LP Magazine EU






Retail Environment

The State of Independents

Why Independent Businesses Are the Backbone of the Economy and the Wider Retail Family

To use a British high street metaphor, the different extremes of the physical bricks-and-mortar retail sector and their multi-level responses to the daily risks they face resemble bruised or fractured family relationships and rivalries compounded by having a less-than-supportive—some would argue dysfunctional—relationship with the less-than-paternal powers that be in Government and law enforcement.

At one end of the scale would be the large, national multiples, the older, more mature, and resourceful sibling protected by legions of risk experts with national and international health and safety, loss prevention, and asset protection teams. Not to mention fraud analysts “watching the store” as far as their online exposure is concerned.

At the other extreme sits the convenience sector that could be viewed as the smallest, more vulnerable child, arguably most in need of the parental protection. Both parts have responded to what they see as absent parenting policing and business crime neglect by developing loud lobbying voices through bodies such as the British Retail Consortium (BRC), the Association of Convenience Stores (ACS), and the National Federation of Retail Newsagents (NFRN).

Both have successfully raised the volume over the increase in violence and aggression, particularly throughout the pandemic, by capturing crime data among their members and feeding it back to Government and law enforcement in response to the Home Office’s various calls for evidence as a data-driven mechanic to curb the problem. However, the figures may not reflect the true crime picture because of the endemic under-reporting of business crime. 

Under-reporting is an issue the sector and the National Retail Crime Steering Group (NRCSG), headed by Crime, Policing, and Fire Minister Kit Malthouse, are trying to address in moves that could bring tougher sentences against those who abuse store staff, although not at the same level as the Protection of Workers Act adopted into law by the Scottish Government in August last year.

But is it true that the family member who shouts loudest, gets heard the most? Can strong words, softly spoken, have an impact?

Independent Retail Sector

To this question, what about the independent sector, the so-called middle child in this familial tableau? According to many psychologists, middle-child syndrome is a real condition where a firmly held belief that the second of three siblings is pushed out and often ignored or at least not prioritised in the same way as the firstborn or the youngest. This, depending upon the middle child’s response, can be a defining moment in their future development. They can choose to play the victim, or they can turn the condition to their advantage by becoming ever more resourceful. Many choose the latter approach by simply “getting on with the job at hand.”

This approach is very much the reality for those in the independent retail sector. Many are entrepreneurial spirits whose business ethos is, to put it simply, the essence of independence—it is not a job, but a lifestyle choice, a passion or a vocation requiring every waking hour to make it succeed.

In the autumn of 2021, there was a national advertising campaign for the spirited self-employed that focussed upon the “upstart start-ups.” They are often business disruptors whose embryonic independent enterprises had turned their ideas, innovations, and artisan dreams into a daily reality, partly facilitated by the pandemic and furlough schemes enabling them to take stock of their lives at a time of nationwide and individual existential angst. The theme of the television commercial for Virgin Money was that two thousand upstart businesses get off the ground every single day and, if they all waited until they were ready, they may never do so.

Despite the pandemic, there was an air of optimism floating down the high street that, according to the media, was flatlining on its death bed. It had suddenly become cool to be an independent business—an indie—as data published in mid-2021 revealed that the independent store market returned to growth in the first half of last year for the first time since 2017.

The dictionary definition of the word “independent” offers a rather one-dimensional interpretation—the “freedom from outside control” or “not being dependent upon others for livelihood or subsistence.”

But the reality is different again. It is about the cult of individuality and making a difference and a statement on the high street and not following the crowd and the homogenisation of the retail landscape. Market and destination towns like Totnes in Devon, for example, have successfully fought off the multiples moving in in favour of their own brand of retail personality that is seen as more reflective of the customers who come through the door. A few years ago, the picturesque Totnes, which nestles on the banks of the River Dart, successfully and famously blocked Costa Coffee from its famous Fore Street frontages, a decision the coffee giant gracefully recognised and accepted, although a branch of Coffee#1, owned by the Caffè Nero chain, has since managed to gain a rare foothold.

But it has generally been good news for this new state of independents with a net total of 804 locally run convenience stores, barbers, bakers, cafés, and fast-food joints opened nationally in the first half of 2021, according to the review of the market by analysts at the Local Data Company (LDC).

LDC said independents had benefited from Government support measures, such as business rates relief and furlough schemes, which had enabled them to remain open and capitalise on cheaper rent deals from landlords as their bigger rivals stumbled.

