Lies, Damned Lies, and Statistics on Business Rates

I started my high street retail career in the fine city of Oxford, so it’s a place that’s close to my heart.  It’s also a place where I first experienced the damage that can be done to an area by a local authority who not only takes its eye off the ball, they take the ball away and refuse to play nice with the local small business community at all.

We closed our last store where we had opened our first 20 years earlier, almost to the day, in Oxford.  It was a sad time for us, made ever more sad by a final tussle with the City Council who had refused us a change of use on the property so that we could finally sell the lease to the only people that wanted it – A Bureau de Change.  They finally relented hours before we were about to call the administrators in.

Not a great end to our Oxford experience, but one that had been marred over the previous 20 years by repeated mismanagement and lack of consideration for the high street.

From a dreadfully thought out one way system, to road works that took over a year to complete and decimated trade for years afterwards, to increasingly hiked, eye-watering parking charges, the city council couldn’t have more effectively shown my business, and many others, the door if they’d tried.

Eventually, after years of depleted useful footfall, and with a new shopping centre that we all knew was going to decimate the traditional retail areas in the city on the horizon, we finally took the hint and left.

Many other small stores and restaurants have followed suit since, and one of the more recent ones – Combibos Coffee – in Gloucester Green made their feelings clear in a newspaper article in the local press, where the owners levied the criticism that the city had “lost it’s sparkle”.

Read the original Oxford Mail Article Here

This chimed with me, not only because, as a jeweller, I think we once provided some of that sparkle, but also because as it mirrored my experience in dealing with the council a few years earlier.  My business had also applied for rates relief before we ultimately gave up on the city where we’d begun our high street adventure.  We were knocked back unceremoniously for our troubles.

The response to this article from the city council seemed to me to support my view, and that of many others in the local community, that they had not grasped the severity of problems in Oxford, particularly for smaller businesses, and were instead trying to wave away such criticism by making bland comments about supporting local businesses.

Moreover the councillor most closely concerned – Mary Clarkson – seemed to be suggesting the council were offering direct support for smaller businesses in the form of targeted business rates relief.

Read the Council’s Response

Intrigued by this claim I made a FOI request asking how many micro-businesses – nationally defined as operations employing 9 people or less – had the council given rates relief to outside of the normal concessions applied on a national basis as part of the new powers granted to local councils in the 2011 Localism Act.

The answer was virtually none.  The only rates relief given as a result of local initiatives came to approximately £40k and this was only to a group of businesses very narrowly defined by the council as operating as if they were charities.

The council made a subsequent claim to the local media that they had in fact given £31m of relief to businesses.  Closer examination of this claim revealed that they had included all the statutory government mandated relief schemes in that figure.  These included such things as transitional relief and charity relief.  As most of us will know, these are simple bolt on measures brought in by the government over many years, intended to reduce the business rates burden, instead of carrying out the root and branch review that everyone, including central government, knows is required.

My concern was that Oxford City Council, in attempting to obfuscate the fact that they have not provided any additional support, were undermining the argument that business rates do need a fundamental rethink.

I know that councils are cash-strapped by government cuts, so expecting them to provide support unaided is probably a tall order.  But in not making that point, and instead relying on empty cut and paste phrases, the council are missing an opportunity to engage with both the government and the business community on the issue.  I have to say that, for a Labour led city council, I find that doubly surprising and disappointing.

As the old truism goes, you can’t deal with a problem if you deny that there is one in the first place.

Unfortunately much of the local media have slightly missed this point and instead focussed on my criticism of the city as a “scruffy clone town”.  I think it’s arguable that it is, and that the reason for that is connected to the council’s apparent lack of support for smaller businesses that provide the diversity and distinctiveness that avoids towns and cities being described as such.  Their recent comments are really only a further indication of this.

I tried to correct this shift of focus in a radio interview I gave on Friday about the local press articles.  Sadly the council didn’t put anyone up to discuss the issue more fully, they will apparently be issuing a fuller statement in due course and I’m waiting with baited breath for that!  In the meantime, as you can hear in the interview they are relying on their claim to support local businesses using the same ‘cut and paste’ answers I accused them of in my letter.

Listen to the interview here

For those who are interested I’ve added the full text of my open letter below. At the time of writing I’ve received no response from the council or Councillor Clarkson.

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Councillor Mary Clarkson
Oxford City Council

18 August 2018

Dear Councillor Clarkson

I read with interest your comments in the Oxford Mail some weeks ago in an article entitled ‘Council hits back at coffee shop claims Oxford has ‘lost its sparkle’ (Oxford Mail 14th June 2018).  This was in response to claims by a local coffee bar, Combibos Coffee, and some other small businesses in the city that Oxford had lost its appeal to consumers and that the council was not supportive towards smaller businesses, specifically those classed nationally as ‘micro businesses’ employing 9 people or less.

In the article you rebuffed claims that the council had not done enough to support such businesses in the city.  Amongst a number of rather glib statements focussing on broad indicators such as footfall and changes to the high street you made the following statement :

“Business rates are set by central government; the city council provides business rate relief to many small businesses”

Whilst I’d not dispute that business rates are indeed set by central government, the second part of your claim surprised me.  It suggested that the city council has provided specific relief to smaller businesses in Oxford over and above those it is mandated to provide by central government.  I assumed you were referring to powers available to local councils under Localism Act 2011 that gave them the discretion to apply rates relief where required.

As a former trader in the city of over 20 years standing, I’d applied myself to the council for help on business rates around 2013 when my store in Cornmarket was suffering as a result of many factors in the city that were arguably caused by the city council.  My business was refused support out of hand at the time, so I was intrigued to find out what help you may have provided to others in a similar situation as you appeared to be claiming in the Oxford Mail.

As well as being a retailer myself, I’m also a commentator and journalist on retail matters in the national and business press.  Many of the problems I highlighted to the council 5 years ago were repeated by Combibos Coffee in the Oxford Mail article you responded to. These included poor management of shared public spaces, high parking charges, lack of easy access to the city centre and a disproportionate focus on larger chain stores in the city centre.

The latter problem has now been massively compounded by the opening of the Westgate Centre which itself is only partially let and has largely cannibalised traders from elsewhere in the city, leaving large holes in the main trading streets.  There appear to have been no contingency plans laid to deal with the devastating effects of this development on other businesses in the city, especially smaller operators, not least in the Covered Market which is losing ground and tenants faster than even the most pessimistic observers predicted.

The response from the council has been one of apparent lack of concern and in many cases an evident lack of understanding of how the commercial property market operates.  Your colleague and former leader Bob Price was regularly heard to claim that more empty shops would lead to a reduction in rental values.  Sadly that is not the case for reasons too complicated to detail here.  It’s a shame that he, and it appears you, are not better informed on such matters.

As a result of your claims in The Oxford Mail, I made a FOI request asking for details of how the city council had provided business rates relief to “many small businesses”.  The response to that request and subsequent clarification you provided to the Oxford Mail demonstrates that little has changed in the council’s approach since my days as a city trader.

Although the city council apparently have no records of how many businesses apply for discretionary relief, you were able to confirm that none had been offered such relief in the preceding 2 years.  I was told that micro businesses “would not normally qualify for Discretionary Relief in the Oxford City Area”.  So the facts seem to run contrary to your claims.

You do apparently offer some relief, but only to a very narrowly defined group of businesses which “act like a charity, but do not have charitable status”.  Even then, you have only provided this to an average of 8 businesses a year and currently provide it to 6.  I doubt that would fit any reasonable definition of “many small businesses” as you have claimed.  The only other form of locally administered relief is hardship relief, for businesses in temporary difficulties.  According to your own figures you haven’t provided this to anyone.  Again, hardly a figure anyone would reasonably describe as “many”.

Your further response to the Oxford Mail did however provide a long list of other business rates rebates and discounts.  These included Mandatory (Charitable) Relief, Small Business Rate Relief, Transitional Relief, Empty Property Relief, Rural Relief, Public House Relief, Supporting Small Business, Local Discretionary Revaluation Relief and Local Newspaper Relief.

To the uninitiated this sounds like an impressive list, but as I assume you know, these are all government mandated schemes imposed and essentially funded by central government.  None of them are initiatives created or provided by Oxford City Council as you implied in the article on 14th June.  The council has no choice, no say, and does not directly contribute financially in the application of these rebates.  These are not optional or locally created schemes and so it’s misleading and disingenuous for the council to claim credit for them.

Contrary to your claims, essentially no direct support exists for small local businesses in Oxford similar to Combibos Coffee to offset the unique problems in the city centre, many of which have been created by your administration.  It follows then that your comments in the newspaper and the assertions your department have made since are at best confused and at worst factually incorrect and misleading.

