RURAL RETAILER Spring 2014

Rural Retailer www.ruralshops.org.uk

Issue 24 l Spring 2014

The Journal of the Rural Shops Alliance

’s ive ut e ec ur Ex fut ief he Ch n t er o ok ws Bo vie

■ Impact of recent floods on village shops ■ Upselling - how to improve impulse sales ■ The greetings card market

Your contacts... ew rn ou ess te dr no ad s e al ea st Pl po

for more information and news...

● Rural Shops Alliance 20 Garland, Rothley Leics. LE7 7RF ● Tel: 01305 752044 ● E-mail: info@ruralshops.org.uk ● Website: www.ruralshops.org.uk

Contents...

In this issue...

3 5 5 6 10

● ● ● ● ●

12 ● 14 ● 15 ● Cover photo: Amelia and Zoe at Hook Norton Village Stores

19 22 25 28

● ● ● ●

In my opinion, By RSA Chief Executive Your Action Checklist Free Training Materials from Store is the Core Profile of Hook Norton Village Stores Bookers Chief Talks about Growth outside the supermarket sector The Power of Upselling MPs Report on the Retail Sector RSA Views: Sales of alcohol at less than “cost price”, Statutory Sick Pay, Business Rates, National Insurance, Workplace pensions, National Minimum Wage Recent Flooding – Impact on Retailers Running two shops Talking to Other Retailers on Facebook The Greetings Card Market

RuralRetailer ● Published by The Rural Shops Alliance. ● Printed by: Russell Press, Nottingham. ● Design: Kavita Graphics. dennis@kavitagraphics.co.uk

2 RuralRetailer ● Spring 2014 ● Issue 25

In my Opinion...

WILL YOUR BUSINESS BE WORTH £1.5 billion?

The financial pages of newspapers have recently highlighted how quickly the fortunes of even the largest companies can change. For once, the news is not about Internet companies trading on ridiculous valuations.

George Osborne’s announcement in his budget that the rules governing pensions are to be radically changed has set the annuity market into turmoil, with some key players losing a high proportion of their value almost overnight. The world is an unpredictable place.

Changes in the grocery market have been less sudden but may prove in the long-term to be just as significant. The last few years have seen customers falling out of love with mainstream supermarkets. Morrisons in particular has moved from being a highly valued company to one whose stores commentators are now predicting will be sold off piecemeal to other operators. In this edition of Rural Retailer we have included the thoughts of Charles Wilson, Chief Executive of Bookers, which highlight just how much our world is expected to change in the next few years.

On the flip side of the coin is a company called AO (formerly Appliances Online) which despite only having been in existence for 14 years is now supposedly worth £1.5 billion and, according to its Chief Executive, has the potential to become nearly as big as Tesco in the next five years. And

this in a mature market such as the supply of white goods, in which one of the key players, Comet, has recently failed!

Many years back, one of my jobs working for a major supermarket chain was showing financial analysts round our stores and explaining the business to them. I can honestly say that their ignorance of the sector was truly impressive and my trust in their judgements would be very limited indeed. However, even if the valuation of AO is grossly overinflated, the fact remains that one dynamic individual and his team have created a significant player in their market in a remarkably short period of time and intend to go on growing at the expense of their competitors.

This highlights the importance of the individual.

For village shops, we know that the impact of the proprietors are immense. However, a lot of brilliant shop owners remain in the one store, rather than seeking to use their talents and energy to expand elsewhere. I hope that our article on individuals who have taken the plunge and taken on further premises will provide food for thought – are there any shopkeepers out there up for this kind of challenge?

Issue 25 ● Spring 2014 ● RuralRetailer 3

Our Partners...

To obtain further information on any of these companies, please contact the RSA at info@ruralshops.org.uk or phone 01305 752044 4 RuralRetailer â—? Spring 2014 â—? Issue 25

Your Action Checklist for this issue...

p p p p p p

1. ACCESS AND USE FREE TRAINING MATERIALS 2. START ACTIVELY UPSELLING TO CUSTOMERS 3. REVIEW ALCOHOL PRICES 4. ENSURE SSP ARRANGEMENTS ARE IN PLACE 5. START PREPARING FOR WORKPLACE PENSIONS 6. SIGN UP TO THE RSA FORUM ON FACEBOOK

SEE PAGE 5 SEE PAGE 12 SEE PAGE 15 SEE PAGE 16 SEE PAGE 17 SEE PAGE 25

Free Training Materials...

In the last edition of Rural Retailer, we commented on the ending of the Store is the Core programme, funded

by DEFRA. As a legacy, a series of training guides and films are available online. These have been produced specifically to help the managers of rural shops and we would thoroughly recommend having a look at them.

They can be found at: ● http://www.storeisthecore.org.uk/ training-guides

● http://www.storeisthe core.org.uk/training-films We are currently trying to persuade DEFRA to support a follow-on programme. It would be very helpful to hear your views on this material and whether you found it useful.

Funded by:

● Please e-mail info@ruralshops.org.uk with your comments.

Issue 25 ● Spring 2014 ● RuralRetailer 5

Hook Norton Village Shop...

There’s more to Hook Norton than The decision to hand over a family business to the next generation is always a tough one. You want to be able to retire without worrying that all your hard work over the years will unravel; and you want to be confident that you haven’t handed over a ticking time bomb!

Timing is, therefore, all. Just a couple of years ago, the thought of taking on the challenges of the small family-run village shop in the heart of rural Oxfordshire, in the face of encroaching competition from the big supermarkets and their home deliveries might have made even retained firefighter Joe Williams quake in his size 11 boots.

