in the life and development of local communities. The longer term effect is that the very arguments currently being put forward as reasons for our Government to support people in so-called 'less developed countries' will become commonly used as cogent arguments for the support of some of our own towns and cities.

Astounding discovery - customers are important

Has anyone else noticed? There seems to be a theme coming from the global sages of retailing that it is important to listen to and to repsond to customers. Well there's a novel idea!

Has it really taken the shell-shocking, mind-numbing, business threatening recession for retailers to discover that their cuistomers are all important? I find it hard to credit, yet these are the words coming from conference after conference. Is it really me, or did I miss something by not paying huge sums of money to attend these mutual back-slapping events. All I do know, is that the reports being published in the trade press over the last couple of months suggest that the really hot news that customers are important. I am amazed!

Having been in and around retailing for almost half a century it was to my mind at least the very bedrock of what retailing is all about. Perhaps someone will offer me a lucrative deal to speak about those other shockingly newsworthy discoveries such as - you need to supply the right goods at the right price and at the right time! We'll keep the location bit until you're all ready for it - perhaps in the next lesson?

The Wonder of Woolies

Although Woolworths' demise from the high street is now one-quarter of a year past, not many days pass without comment or reflection about the post-Woolworth impacts on town centres and upon other businesses. Today we hear from the Retail Bulletin that "Original Factory Shop" is to take various post-Woolworths sites and is also aiming to recruit former Woolworths colleagues into their ranks. They argue, so it is inferred, that the sites lend themselves to the "Original Factory Shop" trade and that the Woolies people will be well trained retailers who will need little or no input to help the "OFS" to gain market share and increasing business.

I can see no fault in the idea; on behalf of the town centres who once hosted a Woolworths, I welcome the plan that will do much to help fill otherwise darkened spaces amongst many shadowy places - not to mention the good news for the people who lost their jobs, a light at the end of their tunnel too!

Not for the first time, what I am wondering is whether, and by how much, the local SME retail communities have sought and gained business that had hitherto been captured by Woolworths. It seems to me that a good number of other, larger, businesses are making their mark. With the exception of the well publicised efforts of the manager and her colleagues at the renamed Wellworths in Dorchester, I have not seen much other evidence for small businesses making hay in the Woolworth meadow. But, perhaps it is because these businesses are so local that those of us a distance off simply fail to see it - if you know otherwise, leave a comment!

New schemes under threat

The development of new retail centres seems, over the past decade or so, to have viewed by many authorities as a bit of a cash cow - certainly in the case of town centre or near centre developments they have often been promoted as economically essential improvements that also impact positively on the visual amenity and upgrades to local public space, something that I believe to be more than just slightly disingenuous.

It seems that the farm-yard animal has changed and it is now the chickens that are coming home to roost. Ben Cooper in 'Retail Week' has today reported on the fact that the City of Wakefield near the eastern fringes of West Yorkshire is having to come to terms with the fact that the principal financers (Anglo-Irish Bank) of the proposed new centre named 'Trinity Walk' have withdrawn the funding. In the current climate it is difficult to see how replacement finance will be procured. I have not had the time nor inclination until now to investigate how this scheme was originated nor how it was to have been implemented, but to judge by the already secured anchor store and those other retailers committed to the scheme it is not difficult to imagine that this was to have been another scheme that was dominated by the usual brands. I am left wondering what role Wakefield's SME retail community were to have played and what impact the development was likely to have had on their existing businesses upon completion?

In the same 'Retail Week', Ben Cooper's report has made mention of the fact that one of the the joint developers, Modus, had already last December announced that it wanted to sell its 50% share which is hardly a ringing endorsement of the scheme - but then they already had had the finance withdrawn on two other schemes in Warrington and Crewe. Is this trend telling us something?