I am aware from my own experience that the council takes the view that discretionary support should only be offered when it returns a direct benefit to the city and I can to some extent understand that.  I also understand that all local authorities are under immense financial pressure as a result of central government cuts, and very few if any have given rates relief on a purely discretionary basis.  But ignoring this fact and the associated pressures on local businesses and making misleading claims about local business rates concessions does not properly highlight this plight.  Neither does it help the national debate on the inequities of the business rates system.

The underuse of discretionary powers also overlooks the value of the amenity provided by such businesses, not to mention the employment and direct contributions they make in the form of local taxation prior to running into such difficulties.  I would also assert that there is a responsibility on you as a council, especially an allegedly socialist led council, to ensure that smaller businesses who are simply looking to make a reasonable living are able to do so, especially when they are providing valuable employment to people in the city.  Yes they are still private enterprises, but their continued success has many knock-on benefits for the city.

These are usually owner-operated outlets working hard against ever diminishing odds to simply stay afloat.  They are not in the same league as the large well-financed corporate operations your council seems to favour, particularly those likely to be attracted to the new shopping centre, itself a development instigated and operated by large wealthy conglomerates.

It’s also noteworthy that, unlike many other councils considering such developments within their purview, you did not impose any requirements on the developers to provide smaller, subsidised units for independent operators other than the usual ubiquitous RMUs.  But considering you didn’t deem it worthy of ensuring the housing element of the development would be affordable for key workers, I suppose this is hardly surprising.

I have to say that I agree with the original assertion by Combibos Coffee that Oxford has “lost its sparkle”.  Having traded in the city since the early 90s I’ve seen it go from a vibrant, destination location to a scruffy, poorly managed, clone town, trading on its past glories.  Over the past 10 years it’s essentially been allowed to go feral by a council who seems to have no concept of how an historic city should be nurtured, shaped and supported.

I was very sad to have to close both my stores in the Oxford after 20 years commitment to the city and it saddens me even more to see other small businesses being forced out in the same way.  It’s little wonder that so many of them are collapsing, if your response to such events is careless platitudes and specious claims.

It’s a truism that you have to recognise there is a problem before you can find the solution.  That solution is not issuing blanket media statements with claims that do not bear closer scrutiny.  So I would ask that you at least be honest with the business community and the wider public and admit that as a council you have no schemes in place that support small local enterprise and perhaps consider setting some up.

Oxford could be a special place again given the right local political will, but from your repeated cut and paste answers it seems that will is not there.  Neither is there any tangible support for struggling small businesses, despite your claims to the contrary.

I’m happy to discuss these matters in more detail if you think that would be useful.  In any event I look forward to hearing your thoughts and seeing an honest clarification of the position of the council on discretionary business rates relief in the near future.

Westgate Oxford – First Impressions of a New Shopping Wonderland

 

 

The extension to the Westgate centre in Oxford has been a long time coming.  I traded in the city centre from 1994 onwards and even then I remember it was a hot topic of discussion in the retail ranks.

There have been several false starts since then.  In 2002 plans to extend the centre were blocked by the then secretary of state for being out of keeping with the city centre architecture.  A view I had some sympathy with considering the heritage of Oxford.

Then in 2008 plans to revamp the Westgate were once again shelved due to the financial crisis, even though a major remodelling of Bonn Square just outside the centre had already been completed, including the unpopular removal of several ancient and well loved trees.

For a while it seems like the whole idea had gone away, and by the end of the last decade it was apparent to most Oxford traders that the time for such a development had come and gone.  The advent of the internet, softening consumer confidence, falling footfall in town centres and of course an impending Brexit all appeared to render moot the idea of expanding the retail offer in Oxford.

Parking

There were (and still are) many other infrastructure issues that drag down trade in Oxford, not least the ridiculously high parking charges, poor travel access into the city centre and a culture of almost perpetual roadworks in the area courtesy of the county council.  None of these issues have really been addressed, with the exception of the parking charges which ironically were reduced by the council in order to fall in line with the more reasonable charges being levied in the new centre car park.

After years of ignored complaints to the council from existing retailers about the damage being done to trade and the image of the city by fleecing car driving consumers, they were finally handed a fait accompli by the developers.  Too late for many long gone businesses (my own included) and also a direct contradiction to the council’s stated aims to improve the appalling air quality in the city with an emissions free zone.  Another example of civic schizophrenia from a council who can’t decide if they love or hate local businesses.

In the meantime, the Westgate fell under something of a planning blight of its own making, as units fell empty while plans bubbled under for the site to be demolished at some point in the near or distant future.

Late

In 2014 the project was given the kiss of life once again when an alliance between the Crown Estates and Land Securities committed to transforming the old centre into the kind of retail experience that had come to be expected in major cities such as Manchester, Leeds and Birmingham.  But like the rabbit in Alice in Wonderland – a story born in Oxford and the main theme of the Westgate opening events – many thought it had all come a little too late.  Still, down the rabbit hole we went.

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the so-called ‘lantern’ at the top is a positive bolt-on, looking like it’s made up from discarded double glazing panels lit by a 40 watt bulb

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This was intended to be an extension, but it pretty soon became clear that little of the original building would remain or at least be visible.  A new John Lewis store would anchor the project and the main multi-storey car park would be demolished to make way and new subterranean parking structure constructed.

So began 2 years of building works, which admittedly caused less disruption than I expected, apart from the long and convoluted walk from the temporary car park into what remained of the city centre.

The new Westgate finally flung open its metaphorical doors (it’s entirely open at both ends) to the public on Tuesday 24th October.  I took a look around that afternoon after some of the initial hoopla had died down.

The main entrance from the latterly refurbished Bonn Square was impressive from a distance.  Walking up Queen Street the façade dominates the skyline, but seems a bit of a mish-mash architecturally.  If the hole in the front facia was a design afterthought, the so-called ‘lantern’ at the top is a positive bolt-on, looking like it’s made up from discarded double glazing panels lit by a 40 watt bulb.  Perhaps the obligatory blue LED lighting will come later.

An Accident Waiting to Happen

The area immediately outside the entrance is a clearly unfinished mess of tarmac and paving slabs which I was surprised to find led seamlessly from the concourse across the road to the square.  I say ‘road’ because that’s exactly what it is.  A still functioning thoroughfare allowing buses to pass pick their way through the crowds thronging outside the centre.

There’s no warning that the buses are coming save for the poor bus drivers franticly beeping his horn as surprised shoppers hop out of the way.  The seamless nature of the paving gives no clue or cue to the visitor that this is still a functioning road.  Even I forgot and realised I’d just walked straight out into the path of a bus, and I’ve been in that area hundreds of times.

It’s an accident waiting to happen, and unless something is done soon, we won’t have to wait long.  Already there’s much talk in the local press about it, with general impression being given that it was deliberately left in this state so that the local council could prove a point to Chris Grayling who refused permission to fully pedestrianise the area.  Let’s hope that point isn’t made by the serious injury or death of an unwitting visitor!

I also seriously doubt that what is essentially a pavement is going to be able to withstand several tons of bus driving over it numerous times a day.  It won’t be long before the cracks start to appear and this whole daft scenario unravels.  Let’s hope some remedial safety measures are taken soon.  Paving slabs can be replaced, people can’t.

Next I turned into the centre proper and was struck by just how narrow the entrance is.  This is a hangover from the original dimensions of the old centre, but with the full height shop fronts it now seems claustrophobic.  This may change when more of the shop fronts are open.  As it is now well over half of them are still boarded up.

Half Open

This is a theme that repeats as you travel around the centre, as only 60 or so of the 125 units are currently open for business.  The rest are either empty or being fitted out.  We don’t know the exact numbers as yet, although I heard on the grapevine that at least 20% of the centre remains un-let.  Presumably many brands are waiting to see how the land lies before committing themselves.  We’re promised that another 30 stores will be open by Christmas, but that still leaves 35 or so dark.

 

 

 

The centre manager and the developers have tried to put a brave spin on this, claiming that it’s not unusual to have so many voids by the opening day.  To anyone with even a rudimentary knowledge of previous centre openings this is plainly whistling in the dark.  I’ve never heard of a centre with so many empty or hoarded stores on launch day.  It remains to be seen how long that situation lasts.

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There’s none of your polished granite here, it’s all slabs and drainage panels, much of which looks like it’s already seen it’s fair share of inclement weather

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As you leave the long entrance corridor, past an alcove that appears to be the only customer seating area in the whole place, you pop out into the main area.  This is a cavernous hall with the obligatory glass roof, so beloved of mall designers for the past decade, none the less impressive all the same.