But, after 25 years running the 7-day high street premises in Hook Norton, Tom and Gloria Williams are confident that now is exactly the right time to put the business into son Joe’s hands.

And it’s not just because they could do with a rest: the whole Williams family are convinced that village shops are coming back into fashion.

Gloria, Joe and Tom

The shop used to be three separate houses, making for a long disjointed sales area

6 RuralRetailer ● Spring 2014 ● Issue 25

“The big supermarkets which once forced the closure of independent shops are now themselves facing big problems. We believe it’s because people are thinking more carefully

By Beth Whittaker

the Famous Brewery Extensive off licence range in a prominent location

At 33, Joe admits that although he is relishing the challenge, he and his parents have worked so well together for so long, it’ll take a while to get used to making decisions on his own.

“We’ve all had defined roles, and we’ve worked together brilliantly over the years” he says.

“Luckily, we have some wonderful staff, including someone with 15 years’ retail experience at Marks and Spencer, so I’ll have a lot of support – even though mum and dad will no longer be involved in the day-to-day.”

about where they shop and what they buy,” says Gloria. “Even with supermarket deliveries, they only manage to 85 per cent fulfilment. We get so many customers in our shop because the supermarket delivery missed out items - we think rural shops are ready to come into their own once again.”

“The current issues with the supermarkets give us confidence that Joe will be able to continue the success of this place, after we retire,” adds Tom. “We’ll be happy to stay in the background; Joe has learned the trade well – he’s been helping out since he was nine! My father kept interfering in the farm business even after he retired, so I’m determined not to do the same!”

The floral business is very unusual

Tom and Gloria bought the shop, housed in a quaint 17th Century listed building at the heart of the village, at the end of the 1980s when Tom’s family market gardening business was hitting hard times.

And they have never regretted the decision.

Even the challenge of presenting enough stock in an awkward and constricted space - basically three small one-room cottages knocked together – has never dampened the family’s enthusiasm and determination.

And Joe already has ideas to make small changes to improve the shopping experience, building up to a potential modern extension at the rear of the building. “The layout is the best we can hope for at the moment. I’m not going to make changes for the sake of it, but I want to make the shop more inviting from outside.

Longer term, I will want to extend the shop area though.

“The Parish Council has identified the shop as an ‘asset of community value’ – basically a village jewel – so I’m confident we will get the Council’s support to make the shop as

Issue 25 ● Spring 2014 ● RuralRetailer 7

Hook Norton Village Shop...continued

There is an excellent display of fresh produce, using old wooden crates to create interest

Recently installed chillers

sustainable in the longer term as possible,” he says, and he should know, as a former chairman of said Council.

the village – it was controversial, but they weathered the storm, strongly believing that, in order to avoid becoming retirement villages, rural communities need the lifeblood of new, and younger, residents. Unusually for a village shop, the enterprise includes a floristry business, set up by Tom (the creative one, according to wife Gloria!) who took himself off on floristry courses to learn the trade about eight years ago, and now has a good trade for weddings and funerals. That part of the business will continue to be run by the family’s part-time florist, as Joe is not the flowery type.

And the family are even pretty sanguine about the fact that they aren’t the only shop in the village – with a Post Office just up the street.

“We don’t really regard them as competition,” says Gloria. “There’s enough business for both shops. They have tried to draw customers away, but we haven’t noticed any change. And we have been here for a long time, building up a strong reputation and putting a lot back into the community.”

The family recently won planning permission to build homes on land they owned at the edge of

Tom’s background in market gardening also means the shop has built a solid and well-deserved reputation for its fresh fruit and vegetables, sourced locally as much as possible, as is their

The shop is really long

Soft drinks and confectionery are good sellers

8 RuralRetailer ● Spring 2014 ● Issue 25

Good support for Nisa promotions

Modern flooring provides a clean look

meat, farmed just five miles away. Gloria – who looks after the financial side of the business – also takes particular interest in the shop’s wine offer.

“Walking a dog is a good way to meet locals as well – people are more likely to talk to you about ways to improve the shop when you chat to them while out walking! At the heart of a successful local business is a welcoming smile and a willingness to get involved in the community.”

“As a Nisa store, we get some excellent special offers on wines. It’s a tough time having to taste them, but someone has to do it!” she laughs. “We think we have the balance about right for the size of the store, and we know what our customers want. Obviously, the shop will need to expand to give more sales space, but that’s something Joe can get his teeth into when the time is right.”

The shop recently received a 5 star health and hygiene ‘score on the door’ and that has boosted trade. “The news travelled incredibly quickly around the village – people have popped in whom we haven’t seen for a while,” says Tom.

Hook Norton is unusual for a village of this size in having a separate post office

Certainly it seems Joe has made his mark on Hook Norton. As well as leading the local awardwinning firefighting team, he became a Parish Councillor at the very young age of 21 and took on the chairmanship when he was just 24. He was a school governor for 12 years, three of those as chairman.

Maybe it’s all that time sitting in committees – helping bring people to consensus - which has stood him in in such good stead running the shop in partnership with his parents.

But it will be his experience as a committee chairman which will help when he takes over the family business in a few months’ time.

Beers from the local Hook Norton Brewery

Issue 25 ● Spring 2014 ● RuralRetailer 9

Charles Wilson

Growth outside the superma This article is much abridged from the City Food Lecture delivered by Charles Wilson, Chief Executive of Bookers. We are very grateful for his permission to reproduce his work. A full copy of his lecture can be found on the RSA website www.ruralshops.or.uk – it is well worth reading.