One thing is certain, the City of Wakefield and other local authorities should pay much more attention to the risk management aspects of the processes that they employ in furthering these schemes. The money is never guaranteed, even in good times - and now is not that! Perhaps as I have said in this blog before, it is time that planning authorities took a more balanced approach to these things and considered how they can help incubate high quality new businesses in their new developments, because even if Trinity Walk had actually opened it is arguable that some of the original lease signatories may well not have survived for too long in the current climate and a poorly populated centre is not one which sends out positive messages to the visiting public. By this time of course, the traditional areas round these new schemes are invariably shot to pieces with vacant plots and over-priced rents and business rates, all acting as barriers to any smaller business wanting to open in the centre - here's a thought, how about a business rates moratorium on locally owned businesses for the first two years of their trading from a town centre site?

OK Mr Darling, let's see if I understand you correctly...

It's just that I'm struggling here Chancellor, and if you could just help me confirm my understanding...

You are quite adamant that the non-domestic rates rises planned for April will go-ahead as planned; you're putting the VAT rate back up to 17.5% in December and presumably there will be new measures to balance the books in the Budget in April too?

I suppose what puzzles me is the sheer scale of negative messages pouring from the Government and other agencies with whom they have a direct relationship with. You have told us Mr Darling that you intend making the non-domestic rate system fairer in the future, but the new ratings list will be published in time for the start of the tax year 2010 and many of us out here have warned often enough about the iniquitous rateable values and the real lack of fairness in the setting of these when comparing SME businesses with larger more erudite firms; yet here we are at the start of what is rapidly developing into the single worst depression since the dust bowl era and you assure us that the above inflation rise this year will magically be mitigated by a fairer system in the future - even though the next damaging blow is already well advanced in the planning and is already being readied for execution.

It would be interesting to measure the impact on all traditional town centres where the reduction in the overall number of SME retailers is already being trumpeted by employers' organisations. My guess is that the increase in rates, with the forthcoming increases in the rateable values (Of course I am guessing here that the Valuations Office Agency do not plan wholesale reductions in the 2010 lists) will all add to the general malaise in the SME retail world and will have the effect to scare quite a number of businesses away - to stop trading, to cease employing people! Then what? Under this Governments' regulations the landlord will have to pay the new rates on the empty properties - so the landlord, not being stupid, offers the premises to a charity at a heavily discounted rate and thus loses the burden of that cost. The sudden expansion of charity shops will in turn provide still further competition for the remaining small businesses, all of whom have to pay their rates and their staff as well as their stock! I am one of those who would describe this process as blight.

Then there's the VAT rate - with much cockolorum the government's announcement of the VAT rate reduction was met (as predicted on this blog) with an understandably muted welcome from the buying public. Surely it was never a serious idea that the 2.5% rate reduction would encourage spenders out into the shops? What is serious though will be the impact of the reversing of that process. Any retailer will tell you that a 10% discount off of the price of goods has a disproportionately smaller effect on sales than the negativity of a 1% increase in price. Imagine - you want to put 2.5% on just at the critical period for many retailers in what looks from my perspective to being another seriously low point in what will, by then, have become a growing depression.

We have all heard the mantra of the Prime Minister that this is a global problem, but what did the former Chancellor do in the relatively good times that the country experienced in the earlier days of New Labour? Did he reverse the policies of the previous Governments and invest heavily in new manufacturing industries that would actually provide real and sustainable growth - no, rather he continued to watch them reduce and decline. It is impossible now for the Government of the UK to avoid the criticisms and time for them to be honest and respond accordingly.

Rates Supplement Bill

This blog tries to avoid being partisan political but there are rimes when it is difficult to understand the machinations of a government whose meanderings seem confused and ill considered. The most consistently ill-considered has been the policies relating to transport.

Transport policies that have been considered include the Cross Rail project which is intended to link to far west of Greater London with the far east, taking in the centre along the way. It will serve, should the bill be passed a heavily congested and populated area - but then it will also be an area that has a huge amount of, albeit disjointed in parts, transport infrastructure already in place. Were we not treated in the west to years of building with the Heathrow extensions to the tube services? Did the Docklands Light Rail not do great things linking the east end and the developing docklands to the centre and the underground network? But what about those other schemes whoch were proposed that never saw the light of day because the government policies of the day ruled them out?