The area feels quite cold and soulless though.  Not helped by the grey utilitarian concrete nature of the floor finishes.  There’s none of your polished granite here, it’s all slabs and drainage panels, much of which looks like it’s already seen it’s fair share of inclement weather probably before the roof was fully installed.  Given that the end of this aircraft hangar-like space is fully open at one end, leaving a gap between the main concourse and the entrance to John Lewis, you can perhaps see why the floor looks just like any other pavement.  There are going to be a lot of wet shoes and maybe even snow flurries in here at some point.  I’m not an architect, but I suspect there’s going to be something of the wind-tunnel about this place come the next bout of inclement weather.

Strange Land

Overall it seemed quite drab, not helped by the large empty spaces visible in the basement area below, and of course more dead-eyed shop hoardings.  Yes they were all tastefully decorated with the ever present and somewhat cheesy Alice in Wonderland theme, but they were still empty spaces.  And just in case you weren’t aware that Alice was born in Oxford and the writer of her fantastical adventures was on Oxford Don, the PR company responsible for the launch didn’t lose any opportunity to remind you.  It certainly felt like I was disappearing into a strange land after consuming some kind of hallucinogenic potion.  A shame that there appeared nowhere for visitors to sit down in the mall, not even a giant mushroom.

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The phrase “It’ll be nice when it’s finished” just kept knocking on the door of my brain begging to come in.

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It was quite difficult to see where the old centre ended and the new one began, but perhaps that was an achievement.  The only cue was the entrance to the original Sainsbury’s store which didn’t look like it had moved from it’s previous location.  It was somewhat tucked away down a side alley, rather like the poor relation that no one wants to talk to at the posh party.

But to be fair, the main shopping area was reasonably impressive.  Nothing particularly new now, but it fulfilled its function well enough.  The usual suspect brands are all there, many of which have decamped from other places in Oxford, leaving behind them empty units like rotten teeth littering the now less well travelled thoroughfares.  But there was really nothing to see that I hadn’t seen dozens of times before.  Perhaps it’ll be more impressive when it’s finished, whenever that is.

Incomplete

And that really seems to be an indefinable point.  The centre is clearly not complete yet, and comments I’ve heard on the grapevine from contractors suggest that work may continue for anything up to 2 months. That takes us dangerously close to Christmas.

 

 

 

This lack of completion was evident throughout the development, with uneven floor surfaces, missing or filthy glazing panels, faulty lifts and escalators and empty planters with pot plants sitting forlornly inside waiting for their forever homes.  The phrase “It’ll be nice when it’s finished” just kept knocking on the door of my brain begging to come in.

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Whomever the contractors were need a series kick up the backside

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I’ve seen a few new centre openings, and opened my own stores in two of them, namely Bluewater in Kent and The New Bullring in Birmingham.  Both of these centres were to all intents and purposes complete on opening day.  My own store in Birmingham wasn’t and I can still hear the sound of the delivery manager screaming down the phone at me at 2am the morning before launch day asking me why.  It wasn’t actually our fault on that occasion, it was our lousy (yet very expensive) contractors, but I still bore the brunt of the ire.

I suspect something similar in the case of the Westgate.  Whomever the contractors were need a series kick up the backside, and I imagine are already deep into penalty clause money.  If not that might in itself be an answer as to why it’s not finished.  Again, I’ve heard rumours that the contractors tried to push back the opening day subject to the approval of the retailers, but they weren’t having any of it, and with rent free periods ticking and all the other considerations of opening a new store I don’t blame them.

I know that the whole centre was also developed by 3 separate architects.  I’m not sure if that also meant 3 sets of main contractors, but if so that also sounds like a recipe for disaster, the proof of which may well be the pudding that the Westgate is in the middle of right now.

Even relatively fundamental things for a modern shopping centre appeared to be missing.  In a city like Oxford, famed for its poor 4G coverage, Wi-Fi is a must.  Not only was this absent from the mall areas, there also appeared to be connectivity problems in the stores themselves.  Accessorize had no data connections at all and had to rely on paper vouchers to complete card transactions.  I’m not sure if this was a problem local to the store or another snag with the centre itself (the staff didn’t seem to know either), but in these days of contactless cards and pay by mobile, taking 10 minutes to complete a sale on paper just isn’t acceptable.

Of course these issues are transient and will eventually be fixed, but it doesn’t give a great first impression of the new centre, nor of the professionalism of those behind it , and as we all know, in retail first impressions tend to stick.

Some Positives

Enough of the negative stuff though, there are some positives!  The fairly run-of-the-mill lower floors belied the treasure that awaited on the rooftop terrace.  With stunning views of the iconic medieval architecture that makes up the Oxford skyline the best is left for last.

This is where the main eateries and restaurants are located and it’s going to be a summer treat to spend some time there.  Although I suspect it’ll be more challenging for the rest of the year.  Even though the temperature was fairly mild at ground level on opening day, it was still pretty chilly on the rather more breezy rooftop.

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stunning views of the iconic medieval architecture that makes up the Oxford skyline

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Even so, the views can presumably still be enjoyed from inside the restaurants.  I haven’t checked that out yet as very few of them were actually open (a theme I was becoming used to) and those that were had menus that made my eyes water if not my mouth.

The prices are pretty much as sky high as the location, but that will of course be understandable.  These units will not come cheap and as we all know the VOA won’t be far behind with their council tax assessment.  They’re going to have shift a lot of £20 minimum main courses to cover those overheads.

I joined many others, milling about the terraced areas, checking out the views, but as it was getting dark I headed back down, past the camera crews reporting for local news, the non-functional escalators and the closed cinema, yet another part of the Westgate promise still unfulfilled.

I had another engagement elsewhere so had no time to check out the delights of the John Lewis store.  I hate to say if you’ve seen one, you’ve seen ’em all, but it had that look about it.  Maybe next time.

Conclusions

Overall it’s very difficult to get a grip on what the new centre will eventually be like when it’s finished and more fully open.  The Westgate is neither an indoor, nor an outdoor mall and the stores and brands within are obviously setting out to raise the game in Oxford, even though I think that could have been done without the need to blow £440m on a development like this.  It all felt rather unaccomplished and unremarkable.  Maybe it’s the jaded eye of someone who sees behind the facades of these places, maybe it’s the memories of my own frantic forays into the mall culture, I’m not sure.  But I was left with a feeling of something unresolved and lacking that essential spark I saw in places like Bluewater so many years ago.  That may not be Westgate’s fault, even that Kentish behemoth has lost it’s shine now and I really think the age of the me-too shopping mall is coming to an end.  The Westgate and it’s ilk may just be a footnote in that journey.

Certainly it’s half open, half closed beginnings are rather apt considering it’s half in/half out positioning within the Oxford city shopping canon and only time will tell how it finally sits with local consumers and those coming from further afield.  I think the latter category may well struggle to get into the city if the predictions of a tripling of shopping visits to 15 or 16 million a year are to materialise. and I’ve written elsewhere about the likely traffic and parking chaos that’s probably going to ensue.

Yes the centre has made some effort to move people towards other modes of transport, but with the promised 1000 extra cycle racks not yet materialising and the kamikaze nature of the current bus route, it seems those elements are just as much lacking in full formation as the rest of the centre.

The excitement around the new mall also overshadows what I think will be some seriously negative impacts on the rest of the city, not least the number of empty units that are already starting to appear.  The shift in focus of the city towards the John Lewis area is also going to be to the disadvantage of existing department stores in the city, not least the likes of Debenhams and the long standing independent Boswells.  One rather surprising development is the appearance of the first charity store in Cornmarket street, one of the most highly sought after and prime locations in the city, or at least it was.

 

 

 

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Only time will prove if some nice views and yet another cavernous retail cathedral will be enough to attract both shoppers and new brands to the city, and time is one thing that an historic site like Oxford has in abundance.

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I think that ultimately when the novelty wears off, the overall experience will be pretty unremarkable, with the obvious exception of the roof terrace.  And that’s where I think the centre will win out, especially once the cinema and all the restaurants are open. That’s likely to be a real boost to the night-time economy as getting into town and parking will be much easier than during the busier times during the day.

Wait and See

Until the centre is fully complete and function it’s of course impossible to really know how well it’ll do.  I think the amount of competition in the area, both locally and a bit further afield in places such as Milton Keynes, Reading, the newly expanded Bicester Village and even Westfield London may well be a deciding factor if the predicted transport and parking problems in Oxford become reality.  Those really are the issues that should have been sorted a long time before the first brick was laid in the new Westgate, that would have helped not only the new centre but the city as a whole.