The first self-service grocery store opened in Memphis, Tennessee, in 1916. Called Piggly Wiggly, it allowed customers to browse aisles and then pay a cashier. In the 1950s, supermarkets reached the UK when Sainsbury opened its first self-service store in Croydon. By 1968, Tesco had launched its first superstore in Crawley. By the 1980s, supermarkets and then hypermarkets had come to dominate the UK retail scene. Supermarkets worked perfectly for the baby boomer generation. A family could do a weekly shop by car, saving time and money.

The consumer, suppliers and the property market helped to push the rapid expansion of the sector. By 2012/13, UK supermarkets and

Where it started, the first self-selection store – Piggly-Wiggly in Memphis

10 RuralRetailer ● Spring 2014 ● Issue 25

hypermarkets dominated the retail scene with £107billion of turnover.

But the world is changing. After 60 years of supermarket expansion, growth in the UK is switching to other formats. We are seeing the hare become the tortoise:

% change expected in next 5 years Eating out of home Convenience stores Discounters Online Supermarkets and hypermarkets

+18% +29% +65% +98% +8%

Source: IGD

The convenience sector overall is doing well and is forecast to grow at a far faster rate than the supermarkets. Although multiples are opening more local stores, these are taking sales and customers from their larger stores and shifting them into convenience locations. As Tesco and Sainsbury’s come into local communities, so they free the consumer to shop around. We can also see the rapid growth of the discounters.

Over Christmas, more than 50% of the UK population shopped with one of the discount chains.

Sales in Aldi were up 31% in 2013, for Lidl they were up 12%. In December 2013, the discounters put on higher growth figures than the supermarkets. This is important, because Christmas usually sees consumers trading up, but this year they were prepared to go to the discounters. Alongside this, aspirational retailers have also been doing well, with Waitrose and

rkets

Home deliveries - predicted to expand considerably

Marks & Spencer’s both showing good increases. Farmers markets, farm shops and deli’s are also flourishing.

Technology is also bringing new players with new ways of thinking into the grocery sector. In the UK, Amazon is only selling ambient groceries but in Seattle they offer a full fresh and frozen offer, bringing a fresh approach to the grocery trade. The growth of foodservice, convenience, discount, new formats and online is putting huge pressure on the supermarket model. Combined, Tesco, Sainsbury’s, Morrison’s and Asda have spent approximately £12 billion of capital expenditure in the UK in the past three years. Despite this, their combined market share has fallen by 1% and their profits have dropped by about £100 million per year. The supermarket is an increasingly challenged economic model as growth shifts elsewhere.

In this new grocery landscape, there will be some huge opportunities for astute grocery suppliers. Suppliers need to go where the growth is. They need to avoid being “ground down” by supermarket chains that are no longer able to provide growth opportunities. Suppliers are increasingly able to sidestep the supermarkets and to really engage directly with the consumer, through QR codes and other on pack technology. For brand owners, investing money in the consumer pays a much better return than investing in the large supermarket chains.

In this new world, choice for consumers will continue to proliferate. Take milk as an example. Back in the 1970s, you could choose between gold or silver top milk. Now consumers can buy whole, semi-, skinned, fat-free,

Cravendale, soya, almond, coconut etc. There are hundreds of milk SKUs and this choice will continue to expand. No retailer can stock all of this long tail of products. Suppliers need to be smarter at locating the right product into the right channel – catering, convenience, discount etc. – if they are going to win in this new world.

Suppliers will have to refine their trade strategies, but the rewards will be substantial as there is plenty of growth outside of the supermarkets.

The RSA view Charles Wilson and Booker are clearly determined to be one of the winners as business moves into new channels. For rural retailers, the picture predicted is quite nuanced. Clearly the expected growth in local convenience shopping is good news. However, independent retailers find it very difficult to match the sophisticated online presence of the larger competitors, or indeed the prices offered by the discounters, and so may not be able to fully grasp the opportunity.

On balance, the end of the decades of supermarket growth and dominance represents a real opportunity for many rural retailers. The rewards will undoubtedly go to local retailers who are able to offer the standards, range and opening hours that customers demand, whilst the opportunity will largely pass by shops that look and feel as though they are living in the past.

Issue 25 ● Spring 2014 ● RuralRetailer 11

Do you want fries with that?

The power of Up Getting new customers through the door is hard. The easiest way to increase sales and profits is to sell more to your existing customers. Upselling simply means encouraging your customers to buy more than they originally intended. Upselling is not about selling customers things they do not want, it is about bringing to their attention products that they might want.

According to the research agency him!, 14% of convenience store shoppers buy an item on promotion. However, no less than 36% were found to buy an item on promotion when they were told about it by store staff. Despite this, only 2% of convenience store shoppers said that store staff informed them about a promotion.

Successful upselling is very much about relationships between people. It must be done in a way that leaves both shop assistant and

The words that work (Examples of upselling) ■ Have you seen our offer on ... ?

■ Do you know about ... ?

■ We’ve got fresh ...

■ Would you like to try our new ... ?

■ This would go well with the item you are buying ... ? customer feeling comfortable about the transaction. This is particularly important for village shops, often serving the same group of loyal customers several times a week. A key element of successful upselling is staff confidence.

You yourself may be hesitant to ask your staff to do it, but in fact it can be a positive incentive and a way of pepping up what can be a fairly routine job for staff. It can make the workplace more interesting and provide a challenge. Don’t get them to work from a script but rather encourage

You want me to do what?!

(Why don’t more staff upsell?)

