Then there were three?

British grocery retailing has for decades been dominated by a small number of large and powerful retailers. That remains the case. Over the period however the number of firms involved has altered.

In the 1980s we talked about the “big 5”. This became the “big 4” when Morrisons and Safeway merged and has remained that since. Until this month when the Kantar market share data for Aldi (9.3%) overtook that of Morrisons (9.1% – the smallest of the big 4). Is this a new “big 4” or a smaller “big 3”?

Regular readers will know that I tend to look at such market share data on an annual basis and see long term change as more critical that monthly swings. This though seems a big moment. It has been coming for some time and as indicated in my latest annual check, the Aldi-Morrison gap was closing rapidly, but also the Aldi-Lidl combined market share was larger than either Asda or Sainsbury on their own (and this market share stagnation/erosion was one of the reasons why there was a proposal to merge the two four years ago, which was blocked by the CMA). This reflects the sea change in British grocery retailing since 2008 and the ongoing switch to discount and smaller formats from larger supermarkets.

The monthly Kantar data that showed Aldi overtaking Morrisons tells a particular story. We might, given inflation, expect large monthly sales growth figures, but the disparities are stark (YoY change, based on the last 12 weeks):

Lidl +20.7%, Aldi +18.7%

Others (Farmfoods etc) +11.6%

Iceland +5.8%, Ocado +5.2%

Co-op +2.7%, Asda +2.2%, Tesco +1.9%, Sainsbury+1.8%

Symbols/Independents -3.1%, Morrisons -4.1%, Waitrose -4.7%

Morrisons are having a bad time and the discounters are having a field day as the cost-of-living rises. It is hard not to see the latter trend continuing given the pressures on consumers (inflation still c10% and food inflation higher, with both predicted to rise further), though discounters, as all retailers, will need to reflect carefully on price rises and how much they are able to pass on of their own cost increases. In that regard the report in Retail Week this week states that Aldi are raising prices faster than other food retail stores, which shows the tensions and pressures for retailers and consumers. Nonetheless it is hard not to think that Lidl (7.1% market share in these figures) will also overtake Morrisons at their current rate and the gap from both discounters to Asda and Sainsbury will narrow.

Asda did the best of the “big 3” and this is being attributed to their expanded Just Essentials range (the replacement for Smart Price), though so successful has this been that they are introducing purchase limits for individuals (It seems as though reactions to the colour yellow were outweighed by the low price). Sainsbury have had increased pay again (as have other retailers) reflecting pressures in the labour market. With energy costs for businesses unclear and price inflation remaining, retailers are under extreme pressure (as are many consumers) and managing this is a new challenge for many.

Breaking my long term rule, these monthly Kantar data will be worth watching in the coming months as significant shifts in spending appear to be underway.

And a final thought; if Aldi is bigger than Morrisons and Lidl closing in, what would the CMA reaction be now to any merger amongst the previous “big 4”?

Posted in Aldi, Asda, Brands, CMA, Cost of Living, Discounters, Food Retailing, Grocery, Kantar, Lidl, Market Shares, Morrisons, Retail brands, Retail Change, Retail Sales, Retailers, Sainsbury, Tesco | Tagged , , , , , , , , , , , , , | Leave a comment

The Cost-of-living Crisis and its impact on Retailers and their Customers

Source: Office for National Statistics

A few weeks ago, I posted a Q&A session I had done with The Conversation on the cost-of-living crisis. At the time I was working on a longer piece for the Economics Observatory. We wanted to wait for various data updates to appear in the w/c 18th July and now these are out my piece “How is the cost-of-living crisis affecting retailers and their customers?” has been published.

It ended up slightly longer than I had anticipated so I will not post it up here in full. Instead, like others of my Economics Observatory pieces you can find the links here, or for this piece you can go directly to their post using this link.

I will though make a few points about the subject:

All the evidence is pointing to the crisis now beginning to impact consumers, consumer spending and retailers. This is of course not uniform but there is compelling evidence of the impacts being particularly acute for lower income segments of the population. Disparities are being exacerbated rapidly, both amongst consumers and for demographic, transport and structural reasons, amongst communities, places and towns.