It remains to be seen if these problems will continue to dog the city’s retail and leisure offer, but it’s certain that the roof terrace area in the new centre will be a big draw for visitors and shoppers alike.  Ironically it’s the views that are the best bit of the new Westgate and arguably they’re nothing much to do with the centre itself.  In fact some would say that the inconsistent architecture of a shopping centre plonked in the middle of such splendour actually detracts from the skyline of the city of dreaming spires.  But then again those admiring the view from the Westgate itself won’t really care about that.

There’s no doubt that the new modern centre is a vast improvement on what it replaces, but it’s not enough just be new.  Every shopping mall was new once.  Only time will prove if some nice views and yet another cavernous retail cathedral will be enough to attract both shoppers and new brands to the city, and time is one thing that an historic site like Oxford has in abundance.

With the centre now finally up and running, albeit with a bit of a limp, retailers and managers will be working hard to make it a success and the city will have to come to terms with it’s newest addition.  As Alice herself says as she walks with the lobster through Wonderland, “It’s no use going back to yesterday, because I was a different person then”

CVAs And Big Names Are No Substitute For Sanity In The Retail Property Market

The collapse of two major retail chains within weeks of each other last year showed that no company, no matter how iconic or well established, can afford to rest on it’s laurels.

Both BHS and Austin Reed were rightly been accused of not responding to changes in consumer tastes and behaviour.  Both notably failed to establish an online presence until it was too late.

But the other misery shared by both these companies was the staggering rents being paid on large, high profile locations that in recent years have exceeded most sane measures of long term economic viability.

The sorts of premises they occupied are testament to a time when rents and rates were regarded more as incidental expenses, rather than the major undertakings they are today.  Indeed Austin Reed’s original Regent Street store had thousands of square feet of space left idle, a situation that is not uncommon amongst huge swathes of legacy high street stores today.

Their move to 100 Regent Street in 2011 seemed born of the same extravagance, no doubt driven by the need for them emulate their previously impressive presence across the road.  I remember at the time thinking that perhaps what they really needed was not yet another impressive shopfit, but rather a brand realignment.  If you’ll excuse the pun, something more tailored to today’s clientèle.

It seems that the disparity between footfall and overheads caught up with them, as it has done with many other retailers in the past few years.  It was clear from Edinburgh Woollen Mill’s refusal to take on the majority of the Austin Reed portfolio that their stores, and the associated costs, were not an attractive aspect of the brand.  Indeed, as with BHS, they were seen as something of a millstone.

Solutions

In the past many retailers saw pre-pack administrations as the magic solution to these troubles, much to the particular consternation of landlords.  But of late, the CVA has been touted as the magic wand that will resolve problem leases in a fairer and more transparent way.  Something else that BHS and Austin Reed had in common.

Unfortunately though, these instruments are not the lifeline they appear to be at the time.  In fact they seem to be more a staging post on the road to inevitable demise.  How many retailers have we seen entering into CVAs – sometimes more than one – only to slip over the edge into oblivion a few months or even weeks later?

I know from personal experience that the CVA idea seems attractive when the wolf is at the door and the rent demands are on the doormat.  On face value, a plan that provides some much needed elbow room seems an irresistible prospect.  But it’s usually a false dawn.  In general a CVA is only considered as a last resort, by which time there are too many other problems to overcome.  It then just becomes another drag on any turnaround plan.

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In the past many retailers saw pre-pack administrations as the solution to these troubles, much to the particular consternation of landlords.

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Ultimately these sorts of agreements are only going to help if the core business is strong enough to service it’s liabilities in the long term.  They are essentially consolidation plans, enabling companies who have hit short term difficulties to ride them out, but they’re not without cost.  If the rot is already widespread they’re really just the last grasp at the straw.

After going through CVA proposals made to us by consultants in 2006, I decided that a lasting solution could only be achieved through direct negotiation with our landlords.  It worked for us, but we were operating in a different climate back then.  Or perhaps I was just very persuasive!

Silver Lining

It’s likely that we’ll see more collapses like those we saw last year, especially as new rates valuations come into force in April.  M&S have already announced the closure of a raft of stores amid advice that property is one of its biggest “headaches”.  Even though they have yet to confirm exactly which stores will close, this might be the first strains of the alarm bells ringing in the retail property market.

The only silver lining in this grim prediction is that this may be a wake up call that there needs to be more open and direct dialogue with landlords, before the next over-rented portfolio blows up in their, and their tenant’s, faces.

Of course there were plenty of eager new retailers salivating over the prospect of taking on some of the more salubrious locations that Austin Reed vacated.  But I doubt any of them will have the same longevity as their predecessors , especially if rents – and their close cousins, business rates – continue to narrow the margin between long term success and sudden death.

We all know that business never stands still and heritage alone is no substitute for innovation.  But if our shopping experience is going to remain vibrant and diverse there has to be enough oxygen in the room for both the old and the new to survive.

A high street monoculture, where success is measured only by how much you can afford to pay per square foot, is fast becoming the norm.  And as with any factory farming ethos, the result is often bland, tasteless and boring.

 

 

Is Mike Ashley The New Blackadder?

Many of us watched the goings on at the Sports Direct AGM yesterday open-mouthed at the level of drama being acted out both on and off the stage.

Shareholder revolts are nothing new, and Ashley and Keith Hellawell surely had it coming, especially as it emerged recently that Hellawell had attempted to dodge the bullet of criticism by tendering his resignation before the company published its damning review into working practices.

One of the major criticisms being lobbed at Mike Ashley is the treatment his staff have to endure as a result of regular end of shift searches.  So it was doubly ironic that yesterday he suffered the same ignominy under the full glare of the cameras.

https://twitter.com/SimonNeville/status/773498897293570048

One wonders if the inclusion of a huge wad of fifty pound notes in his trouser pocket was a deliberate attempt at bravado.  The search came as part of a tour of the warehouse facilities Ashley was leading, presumably as part of an attempt to show improved working practices. He must have known it was going to happen, so the appearance of that crisp wedge of cash would have been unavoidable.  Or perhaps he’s just so loaded he forgot about that bit of loose change in his trousers.  If that’s the case perhaps he should be renamed Blackadder after this scene from the show.

What it says about Ashley rather belies the impression I got of him at the recent Parliamentary inquiry he attended.  I wrote the column below for Retail Week last Month, but after yesterday’s performance I think I may have to revise my assessment.

He may still like to consider my suggestions for improvements in working conditions though, even though they may rob him of future chances to whip his wad out when he needs to make an entrance.

I stand by my judgement on Philip Green however, who seems to get more loathsome by the day.  As an ambassador for all that’s great about retail success, he’s about as welcome as a turd in a swimming pool.  Even if that swimming pool is on board a 100 million pound penis extension.  The recent ‘renaming’ of his fabulous yacht by comedian Lee Nelson rather summed up my feelings and probably those of the thousands of BHS staff and pension holders he’s helped to leave in dry dock

https://twitter.com/RealLeeNelson/status/773227818075492352

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My Column from Retail Week 11th August

Watching the recent Parliamentary appearances of Mike Ashley and Sir Philip Green, I was surprised to find myself warming slightly to Mr Ashley, something I’d never have imagined possible a few months ago.

That said it was rather like deciding which dastardly stage villain you’d most like to share a stage with, or perhaps a better analogy would be the pantomime horse.

In Green’s case he came across as arrogant and resentful.  Quite obviously certain in his belief that he was better than every person in the chamber.

It was a performance of bravado and bluster that, if I had my psychologist’s hat on, I’d say was more over-compensation than real attitude.  But then considering he apparently needs one yacht for himself and several others for his ego, I might be giving him a far too sympathetic analysis.

In both cases it’s apparent that they were less concerned about how their behaviour reflected on their own companies than they perhaps should be.  A blasé attitude that their customers will remain loyal to their brands, regardless of their attitude to the usual social mores that constrain the rest of us.

Ratner Moment

They may be right, but I wonder how far we’ve really moved on from the days when a mis-timed joke can bring down a company, as we saw with Gerald Ratner 25 years ago (yes it really has been that long!).  There but for the grace of the god of retail goes any of us.

With that in mind I remain baffled over Sir Phil’s nonchalance at being photographed relaxing on the deck of his third multi-million pound status symbol, while BHS sinks slowly to the bottom with the loss of almost all hands.  As Gerald discovered to his cost, timing is everything.

Mike Ashley at least looked like he was taking the questions being asked seriously though.  Considering he reportedly had to be dragged to Parliament ‘kicking and screaming’ he seemed to warm to the experience remarkably well.

