Michael Weedon is the deputy CEO for the British Independent Retailers Association (bira). Here, he explains why there are a growing number of small-to-medium businesses surviving and thriving in the face of adversity.
Independent retailers are, in the main, beset by threats and difficulties. Yet, paradoxically, their prospects and the opportunities open to them are brighter than ever.
As small businesses are entrepreneurial and optimistic in ways that large companies could never be, they are in the right place to create their own version of the future of retail – and exactly the wrong place when it comes to danger.
A lot of this is to do with another paradox: while independent bricks and mortar shops are independent both by name and by nature, their prospects usually rely on others – the towns in which they operate, the shops around them and the fortunes of their customers.
So, the first threat: town centre footfall is falling, as the BRC/Springboard data tell us. Second threat: the vacancy rate remains stubbornly high. OK, it stood at 14.6% in June 2010, according to the Local Data Company (LDC), and it’s now only 13.3%, but at this rate it won’t get back to a pre-crash 5% for another 26 years, or, to put that another way, it’s probably never
Yet, at the same time, bira/LDC figures for the past four years show that there has been a net gain of small shops every year since 2010. Amid the increasingly torrid churn of shops, we saw over 15,000 independents turn the sign to closed for the last time last year, while nearly 16,000 put the float in the till for the first time.
In the first half of this year, about 330 closed down every week, but about 340 opened up. If it were not for the fact that chains such as Arcadia are shedding units as their leases expire and slimming their porky estates, while others have just crashed and burned, the improvement in vacancy would have been dramatically better. As it stands, independent shops have been more or less single-handedly saving the high street.
This is against the backdrop of a rise in non-food (bras, books, bongos) online sales to about 17% in the past few years. Only the fact that food (bananas, beans, broccoli) sales online lag at about 5% keeps the proportion of non-food sales at about 11%.
Even if the newer channels haven’t eaten small shops’ lunch, they have probably chomped a lot of their growth. And that growth is proving particularly tricky to find because, as the BRC has shown, non-food prices have been deflating for several years, currently by 3.3% year-on-year. Try growing in that environment.
Holding back from going on sale until a little later can help to keep overall margins healthy, but it’s a marginal effect – and others may be driving the dates.
Nevertheless, bira surveying shows fashion shop members benefiting in turnover from exactly that this year. Other marginal effects can include cost-cutting, such as grinding down the cost of payments (self-promoting ad alert) with collectively negotiated card deals, such as the bira tariff that channels well over £1bn worth of independents’ transactions each year.
The aggregation of many small businesses, while they retain full independence, has been a striking factor in other areas of retail, and the lessons should be learned by clothing and other small operators. In leisure, Just Eat provides a channel for online sales for over 13,000 local food outlets and the heavily-advertised brand is valued itself at well over £1bn.
In services, the hair and beauty booking service Wahanda has put 5,000 independent salons online 24/7. In non-food, MyHigh.St has made a good start in less than a year in providing full e-commerce offering for shops, with no entry price and the ability, uniquely, to promote a whole town of independents at a time. It shouldn’t be forgotten that both eBay and Amazon are also aggregators through which tiny outfits can get a national and often international presence and some of our members have built significant turnover in these channels.
Of course, there is much that a small business can do on its own and bira has been touring the country meeting small shop entrepreneurs, giving practical advice and encouragement about the many things that independents can do for themselves right now, at little or no cost. Very few will want or be able to do all of these – operate a loyalty scheme; maintain a Twitter feed, build a following on Facebook, pin pictures on Pinterest, carry out a text marketing campaign or even open a standalone e-commerce website – but increasing numbers will be doing one or more of these and it’s good that they are.
Because one view of a world in which any of us can open up global online shop operations for little or no money and in short order is that we are coming to the end of the era of Big Capital in retail – and independents are definitely in exactly the right place to take advantage of the opportunities that presents.