Rural Retailer www.ruralshops.org.uk
Issue 33 l Spring 2016
The Journal of the Rural Shops Alliance
Government targets soft drinks
ON ITI ER ED IL R TA PE RE PA AL ST UR LA F R O
PLUS: ■ The Future of the RSA ■ National Living Wage
Your contacts... 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 6 7 8
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13 ● 14 ● 18 ● Cover image: Soft drinks in the firing line
20 23 24 26
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28 ● 30 ●
In my opinion, By RSA Chief Executive Your Action Checklist / to follow To follow To follow Hockey’s Farm - Medieval grazing rights & 21st Century marketing Now thats what I call plastic money The National Minimum Wage - Will jobs be lost? Soft Drinks - Are they causing obesity and is taxing them the Answer? What really brings customers into your store? Business Rates - Rural shops penalised Get paid for listing a product! Tobacco - European Union Tobacco Products Directive & Standardised Packaging update Post Office outreaches Managing the Newspaper & Magazine category
RuralRetailer ● Published by The Rural Shops Alliance. ● Printed by: Russell Press, Nottingham. ● Design: Kavita Graphics. dennis@kavitagraphics.co.uk
2 RuralRetailer ● Spring 2016 ● Issue 33
In my Opinion... Soft Drinks - A Nudge too far? Retail marketing is basically pop psychology, trying to influence customers to react well to your offer and buy slightly more. But it is not just retailers who play this sort of game. In recent years, the government has become more sophisticated in the way it tries to influence our behaviour in non-obvious ways. It even has a so-called “nudge unit” in Westminster specifically to do this.
prices, despite the fact that an own label at a quarter the price may taste pretty much the same. In my experience, few teenagers will give up their Red Bull for a can of Euroshopper despite the massive price difference.
However, we humans delight in our unpredictability, as opinion pollsters know to their cost come election time. A recent attempt by Microsoft to use people on social media to educate a computer's artificial intelligence led the poor machine to becoming foul mouthed, sexist and racist within 24 hours. The recent debacle when people voted to name a very worthy Arctic research ship “Boaty MacBoatface” is another well-publicised example of the population “sticking it to the man”.
So although the principle of nudging us to have a healthier diet is great, this measure will be a resounding failure. The target market of young people does not think the way that the economic textbooks suggest they should when it comes to price. However, in other ways teenagers are more easily influenced.Please don't tell the health lobby about “eye level is buy level” or else they will start lobbying for laws on where product can be placed on shelf. Department of Health planograms, produced for them by the health lobby - now there's a really scary thought!
A less obvious case of naïve thinking is the government proposal to tax soft drinks more highly, based on their sugar content. Their primary objective is to reduce their consumption by younger people. Now, as anybody who has a teenager in the family will tell you, this group’s attitude to money can be quite cavalier. See a teenager accidentally drop a 20p piece and the chances are they will just walk on, not deigning to pick it up. They don’t think about money the way older people tend to. But conversely they do care deeply about brands. Trainers that cost a few pounds to produce sell for many times that, provided they have the right logo. And of course the same applies to soft drinks. We all know that leading cola brands cost pence to produce and then sell in great quantities for very premium
Issue 33 ● Spring 2016 ● RuralRetailer 3
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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 2016 â—? Issue 33
Your Action Checklist for this issue... 1. IMPROVE STAFFING IN LIGHT OF LIVING WAGE 2. IMPROVE FOOTFALL GENERATION 3. WRITE TO YOUR MP ABOUT RURAL BUSINESS RATES 4. JOIN MY PERFECT SHOP SCHEME 5. GET READY FOR TOBACCO PACK CHANGES 6. ENSURE NEWSPAPER SALES ARE WELL MANAGED
p p p p p p
SEE PAGE 14 SEE PAGE 20 SEE PAGE 23 SEE PAGE 24 SEE PAGE 26 SEE PAGE 30
DO VILLAGE SHOPS HAVE ANYTHING IN COMMON WITH THE WELSH STEEL INDUSTRY? We often comment on the law of unintended consequences, where government policy to solve one problem actually creates others. These measures come from politicians who mean well but have no real experience of business. A good example is George Osborne, whose only “real job” before entering politics was a few months of freelance writing. The British steel industry’s problems stem at least in part from government policies. Britain’s green levies create very high energy costs. Low interest rates have made its pension commitments crippling. The UK government blocked moves to hinder the Chinese from dumping its steel at giveaway prices. Our steel industry has been in decline for many years but the government has only acted when the crisis has hit and it is really
too late.The rural shop sector does have parallels. Government keeps loading the industry with additional costs, seems to favour key supermarket competitors and instigates policies that unintentionally harm the sector. Textiles, coal and merchant shipbuilding are gone. Steel is going the same way. In our sector, rural petrol stations have virtually disappeared, pubs are closing at an alarming rate and village shop numbers continue to decline year by year. Governments planned none of this but at the same time their policies have to bear much of the responsibility. In 2015, Lord Cameron of Dillington advised the government to improve how they assess the impact of proposed policies on rural Britain. We can only hope that this approach does bear fruit and that the same government that “accidentally lost” the steel industry does not also “mislay” the rural shop sector as well.
Issue 33 ● Spring 2016 ● RuralRetailer 5
RSA Announcement...
Closure of the Rural Shops The Rural Shops Alliance (RSA) was set up for one reason only, to support rural shops. We believe they are a vital part of the social fabric of rural communities and we work to help both their proprietors and the communities which they serve. We do this with the invaluable support of a wide partnership of stakeholders, linked together by their involvement in the sector. Our very name, the Rural Shops Alliance, is a reflection of this.