His main defence against the revelations of questionable staff treatment at his distribution warehouses was ignorance of the circumstances and practices going on inside his own company.

I’m not going to speculate about the veracity of that claim, but as in many walks of life, as with MPs, doctors, military leaders, and business owners, the fault ultimately lies with the person at the top.  They set the tone and decide the ethos and culture of the organisation.  It’s really not a defence to say ‘Not me guv!’.

The culture in Sports Direct seems to be one of expediency and antipathy.  A strata of mistrust that runs through the company from the warehouse and shop floor staff upwards.  A belief that everyone is out to get everyone else.

Ashley expressed dismay that the daily searches of warehouse staff were taking longer than they did when he set them up 10 years earlier.  But in that admission he confirms that the general tone of the relationship between staff and management remains one of distrust.

Trust

Perhaps he’s right to feel that way, but that does beg the question as to why they would employ staff that they did not have absolute faith in.  Perhaps past experience informed their actions and the belief that they would be robbed blind if they didn’t watch everyone like a hawk.

To me that lack of trust seems to be at the heart of the problems at Sports Direct.  Sadly, rather than dealing with that, Ashley has pushed to improve the searching procedures to reduce the ‘bottlenecks’ at the end of shifts.

But another approach would have been to foster more loyalty in his workforce so that they might be less inclined to help themselves to a five-fingered bonus in the first place.

The culture in Sports Direct seems to be one of expediency and antipathy.  A strata of mistrust that runs through the company from the warehouse and shop floor staff upwards.  A belief that everyone is out to get everyone else.

Studies carried out many years ago showed an inverse relationship between company culture, pay levels, job security and the problem of pilfering.  In my own company, selling many easily pocketable items of high value, we never resorted to body searches.  I did consider them on occasions, but felt that the damage they would do to morale and staff relationships weren’t worth the small amounts that we undoubtedly lost over the years.

And with stringent stock control procedures in place, and – most importantly – seen to be in place, we knew the losses were minimal, even though on one occasion we had to have the manager and all the staff in a branch arrested over cash handling irregularities.

The key for me was that we had a good relationship with our staff and there was mutual trust and respect.  I’m firmly convinced that prevented just as much shrinkage as any number of cavity searches, body scanners and security staff.

So as Mike Ashley starts to get to grips with the managerial problems within a company that he admits may have outgrown previous internal audit procedures, he could perhaps do worse than take a look down the other end of the telescope.  Put himself in the place of his workforce who, if recent reports are to be believed, feel undervalued, under-paid and under suspicion.

A more open and meritocratic attitude towards HR management has so often been cited as the root of success in many companies, most notably in the IT sector.  Likewise success in retail doesn’t have to come down to the hard nosed antisympathetic treatment of those who work for you and with you.

Moreover, in terms of customer facing businesses like ours, we certainly don’t need our leading lights to be seen in the media as disconnected, uncaring profiteers.  Or to be dubbed by the press as “Rude, unprofessional and bad-tempered”.

Indeed as we’re finding out now, in a supposedly more enlightened and informed world, such behaviour could not only be counter-productive, it may even lead to another ‘Ratner moment’ in the very near future.

BHS – The ‘Dead Store Walking’ That Never Really Had a Chance

I greeted the news of the sale of BHS to Retail Acquisitions with the same feeling of incredulity I’d previously experienced over Gordon Brother’s purchase of the ailing Blockbuster chain in 2013.

It seemed like a crazy buy, not least because if a canny businessman like Philip Green wants to shake hands on the sale of a major company for £1, you’d better count your fingers carefully afterwards.

The CVA details, released last month, revealed just how crazy it was. With a massive pension fund hole, debts of around £1.3bn and ongoing trading losses, it was going to take a miracle of biblical proportions to rescue the company for even the most experienced retail turnaround specialist. For someone like Dominic Chappell – a retail novice with several failed companies and a personal bankruptcy behind him – it was totally doolally.

The other thing that bothered me was the name of the company – Retail Acquisitions – which suggests that its primary aim was to acquire the stores, rather than to actually run them.

BHS was a dead store walking and I suspect Sir Green knew that when he sold it. Even the previously over-optimistic Gordon Brothers refused to sanction a £60m loan to Chappell for BHS, which if nothing else at least shows that they did their sums properly this time before leaping head first into another obviously doomed turnaround fiasco.

Dodging the Bullet

There are very few upsides to any of this, but I can’t help thinking how much worse things could have been had Philip Green also managed to buy M&S back in 2004. Already 4 years into his stewardship of BHS by then, one can only wonder if both these venerable old stores would have ended up in the mincer.

M&S still has it’s problems, but it’s taken a far more robust route towards re-inventing itself than was ever evident at BHS. Updated, more up-market branding, a re-positioned clothing offer and a far more efficient front of house has kept Marks and Sparks out of the clutches of the receiver. Above all though it seems that dodging the bullet of being added to the Green portfolio was a far greater benefit to it’s survival.

The tired, confused and cluttered shop floor that greets you in BHS these days screams underinvestment and shredded staff morale. It’s been clear for years that Sir Phil had no idea what to do with BHS. In it’s final days under his stewardship, it was stuffed with poorly executed Arcadia brand concessions making it even less likely that shoppers would cross the threshold.

Essentially there was little inside that wasn’t already available elsewhere. This would also prove to be an Achilles heel for the new owners, leaving them very little room for manoeuvre in re-inventing the stock offer to attract new customers.

A late-to-the-party, rather shonky website did nothing to lift the image of a brand that was already years past it’s sell by date by the time it hit the net. The last gasp flirtation with a food offer shortly before selling the chain suggests the company had finally resorted to plagiarism of the more successful sectors of the M&S operation in a half-hearted attempt to turn the super-tanker before it hit the rocks.

Questions Need Answers

Given Sir Phil’s legendary retail acumen, it’s a conundrum as to why he wasn’t able to breathe new life into BHS rather than bail out. It’s almost like he wasn’t trying. Ultimately his priority was not to be on the apple cart when the wheels came off, which in business terms was a great move for him, but rather a bad one for his staff and creditors.

As shadow business secretary Angela Eagle has pointed out, there are still questions that need answers, especially if it’s it’s going to be left to the taxpayer to make up shortfalls in redundancies and pensions.

I hope in the spirit of openness and transparency recently inspired by his friend David Cameron, Sir Phil will be just as forthright about his own personal financial arrangements. I’m sure speculation that, during the 15 years of his ownership, he trousered remuneration roughly equal to the hole in the pension fund is just a random quirk of inconsequential coincidence.

Likewise, there’s also some concern about pay-outs to Retail Acquisitions that may not have been entirely appropriate in the circumstances. It’s now expected that the company will be called before MPs to explain some of its actions in the run up to the collapse.

Even if there was a plan to relaunch the brand after the buy out, it’s become apparent over recent weeks that this was secondary to re-financing the company. Something that should have been in place long before the new owners picked up the keys.

Speculation

Speculation will now be rife about the future for BHS. A pre-pack resurrection deal seems unlikely considering the complexity of the situation and the continuing dead weight of the pension fund. That would also seem to preclude the option of a buyer being found for the company as a going concern. Even so, according to the administrators, there have been numerous expressions of ‘serious interest’ from prospective buyers. But I suspect it’s the nature of that interest that will be the rub.

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I’m sure speculation that, during the 15 years of his ownership, he trousered remuneration roughly equal to the hole in the pension fund is just a random quirk of inconsequential coincidence.

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If it does shutter it’s doors, it’s likely that BHS sized hole in our high street will be more difficult to fill now than it was after the demise of Woolworths in 2008. Not just as physical space, but in terms economic and societal impact of so many job and creditor losses. The announcement a few days ago of the collapse of Austin Reed will make that even more acute.

When Woolies went down there were plenty of takers from the bargain end of the retail spectrum eager to gain extra floor space. That sector is largely saturated now, although B&M Bargains are apparently eying some of the BHS portfolio.

Dominic Chappell himself is also reported to be keen to extend his BHS pipedream by buying back the majority of the company from the administrators using yet more borrowed money, this time from the USA. This smacks to me now more of obsession than sound business sense and I can see no reason why we wouldn’t just see a re-run of the last 14 months.

Let’s hope then that reports of viable rescue plans prove to be more than the wishful thinking of the administrators, and that if any part of the company can be saved, the future owners have pockets deep enough to allow them to concentrate on the business of retail rather than of finance.

Genuine Loyalty Can Only be Earned from Genuine Loyalty Schemes

Tesco having its knuckles rapped recently by the Advertising Standards Authority seems to me to be yet another symptom of a grocery price war strewn with landmines set for their hapless customers.