Promotions by the counter help up selling

12 RuralRetailer ● Spring 2014 ● Issue 25

■ Not trained to do it ■ Haven’t thought about it ■ Don’t know what to sell ■ Think it’s cheeky ■ Think it upsets customers

By Trevor West

selling them to have a natural conversation with customers. This is an area where you have to lead by example; most staff need to see the boss upselling before they will be confident doing it themselves. You may be lucky enough to have a natural salesperson on your team but most people need to be helped along the way.

Talking to customers (It’s not difficult!)

■ Most customers do not have a clear idea of what they want ■ Upselling makes it easier for them to decide what to buy ■ Upselling provides a service ■ The customer is already at the counter – they are already buying

Ensure the store is laid out to help the process.

Make sure that lines you want to sell are in your promotional display space on the counter or at least close by. It is far easier to sell lines that are close at hand and visible from the counter.

Involve staff in deciding on what to promote to increase their interest and commitment.

This is an area where nothing succeeds like success. Help more hesitant members of staff to get into the swing of it and once they have succeeded a few times, then their confidence

Trust me; I know what I’m talking about (Confidence is key!)

Do you want fries with that?

(What to promote) ■ Lines on special offer ■ Seasonal products ■ New lines ■ Products linked to events such as Easter or Mother’s Day ■ Staff suggestions – they will be more committed to them

■ Staff should fully understand the product - what does it taste like, what does it go with, how would you cook it, how does it fit with the product the customer has just bought?

■ Staff should experience the product for themselves ■ Train staff to recognise selling opportunities and how to exploit them Issue 25 ● Spring 2014 ● RuralRetailer 13

Do you want fries with that?...continued

will soar. A bit of friendly rivalry between staff can be very positive but at the same time it is important to ensure that genuinely diffident assistants do not feel left behind.

When the average store customer is only buying a few products, encouraging the purchase of one extra item can have a huge impact on the bottom line. You do the maths – if one fifth of your customers bought one extra item, what would that do to store sales and profits? ● And now you have enjoyed this article, why don’t you follow it up with a visit to our very interesting website at www.ruralshops.org.uk

Do as I do, do as I say (Staff training) ■ Link upselling activity to measurable and achievable goals ■ Provide clear and fair incentives ■ Give regular updates on progress ■ Observe how staff handle upselling conversations and give feedback and praise ■ Celebrate success

Not a formula (How to do it) ■ Be specific – “is there anything else?” is not real upselling ■ Make suggestions to meet customer needs, based if possible on what they are already buying (probably not for condoms or a bereavement card) ■ Encourage staff to have conversations with customers, rather than using a script ■ Let’s staff themselves identify opportunities to upsell ■ Get the timing right – mention add-ons to customers after the purchase decision has been made but before they have a paid 14 RuralRetailer ● Spring 2014 ● Issue 25

MPs REPORT on the RETAIL SECTOR The House of Commons Business, Innovation and Skills Committee has recently published their report on the retail sector. The Rural Shops Alliance submitted written evidence to this enquiry and our Chief Executive gave evidence in person at one of their hearings. The committee is generally quite critical of lack of effective government action to support the retail industry. The committee's main conclusion is that there is a need for simple and decisive action to reform the whole business rates system. This is an issue that affects high streets more than rural stores. ● The full report can be found at: http://www.publications.parliament.uk/pa/ cm201314/cmselect/cmbis/168/168.pdf

RSAViews Spring 2014

SALES OF ALCOHOL AT LESS THAN “COST PRICE” The Government’s Alcohol Strategy is intended to help problem drinkers whilst limiting its impact on responsible consumers. The new rules ban the sale of alcohol at below cost. This is defined very narrowly for this purpose as the value of the duty +VAT. This is intended to stop businesses from selling alcohol at heavily discounted prices, thus reducing excessive alcohol consumption and the crime and health issues linked with it.

The ban will be a new condition of the Mandatory Code of Practice and will apply to all premises with a licence to sell alcohol. If you sell a product below the permitted price you are in breach of your alcohol licence and could face prosecution or a licence review.

It is the responsibility of the premises licence holder to ensure compliance. Where local store managers are not responsible for pricing, responsibility lies with the relevant person in the company head office.

Examples of minimum prices drawn from the Home Office guidance are: 440ml can of 4% ABV lager £0.41 440ml can of 9% ABV lager £1.16 500ml bottle of 4.5% ABV sparkling cider £0.24 70cl bottle of 37.5% ABV vodka £8.89 75cl bottle of 12.5% ABV wine £2.41 (Duty changes announced in the Budget will slightly change some of these figures)

Multibuy and multipack promotions are still allowed but obviously the price charged must be greater than the total cost prices of the items included. Similarly, promotions that combine alcohol with other goods (e.g. meal deals) must have a selling price higher than the cost price of the alcohol component.

Discounts, whether for staff or as part of a coupon or voucher promotion, must not lead to alcohol being sold at below cost price.

Very few prices in rural shops are likely to be affected by these measures. They are more likely to affect silly supermarket pricing at Christmas and if anything are likely to lead to a more even playing field for alcohol sales at key times of year.

As such, we believe this measure will provide a modest benefit to most rural retailers as well as to society as a whole. ● Full guidance can be found in the Home Office document: https://www.gov.uk/government/uploads/ system/uploads/attachment_data/file/277201/ BelowCostSalesAlcohol.pdf

RSAViews

The Chancellor Giveth, The Chancellor Taketh Away ...

The government is making a significant number of changes affecting most rural retailers. This is a reminder of what shopkeepers need to be aware of and their likely impact on rural businesses. It is very hard indeed to say what the net effect of these significant changes will be, as they affect different businesses in different ways.