Over the years we have enjoyed working with a very wide range of members, from FMCG manufacturers, wholesalers, service suppliers, rural community councils and local government, plus of course many individual shopkeepers. Over the years, we have enjoyed good relations with most county councils in England. Indeed, they have been key to the success of the RSA. We have worked very closely at a county level with many officers and elected members, advising them on issues affecting our retail members and helping them to support their rural retailers. Secondly, many councils have taken advantage of our group membership scheme to sign up their rural shops as associate members of the RSA. This has enabled us to help and communicate with thousands of shopkeepers whilst keeping our administrative costs very low. But the world has changed. In recent years, cutbacks in local authority budgets have forced many councils to cut back ruthlessly on expenditure. Any activity which is not a defined legal requirement is liable to
cutbacks. Support for rural retailers, however desirable, falls squarely into this box. Many of our local authority partners, for example, have cut back on staff travel budgets, preventing their staff from coming to our meetings in London despite the benefit they might get from them. Many councils have stopped nearly all their memberships of external organisations, including the RSA. Quite simply, the partnership model on which the RSA depends is no longer working. Our Board of Directors has considered other ways the RSA could operate. However, in a marketplace that includes other retail trade associations, such as ACS, NFRN, NFSP, plus various more general small business organisations, there is little room to change our model without overlapping on the good work already being carried out by others. With considerable regret, we have therefore decided that the time has come to wind down the RSA’s operation, with complete closure planned by the end of 2016. We believe that we have been effective in our activities over the years and that the sector is in better health as a result of our activities. We have influenced legislation affecting our sector. We have advised decision-makers on how they can
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ELECTRONIC RURAL RETAILER
Alliance Individu Membe al rs Ce Governntral ment
RSA
Industr Supplie y rs assist rural shops. We have helped shopkeepers to run their businesses better. Best of all, there are shops still trading which would have closed without our involvement – we could not wish for a better legacy. We will be running down our operations in a phased manner over the coming months. We will be completing our current projects. We will be going out with our head held high. The RSA will be closing by the end of December 2016.
L Goveroncal ment
In recent years, the number of people reading paper copies of Rural Retailer has been in decline, whilst more and more of you are accessing the online version through computers or tablets. Given this trend, we have decided as part of our rundown of the RSA to publish the next edition of Rural Retailer as an on-line edition only. Hence this is the last edition of Rural Retailer that will be published in a print edition on paper. So hang onto it, who knows, you may be holding a future collectable?
Our summer edition will appear in electronic format only. It will be available to read on our website from July 11th. Please make a note in your diary now to access it via www .ruralshops.org.uk
Issue 33 ● Spring 2016 ● RuralRetailer 7
Hockey’s Farm...
Medieval Grazing Rights & 21 Selling your own home to help fund a new business is not unknown – but persuading your parents to sell theirs too? Now that takes some hutzpah!
But that’s just what Laura Stainton-Burrell did in November 2013 – as well as going ‘off piste’ to find the right bank for a mortgage - to buy a rather neglected farm with a small retail shop and ten acres on the edge of the New Forest in Hampshire. Former teacher Laura, aged 54, knew Hockey’s Farm and its shop of old. In the 80s it was renowned for its superb beef, bred by
the Hockey family to the highest quality, and it employed a team of butchers on site. But in recent years, the farm had struggled, only keeping just a few cattle and sheep, with sales reduced to frozen meat only. Then, just before Christmas in 2012, during a family meal, Laura’s sister Emma casually mentioned that the farm was up for sale – and that set the family`s imagination alight. Laura and husband Jonny saw the potential to realise a dream. Laura recalls: “The old farm brought back a lot of childhood memories and we realised that the place was big enough for us all to live together – my parents, my sister and her son, and Jonny and me. It took a long time and much negotiation to bring the price down to anything like we could afford.” Although Jonny has worked in retail all his working life, no-one in the family had experience of running a farm shop or knowledge of farm animals. Nevertheless Laura’s parents, Anne and Robin Norris, despite being in their late 70s, along with her sister Emma Cooper and Emma’s 23-year-old son Jack, agreed to sell their homes in order to throw their hats into the ring. They would all move onto Hockey’s Farm, to run an environmentally-sensitive rural retail food business in the burgeoning high-end farm shop sector, supporting local producers.
Laura and Jonny
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Months of trying to find the right bank to lend them the money, and haggling over the price of the property, ended with Laura and Jonny becoming temporarily homeless, waiting for the sale to go through. The usual high street banks had shown interest but made no offers – then Jonny approached Triodos, a ‘global pioneer’ of
By Beth Whittaker
st Century Marketing sustainable banking with a mission to make money work for positive social, environmental and cultural change. “When we explained our dream to create a flourishing farm shop stocking local produce with a café to the Triodos account manager Simon, he was so enthusiastic and supportive, we couldn’t believe it!” says Laura. “What we wanted to do fitted so well with the bank’s ethos and support for British food and agriculture; we felt really comfortable about it. And they offered us the money we needed – (including an extra £50,000 this year, for solar panels and rainwater harvesting) - within seven days of our first meeting with Simon.” Getting all the finance needed to transform the business was a real challenge – despite the income from the house sales and the mortgage. But thanks to the brilliant business plan drawn up by Jonny, the family received a boost in the form of a £20,000 Village Shop Grant from Hampshire County Council to help double the size of the existing shop premises. Anne Harrison, from the Council, congratulated Jonny on his comprehensive and focused business
The shop has been extended and modernised
plan, it being one of the reasons she was able to support the grant application. This grant was crucial at a key stage in the expansion of the business, when cash flow was at its tightest. Laura says: “We moved onto the farm in November 2013 almost a year after we decided to buy the place. The grant from the County Council made an incredible difference. Despite facing the worst floods in 30 years when we moved in, which washed away the gravel drive and forced us to get up at 5 am on Christmas Eve to repair the damage, we were able to start building quickly.” Two and a half years on, and Hockey’s Farm Shop has been transformed, selling top quality produce from around 40 local suppliers, alongside some everyday provisions in its 900 sq ft shop.