I’m a fairly avid watcher of supermarket deals, but even I hadn’t noticed the restrictive nature of Tesco’s Brand Guarantee offer.  So claims that they had set it up to be anything but a ploy to hoodwink their customers seem a little hollow to me now.

Even more so as I was about to pen an article proclaiming Tesco as having finally got this price matching thing right in the face of more disingenuous deals from stores like Sainsbury’s.

Next Time We’ll Be Generous!

Giving me a voucher at the checkout telling me that you were actually more expensive than your rivals this time and that NEXT TIME you’ll give me back the difference is a pretty measly offer in my humble opinion.  Even more so when the time limit to claim back the few miserable pence involved is so pitifully short.

And while we’re on the subject, just how many vouchers is it possible for one person to fit into a purse, pocket or wallet?  Judging by the number I get from Sainsbury’s, they’re running their own special study to find out.

Considering we live in a digital age and most of these offers are connected to a databased driven loyalty or discount card, why are we still using annoying and wasteful slips of paper to administer such offers?

The answer, as I’m sure we all know, is redemption ratios.  These stores are assuming we’ll simply be chuffed with their generous offer of a freebie, even though in many cases we’ll not be able to take advantage of it, due to time limits, special conditions or a forgotten or lost magic ticket.

Fast and Loose

It’s been suggested that ASDA’s recent poor performance against it’s rivals was largely down to it’s stance on every day low prices, whilst eschewing a round of discounts and offers, especially in the run up to Christmas.  If that’s true then the value of special promotions is something that no retailer in a highly competitive market can afford to play fast and loose with.

But from my own experience, and from conversations I’ve had with store staff and other consumers, these rather iffy offers are starting to pall in attractiveness.  Coupled with the recent re-jigging of the Nectar scheme in Sainsburys, conditional discounts end up more sour than sweet.  They certainly don’t inspire loyalty.

from conversations I’ve had with store staff and other consumers, these rather iffy offers are starting to pall in attractiveness

Speaking personally, I passed the end of my tether long ago, the last time I had to stand in a checkout queue, leafing through multitudinous fiddly vouchers, checking that they were in date and that I’d bought exactly the qualifying size, variety, colour and amusing shape of kumquats to claim my 0.02p worth of points.

Get Serious

If the big supermarkets are really serious about taking on their snappy little discounting rivals, they are going to have to take a good hard look at how attractive, and above all, how genuine these offers are for their customers.

Bodies like the ASA and Which are feeding into an increasingly savvy and digitally connected consumerate who are not going to put up with the wool being pulled over their eyes forever.  Even if they are offered a discount on knitwear redeemable when there’s an X in the month.

We Need Rates Reform Not Magic Rabbits

Maybe it has something to do with the proximity of Easter, but it’s long been the tradition for chancellors to pull a rabbit out of the hat during a budget speech, and last week there were leporidae leaping about all over the place in Westminster.

Speculation is that the abundance of feats of fiscal phantasmagoria this time, were simply there to divert attention away from the fact that George Osborne has spectacularly failed to hit any of his own arbitrarily set targets which we are supposed to be judging him on.  But whatever the reason, the showstopper for most retailers was the changes to business rates.

As usual, in the run up to this budget, there were calls from retail pressure groups for  there to be some serious moves towards rates reform, rather than yet more promises of reviews and recommendations.  I, along with other campaigners, joined that chorus, although I have to say that this time round I wasn’t expecting much in the way of harmony.  I thought the indications were there that we’d not see any real structural  change in the current broken system of local taxation.

On the whole I think I was right, but there were some more helpful than usual measures in George’s big red box this year.  Unfortunately though, on closer scrutiny they’re not quite as positive as they first seem.

Move to CPI

The one element of the package that could be described as structural was the move to CPI from RPI in the setting of rates multipliers.  CPI is the main indicator used in most other government departments to set things like pension increases, so it’s long been indefensible to use RPI for payments going the other way.

Indeed the last government’s own tame celebrity consultant, Mary Portas, had this as one of the key recommendations in her high street review back in the heady days of 2011.  Although, like many of her recommendations, this was also ignored.

So on the face of it, it’s a good move, until you realise that it’s not going to be implemented until 2020.  The subtext of that for me is that we’ll be keeping the same anachronistic system of setting a tax using notional valuations for at least another 5 years.  Something I had hoped would have been consigned to history some years ago.

Revaluation Cycles 

More evidence supporting that depressing assumption came with the plan to change revaluation cycles to 3 years rather than the current 5.  Again reaffirming that the Chancellor sees a long term continuation of the current arrangements, albeit in a slightly more responsive way.  Although, as he’s been seen to play fast and loose with these cycles when it suits him, including delaying the 2015 revaluation by two years, one wonders how much value there really is in this commitment.

Doubled Thresholds

The other course in this smorgasbord of rates tweaks was the doubling of the threshold before properties become eligible to pay business rates.  This was increased from £6000 to £12000 in one fell swoop, with tapered relief on properties up to the £15000 mark.  Something I’m sure Osborne hoped would give him the wow factor with the small business community.

And yes, it’s a bold move.  But considering the speed with which rental tones have continued to move, even through the recession, this change means the system will have just about caught up with reality only to see it speed off into the distance again.  This is especially true of the very high rented areas like London where decent retail properties below £12000 are going to be even rarer than magic rabbits.

The subtext of that for me is that we’ll be keeping the same anachronistic system of setting a tax using notional valuations for at least another 5 years

And let’s not forget that there are still many relatively small retailers who will continue to fall between two stools, in premises too large and over-rented to benefit from these changes and yet not large enough to have the economies of scale to cope with other challenges on the horizon, such as changes to pension liabilities and the new National Living Wage.

Someone Else’s Money

We also need to remember that in these times of austerity and dwindling local authority budgets, Osborne announcing these generous reductions in tax take is really him writing cheques he knows he’ll never have to cash.  As we all know, it’s always easier to play with someone else’s money.

Having told councils last year that they will be retaining 100% of business rates in exchange for further reductions in central government grants, making changes that will significantly impact that income seems like a breathtakingly cynical bit of game playing.  And this will have a knock on effect in town centres and local communities where small stores are trying to do business.

So, as much as I’m pleased that, by some estimates, as many as 50% of smaller retailers could be taken out of the current business rates madness altogether, I’m struggling to accept these measures as anything other than a sop to distract us away from the real prize of proper, lasting and equitable local taxation reform for all on the high street.

Piecemeal

Until we do have that, I can only see more piecemeal concessions being bolted on to a system already creaking under it’s own inefficiencies.  We still need a mechanism that’s responsive to local business conditions.  One that can be influenced for good and bad by local council policies and can be applied equally across all types and sizes of business.

My personal preference is for a system of local purchase tax, similar to what we see in many US stores.  But I know I’m in a minority in favouring that.  Indeed the very idea was discounted early on in discussions over reform last year.

Much as I support small retailers, I also believe that all sizes of business should pay into the local economy through such taxation.  But a system that took proper account of trading patterns, would mean that smaller businesses would pay an amount appropriate and, above all affordable, in their particular circumstances.

My personal preference is for a system of local purchase tax, similar to what we see in many US stores.

I’m happy for those businesses that will benefit from these changes, and I hope that they will stimulate local economies and help small independent retailers weather the continuing storm on our high streets.  But I remain concerned that these measures are not going to divert us from the goal of seeking a root and branch reform of a rotten system that should have been retired many years ago.

If anything I think the measures announced in the budget suggest that rates reform is going to be kicked into the long grass for at least the term of the current parliament.  If that’s the case I guess all we can expect in the immediate future are a few more rabbits emerging from that undergrowth, making a leap for the Chancellor’s top hat.

Could The ‘Living Wage’ Be The Living End For Some Small Retailers?

The number of major retailers lining up to announce impending pay increases seems to be growing by the day, seemingly inspired by the Chancellor’s surprising commitment to what he called a National Living Wage.

Cynics amongst us may say that one motivation for this uncharacteristically altruistic move was to wrong foot opposition parties such as Labour and The Greens who’ve advocated the pay reforms proposed by the Living Wage Foundation.

That said, George’s Osborne’s aspirations fall somewhat short of the LWF’s, but on the face of it we at least have a welcome move in the right direction.

The new rates don’t come in until next year but there may be an ulterior motivation for some larger retailers upping the wages ante now, and in some cases going beyond new statutory requirements. Not only does it gain them several kudos points in the PR arena, it also piles pressure onto their competitors to follow suit. Happily for employees, wages may just have become a much more competitive battleground.

Tesco for example are currently facing a crescendo of calls for them to chase those foreign upstarts Lidl down the Living Wage trail at a time they can ill afford to add further financial pressures to their already creaking P&L sheets.