In these figures, growth was mainly driven by food retailers such as convenience stores, grocers, and takeaway and cafe operators.

In contrast, the figures revealed that there was a significant reduction in the number of chain store units, which saw a net loss of 5,251 in the six-month period. This was an improvement on the figure for the first half of 2020 but significantly higher than pre-pandemic losses.

As a result of the reduction in multiples, independent occupiers have had access to an increased volume of vacant units, often with attractive deals from landlords including rent-free periods and capital expenditure contributions to encourage uptake of empty units.

LDC Commercial Director Lucy Stainton said, “Independent operators benefited from the volume of available units, many of which come with attractive deals from a new market of shopping centre landlords who are now looking to the independent sector to fill the significant number of stores being vacated by chains.

“For the first time since the onset of the pandemic, there has been some cause for optimism when it comes to the performance of our high streets,” she added.

As mentioned earlier in relation to the critical infrastructure of independent businesses, there are no soft landings in the form of risk departments—loss prevention, health, and safety—with the owner managers multi-tasking many challenges, from crime prevention and detection to keeping the roof over their heads and the lights on during a time of supply challenges driven by Brexit and COVID-19.

British Independent Retail Association 

In the midst of all this turmoil, an organisation that has represented the independent sector for more than 120 years has remained sanguine to the challenges its four thousand members face. The British Independent Retail Association (BIRA), based in Birmingham, looks after the interests of the myriad of independent traders. From artisan start-ups to small department stores covering sectors including fashion, hardware, DIY, cook shops, hairdressers, and hospitality, BIRA holds a mirror up to the warts-and-all face of the British high street.

Like the BRC, ACS, and the NFRN, BIRA is a member of the NRCSG and also lobbies Government across a range of impacting factors, of which the increase in violence and aggression is only one element.

In July, the organisation was a co-signatory to a letter alongside the ACS, BRC, and big-name chains including Aldi, Asda, WH Smith, Waitrose, the Co-op Group, Sainsbury’s, Amazon, ASOS, Tesco, and Morrisons to the prime minister, calling on him to support an amendment to the Police, Crime, Sentencing, and Courts Bill that would tackle escalating violence and abuse against retail workers.

However, although this part of the bill was rejected last summer, the House of Lords is still to vote on an amendment that states that the courts must treat assaults committed “against a person providing a public service, performing a public duty, or providing services to the public” as an aggravating factor, which, although a step forward, does stop short of the changes in law introduced in Scotland.

Andrew Goodacre, BIRA’s CEO, said, “This is so disappointing—all I can suggest is that these MPs work in a shop for a weekend to experience the issues at first hand!”

Crime Impact

Independent stores do experience violence and aggression, but nowhere near the scale experienced by larger stores. To this point, the organisation interestingly carried out its own crime survey during 2021 but chose not to publish its findings wider than its own membership.

“Crime is not the same in the independent sector as it is for large multiples. Whereas there are thousands of people going through Sainsbury’s on a daily basis, many of our members are dealing with double figures,” said Andrew.

“Most of our businesses are in prosperous market towns where members tend to know all of their customers and form part of the community, which was why we decided not to release the figures.

“We are not immune to crime, but we don’t see it as much. Where we do see it may be in the food and drink stores where there are age-related sales restrictions that can be more challenging environments. There has also been pandemic-related conflict over face coverings and occupancy levels in smaller stores, but this conflict has been more likely to be directed from one customer to another rather than directed at the staff.

“On the whole, it would be fairer to say that we are more likely to experience rudeness from customers than violence and aggression. It still occurs, but perhaps not to the same extent,” he added.

BIRA has attempted to insulate its members against retail crime through engagement with the NRCSG and the relaunch of the #ShopKind campaign that encourages customers to think about and moderate their behaviour towards shop staff. It has also been active in discussions with Police and Crime Commissioners (PCCs), and mayors across the UK, and has maintained a strong link to Policing Minister Kit Malthouse.

The organisation is pragmatic. Andrew’s more nuanced approach recognises the wider challenges across the UK, including the fact that Scotland has taken the issue of violence against store staff more seriously. “It is a shame that the four nations are not aligned on their approach to this issue,” he said.

“We all recognise the solutions to business crime, but in terms of policing it is about time and prioritisation—there is not an infinite number of Police officers to deal with incidents on the high street, but we have to get across the message that there is no such thing as a victimless crime.”