The stream by the entrance has caused flood problems
There is fresh, locally baked bread, cakes and pastries, newspapers, local fruit and vegetables, dairy produce, fish products, preserves, chocolate and a selection of wines and local
Issue 33 ● Spring 2016 ● RuralRetailer 9
Hockey’s Farm...continued quality meat, their own rare-breed British Lop pork. Beef is produced by a family friend just outside Ringwood, and lamb is sourced from the New Forest and Dorset. New Forest bronze and white turkeys are also available for Christmas. Nathan Power, who had worked as the farm’s butcher for 12 years, is still hard at work, offering a full and traditional butchery service and making all the additive and preservative-free sausages and burgers on site with meat that is fully traceable. His mum Kate also works in the farm shop. The newly built café
beers. The list goes on and is ever developing. Local non-homogenised milk is increasingly popular as is traditional pannage pork from pigs fed on acorns in the Forest during the season. And the shop has reverted back to its farm traditions, selling the family’s home-reared, top
The key butchery serve over
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The new, licensed, Farmyard Café combines excellent heat insulation with a rustic feel inside. The kitchen is totally open, in line with the modern idea that customers like to see their food being prepared. It serves food using only produce sourced from the farm shop. It also offers that essential for 21st century catering, free Wi-Fi.
Nathan behind his butchery counter
The cheese counter
Outside, a collection of rehomed domestic animals rub along with sheep, chickens, ducks and aviary birds, alpacas, an aviary and Nemo, the hand reared New Forest pony, all providing a great attraction to visitors, making this a
leisure destination. The family’s interest in animals has broadened as the business has grown – in addition to breeding their own rare British Lop pigs, Jack has just taken delivery of five heifer calves. He eventually plans to breed
This is a small working farm
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Hockey’s Farm...continued from them and to then make use of the farm`s Commoning Rights to graze them in the New Forest. The Medieval grazing rights sit alongside 21st century marketing in the business. Effective use of social media – supported by a local marketing professional – including Twitter (1,113 followers), Facebook (1,050 likes), Instagram
(165 likes) and even their own You Tube video channel (where Jonny’s teenage daughter Imogen presents her own promo film about Hockey’s), helps spread the word and business is booming. Online sales and deliveries are picking up, and the family is actively supporting the community (Laura is on the Parish Council) and building links with other local businesses through the New Forest Marque and Hampshire Fare. Business has boomed, with customers coming from the local catchment and nearby urban areas. In the summer, tourists are obviously important. The shop even delivers to a few good customers in London. Overall. sales have more than tripled, with the café now making up an increasing proportion of the total. The butchery counter still accounts for about half the shop sales, although this proportion is expected to decline as other ranges take up the slack.
The animals provide a reason for visiting
Hockey’s Farm Shop won the CPRE’s 2015 Hampshire Rural Enterprise Award and was also awarded Highly Commended, in Best Farm Shop 2015 category, Hampshire Life. But all this success comes at a price Laura explains. “We’re all working ridiculously hard, seven days a week. Luckily Jonny still has a ‘proper job’ which helps and in the evenings he does all the spreadsheets and projections, whilst I tend to do everything by ‘feel’!
The café’s open plan kitchen
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We have now reached the stage where, in order to continue to grow, we really have to take on more staff, but that’s always going to be tricky financially. There is only so much we as a family can manage; although it is a very full on and demanding lifestyle and there have been odd
moments of questioning the sanity of our `move` we have no regrets, we all do our bit and the team is strong!” See: ■ http://hockeys-farm.co.uk ■ http://hockeys-farm.co.uk/hockeys-farm -now-has-its-own-youtube-channel
This is a proper farm with a “proper” farmhouse
Polymer banknotes...
Plastic money for real... 2016 is a big year for banknotes. A new £5 note will be issued by the Bank of England in September, to be followed by a new £10 note in 2017 and new £20 note by 2020.
This is one of the biggest changes since the Bank of England started issuing banknotes over 300 years ago. These new notes will be printed on polymer, a thin and flexible plastic material that fits into wallets and purses just like paper notes. The new notes will be cleaner, more durable, and more secure than paper. Victoria Cleland, the Chief Cashier, said ‘polymer - incorporating complex windows and sophisticated security features - delivers a leap forward in counterfeit resilience’.
The notes will look the same as existing notes. Sir Winston Churchill will feature on the back of the £5 note, with Jane Austen on the £10 note. The new notes will be slightly smaller than the current paper notes (125mm x 65mm). Customers will be using the new £5 notes from September and the two forms will circulate side-by-side for a while before the paper notes are withdrawn. You will need to train staff to recognise the new notes and any machines that handle cash will need to be updated. For the latest information about polymer banknotes, see: ■ www.bankofengland.co.uk/ banknotes/Pages/subscribe
Issue 33 ● Spring 2016 ● RuralRetailer 13
The National Living Wage...
THE LOW PAID GET A MASSIV BUT HOW MANY JOBS WILL IT The National Living Wage (NLW) of £7.20 per hour for employees aged over 25 came into force on April 1st, with plans to increase it to at least nine pounds per hour across the UK by 2020. If this had been introduced by Jeremy Corbyn, it would have been seized upon as evidence of his voodoo economics. Instead, Chancellor George Osborne is hailed as an ace tactician, stealing the centre ground from the wounded Labour Party, and a friend to the downtrodden second only to Robin Hood. Suddenly all of the economic analysis from the Low Pay Commission that has decided the national minimum wage for the last 20 years has been thrown out of the window. Careful analysis of the impact of raising wages – forget it. Discussions with employers or unions – so
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20th century! And who can forget the picture of Iain Duncan Smith excitedly punching the air on hearing the announcement – clearly even Cabinet colleagues were not consulted on this one. The Resolution Foundation, an independent think tank, has highlighted that since September 2015 employees on the lowest wages will have seen a 10.8% increase in pay, at a time when prices have been pretty static. The Foundation expects the lowest paid to receive 5.7% average annual pay rises between now and 2020. The Living Wage will provide an immediate boost to the pay of 4.5 million workers and will “make significant inroads into tackling Britain’s low pay problem”. A survey by the Centre for Macroeconomics, another think tank, suggests that a majority of economists think that the Living Wage will not lead to significant job losses, although about a third of those interviewed disagreed.