STATUTORY SICK PAY CHANGES From April 6th 2014, employers have no longer been able to recover from HMRC any Statutory Sick Pay (SSP) they pay out to their employees. The full cost of Statutory Sick Pay falls to the employer.

This change is a classic example of the government pushing more employment costs and responsibilities onto employers. It is a measure that will be just a nuisance to large employers but will have a dramatic impact on small companies unfortunate enough to be faced with the long-term sickness of a member of staff.

The business has to fund both the pay of the sick employee but also pay the wages of their temporary replacement.

Statutory Sick Pay was one of the bedrock components of the National Insurance scheme when it was first set up after the Second World War. The system has been in place for over 60 years, providing a real safety net for both employer and employee. This change is not helpful and we are very surprised at how little protest there has been to it. ● See: http://www.hmrc.gov.uk/payerti/ forms-updates/rates-thresholds.htm#10

BUSINESS RATES RELIEF In the Autumn Statement, the government announced that it would provide relief from business rates of up to £1000 for occupied retail premises with a rateable value of less than £50,000, for the next two years.

Details of how this will work in practice have just been announced.

This measure is superimposed on existing rate relief schemes, including small business rates relief, rural shops rates relief and Enterprise Zone relief. The new relief must be calculated on a day-to-day basis. It requires applicants to provide a European Union declaration to say that this measure will not push them over the de minimis limit for state aid.

Many rural shops are not eligible for this scheme, instead having to apply to their rating authority (district council or unitary authority) for rural rate relief. Usually the outcome for eligible businesses is 100% relief from business rates, but 50% is discretionary.

RSAViews NATIONAL INSURANCE Thousands of rural retailers should benefit from important changes to their National Insurance contributions. The government is introducing a new employment allowance. This is worth up to £2000 per year, with many businesses seeing their Class 1 Employer NI contributions reduced to zero. We are promised that the administration will be really simple for businesses to claim it. You should be able to do this using your normal payroll software through the real time information system. Further information and an employment allowance calculator can be found on the government's website.

This is a welcome move that that will save businesses money and hopefully reduce the amount of administration needed. However, government claims that this will lead employers to be motivated to purchase new equipment or technology or even take on additional

Authorities, with budgets under extreme pressure, are starting to review this cost more carefully.

Although any assistance for retailers is welcome, nevertheless there are few businesses for which £1,000 relief will make much difference. It is certainly not enough to keep a struggling business alive or to influence a proprietor to invest in new equipment or to employ a new member of staff. This tinkering around the edges and resulting increase in red tape highlights yet again the vital need for a total review of the business rates system. This has already been promised by the Prime Minister. Only in this way will it meet the urgent need for a simple and fair system for the 21st-century and this review needs to be started now”. ● See: https://www.gov.uk/apply-for-business-rate -relief/small-business-rate-relief ● https://www.gov.uk/apply-for-business-rate -relief/rural-rate-relief

member of staff seems fairly optimistic – £2000 is clearly welcome, but it is not a game – changer. It may go a fair way towards covering the costs of SSP – see above! ● See: www.employmentallowance.com/ allowance-calculator

AUTOMATIC ENROLMENT INTO WORKPLACE PENSION This is not happening immediately for the majority of small business but employers do need to keep track of when they need to act. ● See: http://www.thepensionsregulator.gov.uk/ employers/getting-ready-for-automatic -enrolment.aspx

RSAViews NATIONAL MINIMUM WAGE The government has confirmed that from October the National Minimum Wage will rise by 3% to £6.50 for adults. Although this is higher than we had recommended in our submission to the Low Pay Commission, nevertheless the cries of anguish following its announcement from both employer organisations and trade unions suggest that the figure may be a sensible compromise. It is less than the seven pounds figure favoured by the Chancellor, George Osborne. Like most commentators, we very much respect the fact that the commission is totally independent and attempts to carry out a very difficult job with considerable diligence.

However, we have been concerned that the Secretary of State for Business, Innovation and Skills, Vince Cable, asked the commission “to consider the conditions that need to be in place in order to allow a fast increase in the minimum wage taking into account the implications of unemployment”.

This request needs to be set against the context whereby pressures to pay the so-called “living wage” have been building, with the implication that the National Minimum Wage should be set much closer to this higher figure.

In March 2014, the Low Pay Commission published their response. It is an intelligent and well-argued document. It is set against a restatement of the role of the National Minimum Wage. This is “to provide a wage floor, in order to protect low paid workers against exploitation, without causing job losses”. The commission goes on to point out that “the minimum wage should support a competitive economy; be set at a prudent level; be simple and straightforward; and make a difference to the low paid”.

For most of our members, wages are a key part of overall costs. The Commission themselves estimate that in retail, wages make up 11% of turnover, a figure that is about right for many rural shops. Unfortunately, retail is a low wage industry, alongside activities such as catering and hospitality, hairdressing, cleaning, childcare and social care. The commission does recognise the key

importance of staffing costs to these industries.

The commission conclude that the key considerations that would lead to recommendations for a high increase in the National Minimum Wage are: ● an expectation that real wages generally will rise and continues to so in a sustainable way ● stable or rising employment ● an expectation of sustained economic growth ● evidence of conditions affecting the low paying sectors, such as the level of and outlook for consumer spending These are obviously eminently sensible considerations.