In south Greater London there was a scheme that would have linked Croydon to Greenwich, to complement the Croydon Tramlink scheme which links Croydon with Wimbledon in the west and Beckenham to the north east of the borough. This scheme's real merit was that it was to offset the historically problematical transport geography in the capital which can be likened to the spokes on a bicycle wheel - their were plenty of routes providing you were travelling to the central hub. Try going around the wheel east or west north or south if you happened to be in an outer London Borough (where a huge amount of the commuting population actually live) and you'd be stuck. Consequently the hub gets congested because of the throughput of people trying to get elsewhere, alongside those whose destination happens to be the hub. No, that scheme was dropped along the way.

How about South Hampshire? There the scheme was actually winning the argument for integrated transport - even with the government. The scheme which would have joined rail, road and passenger ferry services, was proposed in a number of stages; the first was to link Portsdmouth city centre and the towns of Fareham and Gosport just across the harbour. This stage was important for two reasons - the economic future of the two smaller towns was certainly in doubt given that they are set, as are so many central southern coastal towns, on a peninsular with the limitations of road access that peninsulars always provide - in this case with the A27 and M27 running east west at the top of the peninsular and the A32 running down its length. These roads, along with the minor roads, are frequently congested and the movement of goods and people is a significant problem.

The second stage was to have provided a link to Waterlooville, a dormitory town just up towards the downs and also this stage would have linked Fareham to Southampton central. This last named city, like the town of Gosport, is on a penisular - I forgot to mention that Portsmouth has it even worse because it is actually an island (the Island of Portsea). These towns and cities are an economic powerhouse for the south (that is the south outside of London) and the congestion in the area is frequently the subject of radio traffic reports.

The third stage would have linked Southampton with Totton and the waterside towns on the western side of the Southampton water adjacent to the New Forest - another important trade route (Oil refinery and dockside works), commuter towns for Southampton and beyond and the holiday traffic would all have benefitted from its completion.

So why was it that the scheme was scratched - because of a lack of evidence of the social and economic benefits to these communities? The South Hampshire Rapid Transit system would have provided a relief and the only viable alternative to road transport in the region linking these places. No, the decision was taken by the then Deputy Prime Minister to scrap it on the basis of cost! Not an altogether unreasonable position one might think, except that there had been strong government support at all levels for a great deal of time and the project team were well advanced - but then it happened. This same government's integrated transport policy was shattered by another conflicting government policy - one must presume that the Deputy Prime Minister and the Secretary of State for Defence never actually spoke to each other - the Navy decided that it was to make Portsmouth its home port for their aircraft carriers. The greater draught required by these huge vessels meant that the tunnel under the harbour would need to be deeper and therefore incur far greater costs.

So it was a government decision that adversely affected the costs of the proposed project upon which they based their opinion that the costs were too great. At the time the costs for the project would have equated to about 4 miles of new motorway construction. Is this not perverse?

For the retailers in Fareham, Gosport and Portsmouth they must now face a far more uncertain future and with this new bill before Parliament they will have the double whammy of seeing London, once more, becoming the beneficiary of taxpayers money for which the only possible and frankly dubious benefit will be the London Olympic games of 2012, and they for their part being saddled with the possiblility of further rates charges being sneeked in on the back of Cross Rail. They wonder why people do not trust them anymore?

Lapping up after Woolworths

The Retail Week has a piece by Nicola Harrison about how specialist toy retailers, having had a torrid time of it during the closing down sale when Woolworths were selling toys at or below cost price, are now reaping the benefits of their closure.

This blog discussed the probability of this happening and urged smaller businesses in close proximity to Woolworth sites to maximise their potential for generating new business; I wonder how many have done so - clearly from Nicola Harrison's article the toy group The Entertainer have capitalised, but then they have a higher profile as do Hawkin's Bazaar, who are also mentioned.

I know that within the toy retail sector there have remained a core of SME businesses around the country who now stand to gain local market share - but have they? If anyone reading this has any evidence then please post a comment. If they have not then the question must be asked why?