E PAY RISE – COST? The impact on the economy In reality, we are now in uncharted waters. This is a very significant change. As usual, economists are very divided on its likely impact. Most agree that over the whole economy, the impact on employment will be quite small. However, low wage jobs are concentrated in a few specific industries, such as cleaning, social care, hospitality/ catering and of course retail. The introduction of a NLW is a ‘leap in the dark’ which may put some smaller companies out of business, suggests Associate Professor Felix Ritchie from the University of the West of England. Ritchie and his colleagues have conducted extensive research on low pay,
finding that large organisations will be better able to absorb the extra costs whilst some smaller companies may have to lay off staff or even close. Dr Ritchie also highlights the cost of a pay increase for workers just above the new NLW threshold in order to maintain differentials. The greatest impact of the NLW will be in the care sector. You cannot easily boost productivity when personal contact is such a key part of the job. Squeezed local authority budgets and a massive pay rise for the labour force, however well deserved, is going to cause significant problems down the line. Expect care home closures and a political stink in six months’ time.
The impact on retail Retailers as a whole will take a big hit from the NLW, with more than 300,000 workers having received a pay rise from the start of April. The British Retail Consortium estimates that the sector will have to find up to £3bn more a year to pay staff by 2020, assuming employers maintain differentials between entry and more experienced staff and pay the NLW rate to all employees, not just the over-25s. Many retailers are including under 25s in the pay rise, on the basis that people doing the same job deserve equal pay. The majority of rural retailers work alongside their staff and genuinely want to pay them a decent wage. Too often the business is quite
simply not generating sufficient profit to allow them to do this. Often, proprietors themselves are working for far less per hour than they are paying their staff. Some retailers, including some of the large operators, are trying to reduce the impact of the NLW on their bottom line. There is evidence that increases in basic pay are being offset by a squeeze on benefits, such as extra pay for Sundays and bank holidays. Some employers are cutting back on paid breaks and trying to avoid overtime working. These changes can mean that a worker’s take-home pay may not increase by anything like the amount they might initially have expected. This can be
Issue 33 ● Spring 2016 ● RuralRetailer 15
The National Living Wage...continued particularly true for businesses such as care homes which quite simply cannot afford a large increase in their wage bill, however much they might want to be fair to their staff.
profit margin needs to sell £60 worth of goods per hour just to cover the cost of one member of staff.
Operating small stores is very labour-intensive with few obvious ways to improve staff productivity. Retail sales are currently fairly static and a highly competitive market means there are few chances to raise prices to cover these increased costs. George Osborne’s avowed intention is to make staff more expensive and thus force employers to increase their productivity (their output per hour worked). If sales are static, the only way to do this is to reduce the number of staff hours employed each week. A wage of £9 per hour by 2020 is equal to a total cost of about £12 per hour by the time national insurance, holiday pay, pension contributions and the like are Staff cutbacks must not reduce customer service taken into account. A shop making 20% gross
How to respond Many rural retailers will try to muddle through, to work a few extra hours themselves, cut back a bit on investment, raise a few prices and generally accept the hit. The size of this wage increase over the next four years means that for
most this response is not good enough. Instead, rise to George Osborne’s challenge and systematically work to increase staff productivity. Whilst of course still keeping excellent customer service!
The plus side
Contactless payment can save staff time
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There is a real upside for rural retailers from the NLW. Over much of the country, rural areas have a much higher proportion of low paid workers than in the towns and cities. Many of the customers who shop in rural stores will be receiving a very significant pay rise and hence have more money to spend locally. This means that rural districts will benefit more than urban areas from the increased money circulating in the local economy. Retailers need to make sure they get their fair share!
SOME WAYS TO MEET GEORGE OSBOURNE’S CHALLENGE 1. Raise prices Not easy in the current highly competitive market, but it may be possible to round up prices for some non-KVI lines. Trade up – sell more profitable up-market ranges rather than grocery basics.
2. Review services offered Services often absorb a lot of staff time for little monetary reward, although of course they can be great footfall generators. Are you charging enough for newspaper deliveries? Is it viable to operate your Post Office branch or PayPoint terminal? Do you need to be slightly more hard-headed when supporting community events - If your paid staff are going to sell tickets for a PTA event, perhaps the PTA ought to buy the wine for it from you?
3. Review opening hours If the last hour of the day does not generate much business, but still requires two members of staff to be on duty, then it may need axing. Or could you have different opening times summer and winter? Could you close during the slack early afternoon period?
4. Discuss work practices with staff Paying employees more per hour means that you can expect more from them. Past working practices might not be acceptable in the future. This may mean staff taking on more responsibilities but it may (whisper it gently) quite simply mean staff be expected to work harder and chatter less. Obviously take more care when hiring staff – the business cannot carry passengers. Try not to pay overtime rates.
5. Invest in new equipment In particular, a properly used modern epos system can save significant amounts of staff time, particularly if it is linked with your wholesaler’s system. New equipment, such as LED lighting.or modern refrigeration, can make significant cost savings which you can offset against staff wage rises.