Balance Sheet Shuffling

For most larger retailers though, paying the higher rate shouldn’t really be a problem. They may have to do some balance sheet shuffling, but it should only make a small dent in their profitability. Certainly there may be a few long faces at the next shareholder meeting, but a couple of extra glasses of champagne will probably help them see the positive side.

I have to admit to some bemusement at the recent whinnying from Lord Wolfson about Next’s wage bill increasing by £27m as they also announced profits of nearly £350m. For someone reportedly earning £4m a year himself, it seems rather churlish to begrudge his staff a mere 8% dividend on the profits they helped to generate.

Recent reports about retailers such as Sports Direct allegedly sidestepping even minimum wage regulations don’t do our industry any favours either.

For smaller businesses though the picture is somewhat different and there’s growing disquiet about how many employers are ready and able to deal with the additional demands that will be made on their businesses when the new system starts to be phased in.

For many independent retailers already struggling with overheads increasing every year, the Living Wage is going to be much harder to deal with, especially as we now see that the denouement of the Chancellor’s plot was to pave the way for a shredding of the tax credit system.

Even though that has for the time being proven to be a cut too far, I think it’s far too early to breathe a sigh of relief about future attacks on the low waged economy.

The reliance on tax credits by some businesses has been seen as perversion of the system, but in the face of scant support elsewhere, they  have tangentially helped small businesses by topping up the wages of their lower paid staff.

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For many independent retailers already struggling with overheads increasing every year, the Living Wage is going to be much harder to deal with

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Whilst I agree that for larger operators it’s difficult to defend such subsidisation, for some smaller companies it’s something of a lifeline.  That’s not ideal, and I know most small businesses would much rather pay a decent wage without pushing their valued workforce onto state assistance, but often there’s little choice.

I know of shop owners trading at the very margins of profitability, often only drawing a minimal salary themselves, sometimes well below the minimum or living wage. They can’t simply magic the money to cover additional wages out of thin air without help on other overhead priorities.

Business rates

Most notable amongst these is business rates, which was the subject of yet more empty political posturing at the Conservative Party Conference, followed by an announcement of a further delay on proposals for reform in the Autumn Statement.  There are now fears that this burden will be even more overwhelming in some areas after next years revaluation.

Many are also creaking under the weight of additional pension liabilities now being phased in. The alternatives for these retailers will be to further reduce staff numbers, break the law, or simply go under.

There are some councils who earlier this year proposed schemes where they would reduce business rates for companies who agree to pay the living wage.  However the devil is in the detail and many of the proposals only meet a small part of the additional costs imposed by the increase to the minimum wage.  Although I’m sure most small retailers would prefer to pay their staff more given the opportunity afforded by overheads savings elsewhere

Can’t pay Won’t pay?

There is of course the argument that if you can’t afford to pay a decent wage, you shouldn’t be in business anyway, but that seems to me to be an attitude that runs contrary to the ethos of the Living Wage principle.

Surely small business owners have the right to make a reasonable living as well as their staff, and options such as statutory profit or equity sharing could be considered for smaller employers and their employees.

I’m a supporter of the Living Wage and I’m delighted it’s finally starting to become a reality. But it can’t simply be waved into existence without some thought for the implications for companies who, no matter how much they may back the principle, may genuinely struggle to pay it.

Without a more comprehensive approach to the overall economic model that these businesses face, it’s likely that, for some of them, the Living Wage could easily become the living end.

This article is an updated and expanded version on my recent Retail Week column

Testing Technology in Tottenham Court Road

In the latest of my occasional store analysis outings in association with Shoppertrak, I visit one of my old haunts in London, checking on the some of the huge hi-fi and technology stores in the capital’s main street for technology addicts to see if their stores are as cutting edge as their products.  I include some independent stores as well as one that would probably be familiar to everyone.  The results surprised me and point to a number of areas where some old fashioned personal service wouldn’t go amiss amongst all the impressive gadgetry.   

Whilst visiting most of the major mobile phone retailers in Tottenham Court Road in preparation for my last Undercover Analyst post, I found myself drawn into a trip down memory lane as I eyed some of the older technology stores in the area.

As I said in my previous post, back in the 90s if you wanted the latest slab of shiny consumer technology there really was no better place to come. I was a frequent visitor. In fact it was only a few years ago that I switched from a TV I bought there 25 years ago, and that was only because of the digital switchover. I like to get value for money out of my purchases!

Everything had changed of course, as you’d expect in the world of modern gadgetry, but many of the stores had a familiar layout and a good deal of the sales pitch was pretty much the same as it had been in the days of tower systems and VHS.

Having just taken notes on some of the most cutting edge gizmo stores on the market, I thought it would be good to see how the more traditional technology retailers were doing, if there is such a thing as ‘traditional’ technology.

The first store I visited store predominantly sold Hi-Fi gear. I’m not sure if calling it that is now an anachronism, but I enquired about a sound system anyway. The sales adviser seemed very knowledgeable and had an impressive amount of product knowledge to call on. Buoyed by this initial encounter, I asked if I could perhaps have a demo of the system and the salesman’s face lit up. All I had to do, he explained, was to visit their demo area on the third floor where someone would be happy to help me.

Missing Link

This is where the experience took a disappointing nose dive. I wasn’t escorted to the demo area, I was just told where it was. This seemed like serious missing link in the service chain to me. Most stores, most notably the large supermarkets, now train their staff to take anyone who enquires about a product to where they can find it. Just sending someone risks that person not finding it or changing their mind in transit. It also gives a rather offhand impression of the service model.

Just pointing someone in the general direction is acting like a signpost. Leading someone to the product is a positive interaction with the customer and keeps them engaged. Moreover, in this case I was supposedly interested in an expensive sound system, not a bogoff on a tin of baked beans. It could have been a very costly mistake for this store. My maxim to staff is always ‘guide, don’t point’.

Once on the third floor it took a while to catch the eye of the assistant, who apparently had no idea I was on my way. Even a phone call from the ground floor warning them of my impending arrival was clearly too much to ask. A totally cack-handed way to operate a sales handover in my opinion, and something they really should work on.

The demo itself went well and I felt the adviser really knew his stuff. But the way I’d had to pretty much drive the process to get there myself left me feeling disengaged by this point. I think, had I been a real customer I might not even had got that far.

Overall though, not a bad store, but some serious service issues to deal with.

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ShopperTrak says – How are customers moving around the store? Gaining an understanding of how shoppers are moving around the store can help to ensure that shoppers don’t miss out on any stock as well as making the most of product placement.

I.e. retailers may find that customers are regularly coming in to the store to purchase small items such as headphones but that they are experiencing a high abandonment rate once shoppers realise that these items are located on the third floor. By moving headphones to the till area, the retailer may see a boost in conversion rates.

Retailers can also look to data to monitor the success rate of implementing new changes, i.e. staff radios. I.e. did conversion go up when staff began using radios to communicate across different floors? They can then tweak these changes accordingly.

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My next visit was to a well known electronics supplier. This store sells a variety of less well known brands but is a seriously great place to come for anything from a walkie-talkie to a GPS enabled swizzle stick. I have to admit I could, and probably have, spent hours browsing amazing gadgets that I’d never heard of whilst desperately trying to find a justification for buying. Luckily for my bank balance I usually fail.

Plain Vanilla

Having said that, it’s a bit plain vanilla in terms of shop layout and fit-out. It looks like the store was built around off-the-shelf shop fittings bought in a clearance warehouse at the end of the 1990s. I’m sure that wasn’t the case, but it was not exactly what you’d called ‘retail theatre’. Slightly incongruous for a shop selling up-to-the-minute products, but maybe they think the merchandise is exciting enough.

The stock displays were neat enough and everything was easy to browse. Staff were around and someone from the back of the store shouted across to me to ask if I needed any help.

To me that’s an approach that’s about as contemporary as the shelving was in the store. If you’re going to engage with a customer, do it face to face and with some commitment. Throwing your voice across the shop is also throwing away a golden opportunity to turn that interaction into a sales opportunity. In many respects it would be better to say nothing than do that. Having come from several stores with a much more focussed customer service ethos, even though it was probably poorly executed in some cases, this seemed like a bit of a throw-back.

Again not a bad store overall, but still lacking that certain something.

My final visit was to a store that today stands pretty much unchallenged in the landscape of UK technology retail today. It’s my policy in these articles not to name stores, but I’m sure it won’t take too much of a leap of imagination to work out the name. It houses a number of concessions and has a wide range of different brands on offer. Indeed it recently merged with another equally ubiquitous high street retailer.