There is limited evidence that the pressures on inflation will decline quickly. Despite recent petrol price reductions, energy prices (and not just petrol) remain a concern and production costs are spiking worryingly across sectors. This has medium term consequences for consumers, producers and retailers, the beginnings of which are being seen in shops already.

Source: Andersons Agflation Index

Consumer reactions to these issues include reducing and switching spending within and amongst retailers as well as stopping buying. Retailers’ management of their operations will thus be even more critical at this time of 40-year high inflation, Brexit consequentials and record low consumer confidence, leading to these altered behaviours. Being alert to the pressures and the opportunities will be essential, as will acting quickly.

Source: GfK Consumer Confidence Barometer

We can also expect to see more public disagreements between producers and retailers, along the lines of the recent Kraft Heinz/Tesco spat. These will see products reformulated, reduced in size (shrinkflation) and a tougher battle between retailer and manufacturer brands. In non-food retailing there will be similar concerns, sometimes exacerbated by long supply chains and lead times.

Source: Shrinkflation in action on the Tesco home shopping app (9% cut in size; 8% rise in price)

The full post on the Economics Observatory site provides some wider context, support/sources for these observations and a broader discussion. Please take a look if the subject is of interest.

Posted in Brands, Brexit, Consumer Confidence, Consumers, Cost of Living, Costs, Economics Observatory, Inflation, Producers, Product Sizes, Retail brands, Retail Economy, Retailers, Shrinkflation | Tagged , , , , , , , , , | Leave a comment

Grocery Market Shares in Great Britain (GB) 1997-2022

It’s July and that can only mean one thing – it is time to update the grocery market share data for Great Britain. Forget global warming and the heatwave and the cost-of-living crisis (not really for either), this is the latest instalment of slow data for this series.

Regulars to this blog know that I have been using the Kantar GB market share data each July to build the market share series since 1997.  This isn’t about the last 4 weeks or the last quarter, which tend to fascinate so many, but the longer term shifts. I have commented on this data series before, prior to, during, and sort of post pandemic (though it is not really true to say we are post pandemic and even this year with its lack of restrictions is not unaffected by the pandemic), so this is not new, but the annual update always provides some thought.

As always, I recommend going to the Kantar source here and playing with their time line and tools, but also checking out their commentaries as various figures are released.

I tend to focus on two graphs; the first is the market share for the “big 3” and the discounters and the second the concentration ratios for the largest 3 retailers (CR3). The updated graphs are below.

GB Market Shares 1997-2022 (Source data: Kantar)
CR3 Ratio Grocery Market Share Great Britain, selceted years

For me, three noteworthy things leap out of this July’s data:

  1. The decline of 2 of the “big 3”: Whilst Tesco has rebounded in recent years to some extent, Asda and Sainsbury have been having a torrid time with ongoing decline in market share. Asda’s new owners in particular have a job on their hands. As such the CR3 level has continued its fall and at 55.7% is at its lowest level since the series began.
  2. The rise of the discounters: This is not a new story but has accelerated again. Aldi had a poor pandemic but both Aldi, and especially Lidl, are now firing on all cylinders and have hit record market share levels. Aldi did not quite catch Morrisons but is getting ever closer. For the first time ever Aldi and Lidl combined have a market share larger than both the second and third largest retailers in the “big 3” (16.1% compared with 13.7% and 14.9%). The march of the discounters continues.
  3. The pandemic is over: No, not in reality but in the case of market shares it certainly looks like. The disruptions of 2020 (and to a lesser extent 2021) have been washed away as patterns return. The Co-op is back to where it was in 2019, as is Waitrose. The big losers in this period are Asda and Morrisons. It is far too easy to say that this is a straight swap from these two to the discounters, as consumer patterns are more complex and volatile than that, but there is a grain of truth in there probably.

And the outlook?

One of the features of the Kantar commentary in recent months has been the switch they are seeing to retailer brands and away from manufacturer brands, as consumers try to combat the cost-of-living crisis. Trading “down” to retailer brands, shifting to discounters (and beyond the two Germans) and reducing spending overall, even on food, will all have an impact on individual retailers especially if inflation remains high.