EPoS helps staff work efficiently
6. Schedule staff more effectively Try to get them to be on duty more when the business needs them and less than when they would ideally like to come to work. Clearly you have to compromise, to be sympathetic to parents with childcare commitments, for example. However, in future the balance between business and personal convenience may need to swing slightly towards the needs of the business. Over much of the country, rural areas have a much higher proportion of low paid workers than in the towns and cities. Many of the customers who shop in rural stores will be receiving a very significant pay rise and hence have more money to spend locally. This means that rural districts will benefit more than urban areas from the increased money circulating in the local economy.
7. Consider having stock delivered Rather than visiting the cash-and-carry. The time saved may be worth far more than any delivery charge incurred.
8. Reduce the number of very slow selling products stocked These lines can take up a disproportionate amount of staff time in relation to sales through stock counting, cleaning etc. As is so often the case in retail, there is no one easy answer. The only certainty is that if you do not ask the question, you will have no real answer to rising staffing costs over the next four years. And that will be very costly.
DOING NOTHING IS NOT AN OPTION Issue 33 ● Spring 2016 ● RuralRetailer 17
The ‘Sugar Tax’...
SOFT DRINKS – ARE THEY CAU OBESE YOUNG PEOPLE AND IS A week after the legislation to introduce standardised packaging of tobacco was passed by Parliament, the health lobby switched targets, putting soft drinks and confectionery firmly in their target sights. The 2016 budget included an announcement that in 2018 a new levy on soft drinks would be introduced. It is expected to raise about £1.5 billion in the first three years of implementation. The levy will apply to soft drinks with over 5 g of sugar per100ml, with a higher rate applying to the drinks with over 8 g of sugar per 100ml. Smaller producers are exempt. The levy is designed to encourage producers to reformulate their products to: ■ reduce added sugar content ■ persuade customers to choose low sugar or sugar free brands
■ reduced portion sizes for high sugar drinks The levy will apply to soft drinks with added sugar but will exclude milk-based drinks (on the basis that they contain vitamins, calcium and other nutrients vital to children’s health) and pure fruit juices with no added sugar. This is bizarre: 100ml of orange juice contains about 10g of sugar. so firmly in the high levy bracket. George Osborne said, “I am not prepared to look back at my time here in this Parliament, doing this job and say to my children’s generation ‘I’m sorry, we knew there was a problem with sugary drinks – we knew it caused disease – but we ducked the difficult decisions and we did nothing’”. The Chancellor is right; this undoubtedly a big problem. Sugar consumption is a major factor in childhood obesity and sugar sweetened soft
NEW UNITS OF MEASUREMENT THE TREND TOWARDS LOW CALORIE DRINKS ● Health issues and changing lifestyles have caused a marked trend in recent years towards low or no calorie products – in 2014 it was: Low and no calorie drinks
57%
Mid calorie
5%
Regular
38%
Source: British Soft Drinks Association 18 RuralRetailer ● Spring 2016 ● Issue 33
● For what seems like generations, the UK has run three systems of measurement alongside each other. There is the imperial system (gallons, yards, acres, etc), the metric system (litres, metres, hectares, etc) and the journalist system (swimming pools, London buses or Nelsons columns, football pitches or Wales). The latter system is now being enhanced by new ways of communicating levels of sugar (sugarcubes per can, teaspoons per jar etc) in addition to the more conventional grams per litre.
SING A GENERATION OF TAXING THEM THE ANSWER? drinks are the single biggest source of dietary sugar for children and teenagers. According to NHS Choices, The Chief Medical Officer has said that reducing sugar content and portion sizes is a public health priority. Young people between 11-18 get 15% of their energy input from added sugar in their diet – it should be no more than 5%. And NHS Choices reckon that no less than 40% of the added sugar consumed by this group comes from soft drinks – this is a grotesque figure, so large it is impossible to ignore.
SOURCES OF ADDED SUGAR IN A TYPICAL UK DIET Sugar, preserves, confectionery
27%
Non alcoholic drinks
25%
Biscuits, buns, cakes
20%
Alcoholic drinks
11%
Dairy products
6%
Savoury foods
5%
Other
6%
Source: NHS Choices
The RSA view The levy rates have not been announced but a back of the envelope calculation based on the information available suggests that if the manufacturers pass the full costing onto consumers, a bottle of cola currently costs £1.25 might rise to £1.35. This is significant but is hardly likely to change consumption patterns for the key young consumers. This issue is too important to leave to the uncertain effects of the price mechanism. The emphasis on hitting drinks manufacturers is wrong. And if the reform is so vital, why
wait to 2018? There are clearly no easy answers but we would be a lot happier if the measures were directed far more at changing consumer behaviour and came from the Dept. for Health, rather than the Treasury! For more information, see: ■ http://www.nhs.uk/Livewell/Goodfood/Pages/ Top-sources-of-added-sugar-in-our-diet.aspx ■ http://www.foodpolitics.com/wp-content/uploads/ 160315-Soft-drinks-stakeholder-infosheet -FINAL-2.pdf ■ http://www.britishsoftdrinks.com/soft-drinks Issue 33 ● Spring 2016 ● RuralRetailer 19
Footfall...