Along with other trade associations, we have emphasised to the Department for BIS that the independence of the commission is something we value very highly and that this is an area where political interference should not be countenanced. We would also look askance at any attempt to redefine the National Minimum Wage. If politicians want to increase wage rates in the economy generally, then other mechanisms need to be found. The National Minimum Wage must continue to do what it says on the can – it covers all parts of the country, all industries and is a minimum level. ● See: https://www.gov.uk/government/uploads/system/ uploads/attachment_data/file/292520/The_Future _Path_of_the_National_Minimum_Wage.pdf

The floods...

Behind the TV pictures

By Ian Upshall, Stoke St Gregory Village Stores The recent floods received a lot of media coverage, especially when a high profile politician arrived to survey the scene.

The disaster affected a number of village shops and we asked RSA member Ian

Upshall to provide the perspective from local shopkeepers.

The event certainly provided conclusive evidence, if such were needed, of the importance of village shops to the local communities affected.

The area affected by the 2014 floods in Somerset

caption: to be added

Issue 25 ● Spring 2014 ● RuralRetailer 19

The floods...continued Impact on business County-wide (Source: Somerset Chamber of Commerce Feb 2014)

■ £17,352 – average loss per company in finance and productivity in six weeks ■ £1.23M - combined loss to business ■ Trade down by 25% ■ 14% of businesses surveyed experienced power cuts ■ 10% of businesses surveyed lost telephone and/or broadband services ■ 40% of staff commutes affected ■ 30% of staff now have twice the normal commute distance ■ 44% of companies say employees are regularly late for work 10 business days

Impact on The Village Stores Stoke St Gregory ■ ■ ■ ■

Access denied to about 25% of customers School closure as a result of floods Massive demand for fresh foods Single access road via North Curry with tendency to flood ■ Two days when all vehicle access to village denied ■ Suppliers unable to reach shop due to floods and Police roadblocks ■ Takings about 20% down in four weeks after Christmas 20 RuralRetailer ● Spring 2014 ● Issue 25

Impact on The Village Stores Long Sutton Post Office and Stores ■ No actual flooding due to location ■ No trading days lost but reduction of 30% in shop and PO turnover ■ Absence of passing trade a major contributory factor (a bridge and golf course nearby have been closed for weeks) ■ Minimal problems with deliveries ■ Current situation becoming critical due to significant loss of trade ■ Threat to local employment ■ Some customers now travel 12-15 miles to the shop – was 1 mile.

■ Full extent of impact will not be apparent until after floods receded

Impact on The Village Stores North Curry Post Office and Stores ■ ■ ■ ■ ■ ■ ■ ■ ■

Stockroom flooded three times in 12/13 Freezers flooded but stock relatively unaffected Clean up operations costly and time consuming Loss of trade ‘from other side of Currymoor’ Post Office transactions reduced Supplier deliveries affected but not critically Customer travel affected impacting trade Flood prevention measures installed costing several hundred pounds Cause of floods – local drainage inadequate or poorly maintained/repaired

“Remember what punishments befell us in This world when we ourselves did not cherish learning nor transmit it to other men.”

Alfred the Great, who legend has it burnt the cakes in this area Issue 25 ● Spring 2014 ● RuralRetailer 21

Running two shops...

Is running two shops doubl or just double the hassle?

The vast majority of rural shops are run hands-on by their owners. Operating more than one store obviously presents its own problems but also provides opportunities.

The move from owner operator to becoming an owner manager is a big step – can you find people you can trust and then are you prepared to delegate to them?

Local children were making muffins for a school project, which meant flour and chocolate chips had almost sold out at Steve and Carolyn Ansell’s village shop. Instead of making a special journey to the cash and carry, Ansell kept the kids happy and put packs back on shelf in a matter of minutes – by bringing some in from his other shop.

As one of the small but significant group of rural retailers with two or more stores, Ansell – owner of Ansell Village Stores - benefits from having three shops in Bedfordshire (in Meppershall, Henlow and Shillington) and another in Pirton, Hertfordshire, all within five miles of each other so that a van can quickly make a trip round all of them every morning.

After working hard alone in their first shop, unable to take much time off, Ansell took the first big step. “We decided that if we bought another store we could employ people who could then cover for us – but then we thought ‘why stop there?’” he explains.

Business property expert Barry Frost, MD at Commercial Plus, says this is becoming an increasingly common decision. “There’s only so much you can turn over from a particular store because of the size of the population or location,” he says. “If you can’t increase the size of the shop, you can only increase profits by buying another store.”

Peter Gibbons outside his Siddington shop

22 RuralRetailer ● Spring 2014 ● Issue 25

The Association of Convenience Stores reports that one in five of its members now own more

By Helen Gregory

e the profit Lee McCrumblish

than one shop, and that it seems to work out well for most of them.

together – if someone needs covering it’s not too much of a drama,” says McCrumlish.

Ansell now has an army of part-time staff doing a few shifts a week, which means between them, they can always cover sick leave – although staff rotas can be a headache to organise now.

Obviously running two or more shops is easier if they are not too far apart. This certainly helps with logistics, but just because you have one

He adds. “It’s a sharp learning curve – you need to trust people and accept that they won’t do the job as well as you. “We’ve got a manager in each store working alternate three days on, three days off and I oversee both premises,” explains Lee McCrumlish, whose family has owned a Londis store in Ticehurst village, Sussex, since 1989.

They decided to branch out when a store became available in Burwash, five miles away.

“The managers look after the day-to-day stuff and can work in either shop as they are close

Oakley shop

Issue 25 ● Spring 2014 ● RuralRetailer 23

Running two shops...continued successful shop, it doesn’t mean you will have the same experience in another.

to roadworks or the weather - the other can take up the slack.

Peter Gibbons, who bought Siddington Convenience Store near Cirencester nine years ago, decided to take on Oaksey Post Office and Stores in 2012. It trades using the same VAT number, and both accounts are semi-integrated.