It will require quite a shift in emphasis from Asda and Morrisons to fight back in this climate. And as market share continues to rise in the discounters and the “big 3 plus” focus on retailer brands, so manufacturers will be considering where they are best placed to capture or maintain consumer spend. It is going to be a volatile year.

Posted in Asda, Brands, Consumers, Cooperative Group, Cost of Living, Covid19, Discounters, Food Retailing, Grocery, Inflation, Kantar, Lidl, Market Shares, Morrisons, Pandemic, Private brands, Private Label, Retail brands, Retail Change, Retailers, Sainsbury, Tesco | Tagged , , , , , , , , , , , , , , , , , , , , , , | 2 Comments

Clapped Out

The last two weeks of June saw a mammoth effort in the University of Stirling to catch up on graduation events for our 2020 and 2021 cohorts as well as our 2022 graduands. Ten ceremonies over the two weeks saw close to 4000 students cross the stage to be recognised for their achievements. With perhaps 5 claps on average per student that means 20,000 claps before the speeches. You can perhaps understand the heading for this post.

Seriously though, well done to all. It has not been easy or straightforward in universities through the pandemic.

I did though miss one of the ten ceremonies. I slipped away to try to make myself presentable for the Scottish Design Awards, to which I had been invited as a guest of Page\Park, who had submitted our new Campus Central building at the University in the Education Building or Project category.

And yes, we won, with the judges noting that Campus Central “made sense of a disjointed inheritance” – something of an understatement in my (biased) view.

I was fortunate enough to be the chair of the Project Board for Campus Central and to see talented individuals from inside and outside the University do their very best to produce a project that we can all be proud of. Again, this was not easy, not only because of pandemic stoppages and disruptions, but also the complicated issues arising from working at the heart of a 60-year old estate and its myriad of existing buildings and histories, with previous builds and renovations often unrecorded. Many days brought many surprises.

The result – and this award as with the RICS Scotland award earlier – is testimony to all involved, but especially the architects and designers (Page\Park), the main contractor (Robertson) and their project team (see details on this Roberston link) and the project management leads in house and external (Gleeds).

You need to see Campus Central (and remember what was there before) to really appreciate it, but the description, photographs and a 17 minute video on the Scottish Design Awards site does give a flavour of our intentions and the outcome.

The project had three elements:

  1. The replacement of a road, roundabout and bus stop/idling area by a new public space and a relocated modern bus hub;
  2. The refurbishment and enhancement of the existing central atrium containing student and retail/commercial spaces, moving away from a thoroughfare to a dwell space and better integrating and improving existing facilities, such as the Students’ Union and individual and collaborative student study space;
  3. A new building on three levels to provide double the existing space for enhanced student and staff services and pulling all the elements at the heart of the campus together, including a new integrated entrance for the Macrobert Arts Centre.

I won’t labour the comparison, but for me aspects of this project combine some of my thinking about town centres and high streets. We reorganised the traffic flows and access and removed bad neighbour polluting effects, creating a public social green space in its place and at its core. Existing retail and commercial space was refurbished and enhanced (see our new Co-op for example) leading to multi- and extended use and enhanced dwell time. This approach also featured in the new build which tied together all the elements, linking the outside green campus spaces with inside space and focused on different uses for the same space over extended hours of operation.

Uptake and reaction have been incredibly positive, and the transformation is remarkable. We did not really need the awards to validate what we had done, but it is nice to win!

Posted in Academics, Architecture, Buildings, Campus Central, Design, Places, Reinvention, RICS, Scotland's Town and High Streets, Scottish Design Awards, University of Stirling | Tagged , , , , , , | Leave a comment

Shopping: the cost of living crisis – Q&A with The Conversation

In between graduation ceremonies last Friday (as we caught up with the pandemic impacted ceremonies of 2020 and 2021), I was interviewed by Steven Vass of The Conversation about the cost of living crisis and Shopping. The result is a Q&A piece which was published last Friday and which I reproduce from The Conversation below. Some images and a couple of links are not reproduced here, so please go to The Conversation source material for the full version as Steven intended it.