WHAT REALLY BRINGS INTO YOUR STORE? “Some customers come in every day to get a 12.5g pack of tobacco and often buy something else to go with it,” reports Marc Jones, at Siop Hoffnant Stores in Brynhoffnant, Wales. “But when the pack sizes go up I expect we’ll see these people a bit less.” Jones’s concern is shared by other retailers, who are waiting to feel the impact of next month’s Tobacco Products Directive, particularly as tobacco companies like to cite research that smokers visit stores more frequently than nonsmokers and spend more while they’re there. But tobacco isn’t the only category to take a hit. These days, many shoppers are no longer picking up newspapers and lottery tickets in
their local c-store; newspaper sales are in longterm decline while gambling is moving online – two categories which have traditionally helped to drive footfall and impulse spending. “Younger people have migrated online to read news and play the Lottery and that will continue to happen, to the detriment of c-stores, particularly in rural areas where they would have relied on those as footfall drivers,” explains Nick Carroll, retail analyst at Mintel. Siddington Convenience Store near Cirencester is already feeling the pinch. “Newspaper sales are in decline and I’m planning to open an hour later than we used to – at 7am – because of this,” says owner Peter Gibbons. So what can rural retailers do to draw people in and get them spending? Services such as ATMs, the Lottery, PayPoint and Post Office can do the trick, according to the companies themselves. Camelot reports that when a rural store fits a National Lottery terminal, footfall and sales immediately begin to increase. It points to IGD research which shows that a National Lottery player spends, on average, £8.46 more than those whose who don’t play. And according to PayPoint, whilst traditional shoppers visit 3.8 times a week, a PayPoint shopper visits 4.6 times and spend £7.70 per visit shop items compared with £6.39 spent by traditional shoppers.
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By Helen Gregory
CUSTOMERS It sounds great, but not all retailers are convinced. Gibbons, at Siddington reckons it’s difficult to get Post Office customers and lottery ticket buyers to spend more, while Colin Woods, of Amberley Village Stores in West Sussex, is subsidising his Post Office by about £40 a week – although having the Lottery does make up for the shortfall. “I wonder whether we’ll even have it in future as there’s so few things we can get commission on now,” he muses, “We could just put in PayPoint and an ATM instead.”
Says Jones: “They often then pick up crisps, soft drinks or chocolate for lunch and maybe a paper – it’s a very successful part of the business and I think it’s only going to grow.” Today’s Retail Director John Kinney suggests another two categories that could provide opportunities for more spend: pet food and baby. “They would suggest a larger household yet they are probably two categories not considered key by many retailers,” he says. He points to fresh food, food-to-go and wines and spirits as categories where a good product range
Other stores are acting as a collection point for home delivery services although this can be a logistical nightmare, particularly at key times such as Christmas, with big parcels taking up valuable storage space, according to Mintel’s Carroll. So what else can encourage shoppers to come in and fill their baskets? According to him! research & consulting research, only 10% of Lottery shoppers have three items in their baskets, while those buying food-to-go, crisps and snacks and in-store bakery are the most likely to have three items (28%, 23% and 22% respectively). It’s certainly the experience of Jones at Siop Hoffnant Stores, who reckons his in-store bakery is a big draw, with some customers popping in two or three times a day to get breakfast food, sandwiches or hot snacks – and then making impulse purchases on top.
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Footfall...continued will help retailers create a destination store. Indeed, Mintel research has revealed that the alcoholic drinks category isn’t currently being exploited fully by small retailers. Younger people in particular are looking to drink at home rather than in pubs and it suggests that making the alcohol section more appealing can really encourage impulse buys. As many rural retailers are already doing, it recommends that retailers do not just sell Fosters and budget bottles of wine, but also stock up on local beers. “We’re getting more people coming in the evening, buying beers and wine and ready meals - alcohol is a growing market,” agrees Gibbons, at Siddington Convenience Store. And when someone’s coming in specifically to buy cigarettes, for example, the challenge is to interrupt their shopping trip – so the counter top is vital for impulse purchases.
Woods at Amberley Village Stores also reckons it helps to have niche products your customers can’t get in supermarkets. He always stocks about 50 local cheeses, sourdough bread from a local bakery, and makes fresh sandwiches which customers will come in for specifically. And let’s not forget the value of good value when it comes to pulling in the punters. Regular customers at Siddington Convenience Store will actively look for offers and Gibbons was surprised when a recent promotion saw some buying two or three nine-roll packs of toilet rolls. He adds: “It’s good for us, but we just need to get them to buy other things while they’re here.” The overall message is that retailers cannot rely on traditional footfall drivers continuing to work as well in the future as they have done in the past. Convenience will always encourage people to shop locally, but retailers do need to provide that key point of difference in-store that will keep them coming back time and time again.
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Business Rates...
RURAL SHOPS UNFAIRLY PENALISED In his budget, the Chancellor announced some welcome changes to the business rates system. The Small Business Rate Relief threshold will be extended in order to take more companies out of paying the tax altogether. From April 2017, businesses in premises below £12,000 rateable value will receive 100% rate relief (up from the current £6000 threshold). Businesses with rateable values between £12,000-£15,000 will receive tapered relief and those in premises between £15,000-£51,000 rateable value will benefit from the small business rates multiplier. George Osborne also announced that from 2020 property revaluations will move to a three yearly cycle.. There will also be a change in the inflation indexing used to calculate business rates, moving from CPI to RPI, which should reduce the annual percentage increase in most years. This is all good news for businesses in the convenience store sector. However, for rural retailers, there is a great big caveat.
Rural Rate Relief We have pointed out many times that many rural retailers are covered by The Rural Rate Relief scheme. Legally, if you qualify for this scheme this takes precedence over Small Business Rates Relief. You cannot apply to both. Under the Rural Rate Relief scheme, if your business is in a rural area with a population below 3,000 and is the only village shop or post office with a rateable value of up to £8,500 or is the only public house
or petrol station, with a rateable value of up to £12,500, you get 50% mandatory business rate relief, with the possibility of up to a further 50% at the discretion of your rating authority. Different district councils or unitary authorities have different policies in this respect, some providing it to all eligible businesses, others demanding the completion of an application form each year, whilst increasingly cutbacks in the local government budgets are leading some to be very loth to provide full relief to anybody. A postcode lottery is emerging. This situation is absolutely bizarre. Because of a quirk in the law, some of the businesses that need the 100% business rates relief the most are being denied it. In this particular instance, the law is an ass. We would urge all rating authority offices and elected members to play fair and to give rural shops hundred percent business rate relief wherever possible. For most district councils, the amount of money involved is a drop in the ocean but it can make a significant difference to the businesses involved.