There were a lot of staff about, but oddly many of them appeared to be cleaning staff. They were adorned with Hi-Viz jackets and were busy with cleaning tools. It seemed to me to be an odd time to be cleaning as the store was fairly full of potential customers. I’m assuming it was an outsourced company, but if it had been my store I wouldn’t have wanted to see them on the shop floor during trading hours.

There were numerous sales staff floating about, but it was difficult to get their attention. One of them seemed to deliberately avoid my gaze. I have to say I’ve had this experience in the past in these stores, and it was a behaviour they were at one time famous for. I understood it had been ‘trained-out’ of staff after an extensive re-branding effort a few years ago. Maybe this guy had missed the seminar.

Technical Problems

Many of the products on sale had a demo facility, which was a great idea, except for the fact that most of them appeared not to be working that day. When I finally did manage to capture a member of staff they explained that they’d been having technical problems, so perhaps I just picked the wrong time. Once we did get some of the demonstrations going they were generally a good sales tool.

I must admit I wasn’t particularly impressed after my visit and did notice a customer satisfaction button by the door on the way out. I’ve noticed these are becoming more popular now in larger chain stores, although I suspect the data they provide will be about as qualitative as badly implemented footfall counters. On this occasion it was placed slightly behind the door so I’m not sure many customers would have seen it anyway. Perhaps an indication that the store staff were not particularly keen to see them use it.

I’d previously seen improvements in this company’s customer service performance so it was a surprise to see they’d started to slip back into their old ways. Perhaps having less competition leads to complacency.

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ShopperTrak says:

• It would be interesting to use heat maps or beacons to map out key areas and understand which concessions are drawing in shoppers. By doing so, retailers can gain insights into the customer journey and how shoppers are moving around the store, as well as store layout, staff allocation etc.
• An understanding of your busiest periods means that retailers can use their least busy times to carry out staff training and cleaning for example.

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“Take me to your checkout!”

So there you have it. Smart gizmos not always being sold in a particularly smart way, which considering we’re talking about highly advanced products seems something of an irony.

I was at a conference a few months ago where the concept of robot salespeople was being pitched. It’s not as outlandish as you might think either. These robo-shop-assistants were based on a Japanese designed personal helper droids intended as home help for infirm people. Apparently they cost around a thousand dollars and are easily re-tasked to the world of retail. Maybe we’ll see these in our high street stores in years to come, and I think it would be a good bet that the first place would be in a technology store.

I’m not sure if that says more about retailers than it does about the evolution of artificial intelligence. But as I saw on my travels around mechanical Mecca, there may well come a time when it will be difficult to tell which gadgets are for sale and which are doing the selling. In some instances I don’t think that would be a bad thing.

For more information and insights from Shoppertrak, click the logo below and subscribe to my blog for future posts from The Undercover Analyst.  I could be coming to your store soon!

Our Willy Wonka Chancellor Feeds Us More Fudge On Business Rates

Six and a half years after promising to reform the UK’s arcane business rates system, Chancellor George Osborne announced some sweeping changes at the Conservative Party conference on Monday.

However, instead of a carefully thought out progressive revision of local business taxation, we had yet more fudge from a Willy Wonka chancellor, eager to impress the party faithful with a plan so fiendish even Blackadder would blush at its audacity.

Currently business rates are levied by central government and collected on its behalf by local authorities who then pass the money to the Treasury. A portion of this is subsequently returned to councils to fund local services. This is the process of the Uniform Business Rate system, or UBR, a scheme instigated by Margaret Thatcher, partly with the intention of evening out disparities between richer and poorer areas of the country and re-distributing that wealth more fairly. Yes, even Maggie was a little bit commie on the quiet.

The problem in recent years though has been that rates have sky-rocketed in line with the rental valuations to which they are inexorably tied. The retail boom in the early part of the new century drove landlords to expect more and more returns on property. With large, heavily-leveraged retail chains eager to stump up ridiculous amounts of rent to be in key locations, the market mushroomed.

Consequently business rates have generated massive piles of wonga for central government and successive chancellors of every hue haven’t exactly been itching to relinquish the embarrassment of riches they’ve had bestowed on them. Indeed in 2012 alone, £350M was added to the rates liabilities of businesses amidst one of the worst recessions on record. During the last parliament the business rates take ballooned by over £1bn and the situation has been further exacerbated by the arbitrary postponement of the regular 5 yearly rating revaluation which should have taken place this year.

Pressure has therefore been mounting on government from businesses and retail campaigners like myself to do something about the damage this system is wreaking on our local high streets. This reached something of a crescendo prior to the general election, when once again the Conservatives promised that improvements would be made, even though they’d singularly dodged the issue throughout the previous five years.

So it was surprising that there was scant mention of rates in the emergency budget cobbled together by Osborne just after The Conservatives shock victory in May. I think I now we see the reason why. He’s obviously confused his party conference with budget day.

Devolution Illusion

Rather than kick this thorny little ball into the long grass for a few more years, Gorgeous George included in his keynote speech the wizard wheeze of passing the problem back to local councils under the guise of localism. The plan is simply to abolish UBR – the one part of the current regime that actually has any merit – and allow councils to hang on to all the money they collect from local businesses, regardless of the disparity that will result.

Apparently eschewing any further rounds of tokenistic consultation with business leaders, he’s neatly avoided central government having to find a solution to the whole soggy mess. In a move that sounds like it was thought up after a particularly good session in the House of Commons bar, he’s dropped the problem into the lap of local councils and walked away. Bang! Sorted!

However, Osborne’s claims about the benefits of his grand idea show just how staggeringly little he understands about the way the system actually works. Something that’s probably a teeny bit worrying coming from our Chancellor, considering we’re talking about a major plank of our national fiscal structure.

Bold Claims

He claims that giving Local authorities the power to reduce rates will help them attract new businesses to the area. In this bold statement he seems to be lamentably ignorant of the fact that councils have had the power to reduce rates since the Localism Act was introduced by his government in 2011. But like so many of these devolution illusions, giving people the ability to do something doesn’t mean they can actually do it.

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He’s dropped the problem into the lap of local councils and walked away. Bang! Sorted!

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Most councils struggle on the budgets they have already, any decreases in rates payments have to be taken out of that already dwindling sum and so hardly any have availed themselves of their new powers. Sweeping away the last vestige of Thatcherite socialism will only serve to exacerbate these problems, not make things better.

The Chancellor also seems to be unaware of the fact that empty properties still attract a rates liability. Landlords continue to pay rates on voids with only a small amount of relief in the early stages of a vacancy, so there’s little incentive for councils to reduce rates on empty properties. A problem that I once tried to explain to our erstwhile minister for the high street, Grant Shapps, without much success. It appears that obliviousness to the principles of local taxation goes even higher than I thought. Which explains a lot.

Rates will therefore continue to be an unavoidable burden weighing particularly heavily on small retailers, especially as, under Osborne’s new scheme, it appears that central government will still be setting the national levy as it does now. I say ‘appears’ as the details seem to be thin on the ground right now. Perhaps George lost the fag packet he wrote them on somewhere between the conference podium and the bar.

There is some talk about a system of re-distributing funds between richer and poorer councils, but again there are not many specifics beyond the idea that city councils who agree to have an elected mayor will be allowed to impose small additional levies for infrastructure projects, again something they can already do now.

There may be some scope for individual councils to adjust liabilities between different types and levels of business, but without the ability to increase rates on others beyond government limits, that will only work in one direction.

Rich and Poor

Well heeled and over-subscribed areas like London’s West End will reap huge rewards from this new regime, hanging on to far more money than they ever received in government grants. But they’ll have little reason to reduce rates liabilities. They will simply, and sensibly, bank the extra cash for a rainy day.

Meanwhile poorer authorities will continue to languish in the doldrums. After all, why would anyone want to set up business in a depressed area that is destined to become even more dilapidated as council budgets are swept away in the dust of the government’s on-the-hoof policy making?

With the balancing principle of the UBR gone, richer areas will become even richer and the poorer even more impoverished. Most councils will probably just hope that the amount they receive in newly retained rates payments will at least offset the amount that will be missing from their government grant. But in the most desperate areas that’s likely to be a forlorn hope. It’s a quid pro quo where the quids will only be going one way.

If nothing else I suppose Osborne has at least affirmed early on in this parliament that we’ll see just as little meaningful progress on local taxation reform as we did during the last. And while he basks in the glory of grand gesture politics and party political back-slapping, it seems our high streets and local services will have to continue to cope with this government’s ignorance and avoidance of the real issues for at least another 5 years. A prospect I doubt many people will find particularly sweet.