Conflicting pressures - potential for problems

There was an interesting piece by Mike Dennis in 'Talking Retail' just over a month ago (16 Jan) where he looks at the potential for opportunity for SMEs amidst the chaos of the growing number of closures and administration orders in the High Street.

I have noted a similar potential for SMEs and added that it is crucial for SMEs to remain focussed on the markets that they know and understand, provided that such a market is to continue in existence - changing shopping habits because of on-line provision, changing technologies, cultural and demographic changes can all substantially undermine previously solid markets. It is right nonetheless that SMEs look to the gaps being left in the market by defunct or retreating businesses with the purpose of exploiting these opportunities.

Unfortunately, there are signs that the credit crunch is having further unexpected impacts upon the trading environment of SME retailers and the threat appears to be coming from the Town Halls. There have been a number of reports in the press recently of local campaigns by small businesses - especially in market towns - against the introduction of parking charges where previously there were none, and raising the charges beyond the rate of inflation where charges already existed.

I believe that these measures are being adopted by local councils simply because it is easy to do and has a marginal effect of voter intentions; I believe also that it is foolish to introduce these kinds of charge changes without substantial and meaningful discussions with the local businesses. In an e-mail conversation that I had recently with an academic we had reason to discuss the interaction between local authorities and SME retailers and he emphasised the difficulties that exist in finding a mouthpiece for these smaller businesses. I did understand, and indeed have discussed this problem previously on this blog - but these logistical difficulties cannot be an excuse for not engaging with small businesses, especially where the impact of decisions has an impact on their businesses and their investments.

The period of recession will not last forever and the local High Streets will be sadder places if not only have they lost their Woolworths and their M&S food offer but that their independent businesses were also lost in an attempt by local authorities to balance the books.

Retail Bulletin Blog

Welbeck would like to direct reader's attention to a new retail blog on the patch...
Retail Bulletin has launched a new blog called, not inappropriately, the Retail Bulletin Blog. It really does "do what it says on the tin".

Congratulations to Mark Higgins, the editor of RB, on this initiative - I hope that he has more time to devote to the venture than I have been having recently, but then it is more in his line of country - I'm still practicing the arts of retailing and am often called away to remote and foreign parts.

Good luck Mark, and thanks for the Bulletin!

Small towns and the loss of big players

In the withering economic and trading climate on the High Street it is worth stopping to consider the impact that the closure of key national brands will have upon small market towns and other secondary shopping streets in the UK.

Certainly there is evidence that the most notable of the recent closures, Woolworths, will have a measurable impact in these places; what is less certain is whether on balance the effect will be for good or ill upon the SME retailer population. On the face of it there is good reason to believe that the disappearance of the likes of Woolies from rural market town settings would be a nail in the coffin of the retail offer in those towns - where else can locals get their music and their computer games, or perhaps schoolwear or haberdashery? The logic of this position is that Woolies, and firms in the same position (often Boots are in a similar role as a national brand in an otherwise purely local retail offer) will drive footfall and attract numbers of residents within the hinterland of that particular town to shop locally, rather than embark on an expedition to the more distant regional hub.

There is, of course, a counter-argument; this being that the very presence of large purchasing firms directly suppress the development of certain local markets, because they were using loss-leaders and other means of exercising their relatively strong purchasing power. This has certainly been an oft used argument when describing the activities of the main players in the food retailing sector. The removal, therefore, of the offending large retailer thus frees up the local market for the entrepreneur.

There is clearly a large space between these two contradictory positions and neither may turn out to be entirely correct nor entirely wrong. It will be interesting to measure how these towns progress from this point. If I were advising the local planning authority I would strongly advise that they based their planning opinion on the basis of a loss of footfall with the attendant need to bolster local regulation and planning to mitigate the worst effects of the current downturn with every tool and weapon available to that local authority.

Smaller businesses in these areas need to be reflecting upon the fast changing markets that are open to them; in these times of 'downturn' there may be useful opportunities to refocus the business and to gain new markets previously denied them.