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My Perfect Shop...
HOW TO GET PAID FOR LISTING Over the years, large multiples have charged their suppliers for all sorts of services, including bizarrely things like listing fees just for stocking the product. There is now a product that may help balance the situation out to the benefit of small shops. The My Perfect Shop programme provides straightforward advice on the ranges that you ought to be stocking in your store. The big plus is that it then provides financial rewards just for stocking them. The scheme is backed by 6 major FMCG brand owners including Weetabix, Kettle Chips, Birds Eye, Burton’s Biscuit Company, Diageo, & Mars Petcare. Retailers can also order free POS and display units from these participating suppliers. After the success of its pilot programme in London and Liverpool in early 2015, the My Perfect Shop app launched in October 2015. It works through a free app, available on both IOS
and Android devices. The app provides c-store operators with rewards of up to £100 simply for stocking specific products, most of which a typical convenience store should be stocking anyway Lorna Davidson, CEO of Liverpool-based The Mothership Group, says: “We’re very excited about the My Perfect Shop concept that’s utilising digital technology to help open up a direct dialogue between the big retail brands and independent retailers. Our unique costeffective tool enables the brands to talk directly to the current 50,000 local convenience store owners in the UK, which eradicates the time and cost needed for individual store visits.” Catherine Parkin, Sales Director of The Mothership Group says, “It’s about engaging with the retailers and brand owners to give the retailers more information on the right range of products to drive sales and profitability.” “This initiative is good for shoppers, retailers, wholesalers and suppliers, and we are excited to see it drive sales,” said Weetabix Business Unit Controller Darryl Burgess. Store owners can earn c.£100 per month from the app. AJ Hashmi of Keinton Stores in Somerset commented, “As a retailer in a rural village, every penny counts. The opportunity to earn free money is not one that should be turned down. The app benefits me in two ways. The first is when it gives me information on new products that I might not have seen. The second and most important one is when it rewards me for trying the new product. This sometimes coincides with the product being on promotion
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By Joe
A PRODUCT at the wholesalers so it’s a double whammy! The app is easy to use and the process of claiming only takes a few minutes. It is the most financially rewarding few minutes of the week”. Joanne from Londis, Greenhill Road in Liverpool, simply ordered a range of products, which she realised she ought to be stocking, as highlighted in the Core Range section of the App, and was rewarded for doing so. “It was so easy, all I had to do was press claim against the item in the “Discounts for New Listings” section and then uploaded a photograph of my wholesaler invoice as proof of
purchase. The team at My Perfect Shop then validated my claims and I received my reward in high street vouchers via the post.”
The App can be found at the following locations: ■ If you have an Apple Device iTunes: https://itunes.apple.com/gb/app/myperfect shop/id957194793?mt=8 ■ If you have an Android device Google Play: http:/play.google.com/store/apps/details? id=com.ps.app&hl=en_GB
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Tobacco...
European Union Tobacco Products Directive On 20 May 2014, the revised Tobacco Products Directive (EUTPD II) was adopted by the European Union. The UK is required to transpose the provisions into national law, after which the legislation will come into force on 20 May 2016. The legislation will bring in new rules about the way tobacco products are manufactured, packed and sold. The changes include: ■ Minimum pack size for cigarettes (20 cigarettes) ■ Minimum pack size for Roll Your Own (30g) ■ Ban on smaller pack sizes ■ Only brand and variant name permitted on pack ■ Combined text and pictorial health warnings positioned at the top of the pack on the front and back to cover 65% of the surface area
■ No reference to taste, smell, flavourings or additive-free ■ No Price Marked Packs ■ Menthol banned from 2020 Earlier this year MPs voted in favour of the introduction of Standardised Packaging for tobacco products. This is a separate piece of legislation and goes further than EUTPDII. However, it will be implemented at the same time (May 2016) as the revised EUTPD II.
What does this mean for you? Tobacco will continue to be an important revenue driver for rural retailers, now and in the future. EUTPD II states that all products manufactured after 20 May 2016 must comply with the new rules. However, current stock can be sold through until 19 May 2017. The ban on menthol will only apply from 2020 onwards. Until then, it’s imperative that retailers continue to have good availability of popular SKUs and pack sizes; otherwise they run the risk of losing customers to a competing shop.
How are we planning to support you? Imperial Tobacco believes both EUTPD II and Standardised Packaging are unlawful, and continue to fight the latter legislation through the courts. However, as a responsible business we also recognise the need to prepare for compliance. The result is Partnering for Success, a programme to advise and support retailers through EUTPD II and Standardised Packaging.
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& Standardised Packaging update Imperial Tobacco has already begun to drive engagement with retailers through initiatives like working groups and presentations. By implementing their feedback, we’ve created the Partnering for Success START pack. START stands for: SUPPORT, TRAINING, AVAILABILITY, RANGE AND TRUST. The packs will keep you updated with all the latest legislative and tobacco category information – and help ensure your business is a success. START packs are being distributed by your designated representative. Retailers can also download digital versions from www.imperial-trade.co.uk. Melvin Ruigrok, General Manager, Imperial Tobacco UK & Ireland said: “Partnering for Success reflects our continuing commitment to working together with the trade to secure the ongoing success of the category in a highly regulated environment. Initiatives like the START packs will ensure our sales force continues to both support and reassure retailers through potential legislation, and ensure the tobacco category remains both a key footfall driver and profit generator.”