Gibbons admits it has been a steep learning curve, to appreciate the difference between the stores; Oaksey is in a more rural location and has loyal village customers who buy products such as whole chickens and aren’t as bothered about promotions, whereas that’s not the case in Siddington. “It enabled us to test the water with very little risk,” explains Gibbons, “however, it takes a long time to recoup your investment, as we’ve had to make a lot of changes to the shop and convert the part-time post office into a Post Office Local.”

Another benefit is that you are taken more seriously as a buyer and should expect better deals when buying in bulk from your cash and carry or symbol group. “Londis’s reward scheme is good for us and we can aggregate our spend – you get a better return,” explains McCrumlish.

However, Graham Brown of Blagdon Stores provides a note of caution.

Once you’ve forked out for any of this necessary equipment or revamp, with two shops, if one is going through challenging times - perhaps due

Jack Cohen set up his first market stall in 1919.

Further stalls followed, run by family members, but he soon took the key step of employing staff to run more of them. The rest is history; he combined the initials of his tea supplier, T.E.Stockwell, with part of his own surname, to form Tesco.

24 RuralRetailer ● Spring 2014 ● Issue 25

Even if a nearby community is desperate for you to take over their shop, the catchment still needs to be big enough to be viable. “The biggest challenge with a second shop, we found, was staffing; it was very difficult to find people who cared as much as we did about customer service and were up to maintaining the highest standards. The fixed costs are there from day one, wages, rent, rates, electricity, insurance, etc., which didn’t allow us the luxury of a “honeymoon period” to grow the business.

After two years we found that we were still spending a disproportionate amount of time on it, to the detriment of our main business. We never achieved any of the economies of scale we had hoped for through increased bulk buying, so in the end we decided to retrench back to just our original shop.

Frost at Commercial Plus believes it’s a great time to expand; banks are lending again, rents are not rising in many areas. “There’s an availability of affordable businesses out there and buyers can drive a hard bargain,” he says.

“You increase staffing costs and face management challenges, such as hiring people you can trust, but it is the way to significantly scale up revenue and earning potential.” ● Barry Frost of Commercial Plus can be contacted on 01244 659 101.

DISCUSSION FORUM FOR RURAL RETAILERS We know that running a rural shop can be an all-consuming job, leaving little time to meet and talk to other retailers. Whenever we organise seminars for rural retailers, we know that the most important part will probably be shopkeepers talking to each other and exchanging ideas, rather than anything we say! Modern technology can help overcome the difficulties of talking informally for village shopkeepers. In particular, the RSA Facebook page provides a great opportunity to discuss issues with other like-minded retailers.

So how do I use Facebook to follow the Rural Shops Alliance?

First set up an account Well first of all you need to have a Facebook account, to create a new account follow these basic steps: 1) Go to www.facebook.com 2) To the right of the page and in big letters it is marked “create an account” 3) Fill in the details on the form under this heading (first name, last name, email address, password, male or female, date of birth) 4) Your account will now be created and you will be sent an email to verify this

Log in To use your account go back to www.facebook.com and log in using your email address and password on the blue bar on the top right of the page.

Your profile

Search for friends, businesses or groups and pages You can now search for people, groups and pages in the search bar which is top left in the blue bar. To find the rural shops page enter “The Rural Shops Alliance” in the search bar.

You will See “The Rural Shops Alliance – Closed Group”, click on this to ask to join.

(Being a closed group means that it is just for retailers – for example, your customers will not be able to see what you are posting!)

Post away, comment and engage Once your membership has been approved – a quick formality - you will be able to view posts of members and either “like” them or comment on them at the bottom of each thread. Or if you feel like getting members comments select “write post” and see the comments come flying in.

You will now be connected to your homepage in Facebook. Top left under the blue banner you will be able to click “edit profile” to enter more personal info, interests location and a photo if you wish.

Issue 25 ● Spring 2014 ● RuralRetailer 25

Cards for all occasions...

The British Greetings The British are a nation of card buyers, sending more cards than any other country in the world. The current UK Greetings Card market is worth in excess of £1.5 billion a year.

Over a billion of this is made up of everyday card sales with Christmas, Valentines, Mother’s Day, Easter and Father’s day making up the other £0.5 billion.

Everyday open cards such as Birthday, Blank and Humour make up around 55% of sales and Ages, Relations and Occasion Cards make up the other 45%. It’s true there is a card for every occasion.

Greetings cards remain a very important part of the UK social culture; people clearly still want to celebrate everyday and special occasions with their loved ones, and to mark many of life’s key connecting moments by sending a card. Market trends within cards make our industry a very exciting place to be.

Today the UK consumer demands more choice than ever from their greetings cards. For example if you are selling a ‘Daughter Birthday Card’, you ideally need Traditional, Cute, Contemporary and Humour choices just within that one caption.

Cards are stocked in more types of retail outlet than any other product, with 1 in 6 retailers now stocking them. For many of them, greetings cards are their highest margin range, achieving 50% GP as standard. This is a very impressive figure for a product that is relatively risk-free and has a long shelf life.

Retail price can vary enormously within the greeting card market, ranging from 49p through

Displays can mix spinners and card racks

28 RuralRetailer ● Spring 2014 ● Issue 25

A neat display helps customers find what they want

By Michael McGunnigle, Independent Sales Manager, The Great British Card Company

Card Market to £4.99 and upwards per card. The difference in quality, design and finish between cards is extremely wide. Even when taking discount retailers into consideration, the average selling price of an everyday greetings card is £1.75.