On top of rampant inflation, strikes, business gloom and rising interest rates, bad news about our shopping habits was all but inevitable. The volume of goods being sold in the UK is now falling, according to the latest monthly data from the Office for National Statistics (ONS), with food purchases the number one culprit.

Consumer sentiment is at record lows for the second month running, according to the closely watched GfK consumer sentiment survey. People are now more downbeat than in the depths of COVID or even during the global financial crisis.

With the UK economy already apparently in the early stages of a recession, we asked retail specialist Professor Leigh Sparks from the University of Stirling for his perspective.

What’s the big picture?

Times are hard as people start to feel the effects of the soaring costs of consumer goods, energy and petrol – it was £1.97 for a litre in Stirling this morning. If you’ve seen a decline in your benefits, or you’re paying more in national insurance, or your pay is not keeping up with inflation, your income has reduced. This has been a multiple shock for people – in a very short period of time.

In food in particular, patterns are beginning to shift. We’re seeing tighter budgets – for example reports of people putting things back at checkouts when they reach £30 in purchases. There’s some evidence of people switching to cheaper brands and stores. Convenience stores are doing far better than big stores, as consumers search for bargains and value. Also, ONS retail sales figures are often revised downwards.

Why are food purchases driving the drop rather than optional items?

Because the cost of living is hitting people very urgently and directly. Food is a much bigger percentage of retail sales than other categories, and the cost is going up rapidly. Anything grain-related is being hit by Ukraine. The farm-related agriculture index is showing ridiculous spikes.

Heatwaves in places like Spain are not helping. Some British facilities, which grow a lot of the country’s greenhouse tomatoes, peppers and so on, didn’t switch on this year because energy prices were rising so fast.

Overall sales volumes in non-food are unchanged in the ONS data, but it varies considerably between categories. Clothing has increased, though that may well be seasonal. It’s being offset by falls in household goods, furniture and departure stores – big purchases are being postponed.

How does this compare to previous crises?

The 40-year high in inflation and the consumer sentiment lows in a survey dating back around 50 years tells you these are very difficult times. It has also come on the back of the pandemic, Brexit and a decade of austerity. People are far less resilient as a result, so it’s affecting them more quickly than it might have done.

The energy price spike is comparable to 1973 and inflation was close to 20% in the early 1980s, but consumer behaviour is currently being affected by fears about what comes next. If the supply of products remains a problem because of the pandemic, war and global warming, what then?

The GfK data shows that consumers are feeling negatively affected already, but the bigger negative for them is the macroeconomic situation in 12 months’ time. They look at the sheer acceleration in the cost of living and worry it will continue.

Is consumer sentiment too negative?

There may be some excessive negativity around the macroeconomic outlook. At the Tiverton and Wakefield by-elections in the UK, lots of voters were reported on their doorsteps as saying that the government is doing nothing about the cost of living. It’s hard to know if that’s being over-emphasised by the media because it fits the present narrative, but people certainly have reason to worry.

The geopolitical situation might make things worse, particularly when winter comes and demand for energy goes up. I would also point to the massive use of food banks: the number of people struggling at the lower end has been steadily increasing, so they are starting from a low base.

Which retailers will be winners and losers?

The cost of heating, lighting and power for retailers is going up. And unlike for households, there’s no energy price cap to help businesses. So now that consumers are also cutting back, all the calculations for retailers about cost vs income are changing.

Budget retailers like Aldi, Lidl, Home Bargains and B&M are going to benefit. Among other big retailers, those that will hold up best will be those that give good discounts such as through loyalty cards or value/own brand products. In categories such as furniture, household and big purchases, there’s an opportunity for retailers offering good prices – Dunelm, for example.

Aldi is tipped to overtake Morrisons as the fourth largest supermarket chain in the UK.

Where it becomes difficult to comment on individual retailers is because you don’t know their stock position. Many might have stock hangovers from COVID, and are therefore carrying high capital costs. They will have difficult decisions to make about offloading it, so there could be some real bargains for consumers.

Do we expect collapses?

There has been a shakeout in recent years of companies that either built too many stores or had high costs or just weren’t that good. So there may be casualties or there may not be.