* For the avoidance of doubt, the content of this article and the START packs are without prejudice to Imperial Tobacco’s position that the Standardised Packaging of Tobacco Products Regulations 2015 are unlawful and therefore subject to the outcome of Imperial Tobacco’s ongoing legal challenges. ** The images presented are for illustrative purposes only. Tobacco dispenser equipment will make serving customers far easier
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Post Offices...
POST OFFICE Part of the restructuring of Post Office Ltd outlets to make the network more viable was to introduce a number of Outreach services for places too small to support a traditional Post Office. These are overseen by sub postmasters in addition to running their own (core) branches. These Post Office outreach services can take several forms. Mobile Post Offices are specially equipped vans that visit around 250 rural locations every week at set times. The Partner service is where Post Office services are offered through a local business, for example, a local shop, and are usually open when the partners business is open.
Hosted Services are operated out of a local community facility such as a village shop, village hall, community centre or café, again at set times. Michael Carnall is a sub postmaster operating outreach services. His core office is Wheatley Post Office in Nottinghamshire and from this core he operates a satellite office and seven outreach services in hosted locations in rural Nottinghamshire and Lincolnshire. Michael operates services from some interesting locations, one is the former telephone exchange in the historic village of Sturton le Steeple which is probably one of the smallest buildings in the country operated as a post office. Another, Stow Minster, is probably the oldest building in the country (dating back to 975AD) that operates a pop-up post office 3 half-days a week in the ancient village of Stow. Michael commented, “The rural communities we serve actively support us, as they really appreciate the comprehensive range of Post Office services we make available, especially as these communities are often deprived of many other local services. Our customers are a good mix of the young and old as well as some enthusiastic rural entrepreneurs.
This small community shop hosts an Outreach session each week
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“There are many opportunities to develop the service further in the future by expanding business banking to offer the complete range of Post Office services, to supply more government information and to partner with other services such as the library service” . To be able to do
OUTREACHES this, Michael suggested that the Mobile Post Office Horizon equipment needs updating, current equipment having far too many wires and connections as well as many other issues.” He added, “We also need better arrangements with Royal Mail for collection of mail as by the time it is taken back to the core office the last collection has already been picked up.” Certainly at the RSA we find that for many customers access to an Outreach is a lifeline, enabling them to access key Post Office services without the need to travel, albeit on limited opening times and without the complete range of Post Office services.. Whilst they would ideally like an extension of opening hours and the full range of Post Office services, they usually realise that this would not be sustainable with the number of customers that use the service and are very grateful for the service they do have. Like sub postmaster Michael Carnall, they would like to see greater access to government services and information and access to a wider range of business banking.
The RSA view Outreaches make up a significant proportion of all POL outlets in rural areas and the RSA are aware of several places where there is a demand for the service but no sub postmaster prepared to provide it. This includes some locations where the existing operator of a PO Local wants to relinquish it for financial reasons and
instead have an Outreach service based in their shop. We would expect more Local operators to consider this option if the introduction of the National Living Wage increases their wages bill. It is clearly very important that Outreach operators receive sufficient remuneration to make it worth their while to provide this valuable service. Issue 33 ● Spring 2016 ● RuralRetailer 29
Newspapers & Magazines...
MANAGING THE NEWSPAPER Newspaper and Magazine sales have generally been in slow decline for some years, but for a significant number of rural shops, this product group can still make up 20-25% of all sales. There is still money to be made from it if you have the right controls in place to manage the business efficiently and keep costs down. An EPoS system that manages newspaper and magazine titles by issue, from delivery from the wholesaler to claiming credit on returns is a vital business tool to help you do this.
on time, then it can be very difficult and time consuming to stay on top of what is coming through from the wholesaler. Add in the need to keep track of shop saves and home news deliveries (HND) changes, particularly in peak holiday seasons, then paper systems can easily start to creak at the seams. Modern EPoS systems can provide a crucial tool to manage this category. An EPoS system connected with your news wholesaler’s computer can download the delivery quantities each day, add new titles with the correct cover prices and update prices where necessary.
Keeping Track At its most basic, you need to ensure that you are selling the current issue of each title at the right price. Add in the complexities of daily deliveries, constant cover price changes, not to mention the importance of getting returns back
This then enables your system to manage the sales of that issue of the title, allocating the quantities required for shop saves and HND, and then crucially to alert you when remainders of a title need to be returned. This saves you a lot of time and the hassle of trying to keep a manual system up to date. It also reduces mistakes, ensures you do not miss credits on returns and also enables you to provide better service to your customers.
Integrated Home News Delivery / Shop Saves In recent years, many village shops have discontinued their delivery services and the introduction of the National Living Wage will no doubt make more retailers review whether this service is really profitable. However, a well run Home News Delivery and shop saves service can be a good source of a regular income, as well as driving potential customers to your shop and offering a valuable community service.
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& MAGAZINE CATEGORY Good control is essential if these services are going to be viable. Paper rounds and News accounts on a manual book or other paperbased system can cost you in both time and money. Often you end up working for far less than the National Living Wage per hour. The hassle of dealing with holiday stops, the scrappy pieces of paper, the sheer time taken to administer paper-based systems, all discourage shopkeepers from wanting to treat this side of the business as a priority. Too often there is no incentive to go out and win new customers or even to strive hard to retain existing customers. However, the right modern EPoS system does put you in control. With fully integrated news control, you can manage each one of your customers’ accounts quickly and efficiently.
Changes are easily recorded, so you order the right quantities of each title, everything gets billed correctly, you can send out invoices / bills to customers with the touch of a button and keep track of slow payers. At the RSA, we believe that any store with a significant news and magazine business should at least look at the options available to them. Our partners at REPOSS are leaders in the provision of these systems to independent retailers and they are happy to talk to any shopkeeper needing more information on the options. ■ For more information or a demonstration call 0845 0945 200 or visit www.reposs.com.
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