Missing Shock Absorbers

As smaller, multi-tasking entities, independent stores do not have the luxury of shock absorbers, the insulation provided by the risk teams of larger multiples, so they feel every commercial bump in the road. The same teams minding the stores are also often the face of the online fulfilment aspect of the business.

There are also COVID legacy stresses such as higher levels of debt being carried by independent businesses—up to five times what it would have been pre-pandemic, according to BIRA.

“This is particularly worrying at a time of a higher inflationary period with many businesses simply feeling drained and worried about the future—it is what our members talk about all of the time,” said Andrew.

“Whereas members are seeing double-digit increased costs in the supply chain, they are only able to pass on single-digit increases to their customers. Coupled with the increased costs of energy, 2022 could be even tougher with the cost of business sitting at £30,000 more than it was this time last year.”

Christmas 2021 provided the litmus paper test for many independents as they wrestled with the need to boost sales at a time when the nation was looking at increased restrictions because of the growing omicron variant.

Whilst many multiples took part in the Black Friday sales, BIRA and its members took an opposing stance where most members refused to slash prices within their stores over Black Friday. “Black Friday does not suit the independent sector at all,” said Andrew.

“From our research, last year, around 85 per cent of independent retailers said they would not participate in Black Friday, which was higher than ever before. We have always known that independents don’t see much value in this event.” 

This is hardly likely to change during the autumn of 2022 as the notion of large-scale seasonal discounting ahead of the busiest season of the year is completely at odds with the philosophy of most “indie” brands.

“The main reasons for them were that they either don’t agree with this idea, there are higher prices, and there is also insufficient volume to make the large discounting work. They also need to preserve their margins,” said Andrew.

Fluid Business Models

But this did not mean that independents were averse to adapting to a fluid and mercurial marketplace, and many were well set up to take full advantage of social media platforms to promote the “shop local” narrative and tap into a wider conversation, which included green messaging, around supporting local retail eco-systems.

“Independents changed their business model during the pandemic by promoting themselves more through social media and implementing services such as click and collect. This creativity is still important, with shoppers looking to shop local and spend money in their local community,” he added.

“The pandemic has been very difficult for those retailers classed as non-essential. In the past two years they have suffered lockdowns, weeks of restrictive regulations, and are now just starting to build back their business.

“At the start of the pandemic, we saw customers turn to online providers because there was no other choice, and the large companies such as Amazon were the big winners. Whilst we, in some ways, admire what Amazon does, the pandemic simply highlighted the unfair playing field between high street shops and online retailers.

“I am pleased to say that indies are always resilient, and retail sales figures show that online penetration fell again in the autumn to 27 per cent, from a high of 59 per cent. This is a sign that shops are fighting back and regaining the confidence of the consumer. However, more needs to be done by the Government to enable the physical stores to continue to compete, and the best way would have been to completely reform business rates. Sadly, that well-known problem has been kicked into the long grass yet again,” he added.

Neartoo Online Marketplace

BIRA has, however, also taken the fight to the online services with the launch of its new online marketplace Neartoo, a collaborative platform providing independent retailers with a new, cost-effective way to sell online, helping them build their presence both locally and nationally.

The UK-wide platform is open to all types of retailers and is owned by indies, exclusively for indies, and will operate at significantly lower sales commission than its competitors.

Developed in the wake of the pandemic, which resulted in at least one in five independents closing their doors for good, it offers independent businesses the chance to rebuild and grow on a platform designed for them. Its benefits include a lower commission and minimal transaction fees and wider synchronisation with open-source e-commerce platforms Woocomerce and Shopify.

“BIRA wants independent retailers to succeed and that is why we developed Neartoo, an online trading platform that allows indie retailers to sell online, arrange click and collect, and really engage with local customers—and all at a lower cost than any other similar marketplace by charging only 7 per cent commission,” said Andrew.

“We have made it easy to use and indies can even transfer their information from an existing platform like Shopify to our Neartoo to help retailers to sell more,” he added.

The state of independents is currently stable and has found its niche in what is a nuanced retail family. Like the Virgin Money TV commercial suggests, upstart start-ups are resilient, used to being knocked down so that they can get up and rise to the next challenge. 

Independents are the poster boys and girls, the quieter retail family members who simply refuse to give in, irrespective of what the world throws their way in terms of supply challenges, inflationary pressures, COVID, and crime. Independents are the brother you go to for inspiring advice and the sister who has your back, even when it is against the wall—it is the family values we have lost sight of but never left us, or as the advert says: “It’s in our DNA.”

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