This is higher for captions, such as Anniversary, and seasons such as Valentines and Mother’s Day. As with any product you sell within your store, you have to know your market, but we have found that stocking more appealing, quality cards can make you a destination store for greetings cards.

advise devoting half to Birthday, Blank & Humour cards and the other half to bestselling captions within Ages, Relations and Occasions.

In limited space, Sympathy and Thank You Cards are a much higher priority than, for example, Cousin Birthday and Belated cards. In a larger display space, the proportion devoted to Birthday, Blank & Humour would typically be somewhat less, at 35-40% of the total.

An often-ignored benefit of stocking greetings cards for the retailer is the opportunity for linked sales. A high proportion of cards are bought for a specific occasion. Whether it is a purchase for a birthday; a thank you or a get well, tie-in purchases like gift wrap, a gift bag, a bottle of wine, a box of chocolates or a bunch of flowers can all provide extra high margin sales.

Display Retailers often ask which is the best way to display cards, on a Spinner or on more traditional racks? Some styles of cards such as Square Blank cards and Humour cards can work well on a spinner, as they all tend to be one size and can be shown full face.

However, when it comes to offering a choice of Age, Relation and Occasion cards, more traditional tiered racking is recommended because of the numerous styles, sizes and finishes each caption has. It is important to get the balance and mix right. For example, in two metres of card racking, we would normally

There is an obvious link between giftwrap and partyware

Issue 25 ● Spring 2014 ● RuralRetailer 29

Cards for all occasions...continued The best location in-store for cards is somewhere customers can have the time to choose and read various cards, out of the main traffic flows in a quieter part of the store. Remember that for a lot of people, buying a card is a very personal and sometimes an emotional purchase.

Ranges It is very important for retailers to understand who their customers are, with different generations and cultures coming through their doors every day, and to tailor the greetings card

We started life back in the 1980’s and have grown organically and through a series of acquisitions, including Medici Cards and more recently The Almanac Gallery. We pride ourselves on proactively supporting and supplying the Independent retailer over those years through our professional service. We are the UK’s largest independent family-run greetings card publisher. With the wealth of stunning card ranges at our disposal, we can work with you to tailor your greetings card display to look excitingly different. Our ranges include humour from Humour Factory and Eric the Penguin Ranges, super photographic images in our Darkroom or English Heritage ranges, plus a wonderful array of special occasion and family birthday designs.

At GBCC we work very closely on a one to one basis with our customers to achieve the right display for their store. This extends from improving their existing card offering with new product through to completely rethinking the card display. Any dealings with the GBCC are enhanced by our nationwide coverage of 30 RuralRetailer ● Spring 2014 ● Issue 25

range accordingly. People are living longer, creating an increased demand for High Milestone ages cards, plus significant anniversaries such as Golden and Diamond.

Adept reorganisation is essential if you need to display your Christmas and other seasonal cards within the existing card space. If possible, we recommend displaying your Seasonal cards separately from your existing card display so as not to disrupt your everyday card sales. Usually we can help with smaller temporary displays sited more appropriately for these occasions.

dedicated knowledgeable Account Managers. They ensure the delivery of the very best service, plus give advice and help on any aspect of Greetings Card Retailing. We also have a dedicated Card Planning department that works out the optimum balance of designs and captions for any size of display, ensuring the best choice for your customers.

We can supply fittings from a Wire Spinner stand through to entire new card departments with the latest in acrylic and traditional wooden card units. This can be a free-on-loan arrangement with a contract or you can purchase racks through our recommended display supplier. We proactively work with our retailers to ensure their displays are up to date and we are happy to swap out and credit older ranges or slow selling designs for new product, thus keeping the display new and fresh for customers. We also offer all our Christmas, Valentines, Mother’s Day, Easter and Father’s Day Cards on a full Sale or Return basis, giving the Retailer a risk-free sales opportunity.

Cards are often displayed at the back of the store alongside newspapers and magazines

The RSA View Greetings cards attract an exceptionally high level of pricing - as the classic gift line, design and quality are more important to most purchasers than just price. As a result, they provide stockists with a very high gross profit margin - for most rural retailers, they have the best gross profit margin in the entire store. However, we often find that weekly sales are not that high, and coupled with the need to stock an extensive range, the high margins need to be balanced against an often low £/sq. ft. sales figure.

Some stores have successfully made themselves into local specialists, offering a very wide range at prices that can significantly undercut town centre chains, often resulting in customers stocking up and buying several cards at a time. For a typical convenience store, cards are a relatively small proportion of total sales. For proprietors, they can represent one of the more interesting ranges to buy, but herein can lie a problem.

Often retailers buy in the cards that they themselves like rather than reflecting a range of their customers’ tastes,

and consequently do not get the right balance between different types of card. There are other potential problems which can prevent retailers taking full advantage of the range. There is the pressure to stock cards produced by the local artist irrespective of merit (nearly every village seems to have one!). There is a temptation to introduce new ranges without discontinuing older ones (reps can be very persuasive, “I am sure we can fit in another spinner somehow….”).

Many shopkeepers allow slow selling cards to linger on the display (whenever shops change hands, there always seems to be a surfeit of cards from about five years ago for the stocktakers to value).

An alternative approach is to get GBCC or similar company to help to produce a professional display based on their knowledge of the market. This is not going to produce the same gross profit margin as buying cards at the cash-and-carry but for many retailers it is actually the right approach, enabling you to both meet customer demand and to maximize your overall financial returns from the space available.

Issue 25 ● Spring 2014 ● RuralRetailer 31