Most management teams have never had to trade through high inflation. How quickly teams adapt will be the difference between surviving and not surviving. For example, high inflation changes how you have to manage cashflow. It changes the price at which you buy stock, how long you are willing to hold it for and how much you are willing to pay for storage.

Is there an optimists’ case?

There are still people who have money and are looking for interesting things to buy. During the pandemic, we’ve also seen good performances from local independents, and people thinking local, acting local and spending local – those are bright spots.

More generally, if we get on top of energy costs, including petrol, that would be a big shift: it would make consumers more positive and bring down inflation, and therefore some of the narrative would improve.”

Posted in Consumer Confidence, Consumers, Cost of Living, Discounters, Food, Food Banks, Food Retailing, Inflation, Local Retailers, Office for National Statistics, Pricing, Retail Sales, Retailers, Shopping, The Conversation | Tagged , , , , , , , , | 3 Comments

Departing Stores and Place Vandalism

Loss of local identity is a powerful factor that can influence the social and economic wellbeing of a town. By preserving the fabric of distinctive historic buildings, particularly those as prominent as former department stores, residents can recover a sense of connection and continuity … The loss of these buildings concerns not just their inherent architectural and historic value, but the shape of daily life” (Departing Stores, 2022, p12-13)

Readers of this blog will be aware of the successful campaign to protect and save the Three Ships murals in Hull.  These wonderful pieces are iconic components of a place and their loss would have been place vandalism at its worst.  The murals were once part of a department store building.  Not knowing the store, I can make little comment about its merits, but department stores were often very well designed and built stores, architecturally interesting and important and became a key feature of a street or a town.

This came to mind recently as a furore continued around the proposal to demolish the Marks and Spencer store in Oxford Street and replace it with a new build mixed use development (see my earlier brief piece).  That Oxford Street store is iconic in its design and place and there was a (predictable) outcry.  From a distance it was hard to work out the balance of concern; was it for the beauty and design of the original, or was it disgust at the perceived mundaneness of the replacement? Whichever, the destruction of a sense of place was apparent. The saga rumbles on.

The questions the proposed demolition and rebuild anew in this case raise are of course not new.  How much of the past should we protect and preserve, and on what basis do we make that choice?  What I think as grand, important design may not be to everyone’s taste and vice versa.  Modern needs may not be suitable for older buildings (especially when we financially penalise developers for repair/renovation not demolition and new build) and we do need modern functioning activities. But it can be done (as this small example in Edinburgh suggests, and as the reuse of Frasers and Jenners on Princes Street shows on a larger scale)

There is something more significant about these grand department stores on our high streets.  They are so much more than just a building in that they have become a statement about and of place.  We have noted this before (in Hull and in the Co-operative Architecture across the country) but the Marks and Spencer Oxford Street debate re-emphasises this.

That is why the recent pamphlet by Harriet Lloyd from SAVE Britain’s Heritage on “Departing Stores: emporia at risk” is such an important and interesting read. It documents the importance and the risks to department stores across the country, focusing on their architecture, importance to place and the discussion of what has happened to them, town by town. This is so timely and significant.  These stores are so much more than an old shop (to be bulldozed and forgotten) being signifiers and glue for a place.  Destroying them, or not protecting and valuing them, is place vandalism.  We lose more than a shop in these cases; we lose the sense of place.  They are not the only component of a place, obviously, but they are an integral part.  If we value our town centres we need to look up and see what we are doing.  Our architectural and design history in our streets is so much more than mere buildings.

The pamphlet can be downloaded here or is available in hard copy. In just under a hundred pages it details some of the risks and the opportunities. Most of the pamphlet is given over to individual case studies, store by store and town by town (see contents list above). These examples are surrounded by discussions of the issues, the origins and role of the department store and the opportunities their preservation and re-use provides. There are a large number of excellent illustrations and photographs which illustrate the architectural, design and place significance of these buildings.

Posted in Architecture, Buildings, City Centres, Department Stores, Design, Edinburgh, Heritage, High Streets, Historic Shops, Marks and Spencer, Oxford Street, Places, Town Centres, Urban History | Tagged , , , , , , , , , , , , , , , , , , , | 1 Comment

Town Centre Action Plan Launch and Roadshows

It was good to get back out and about and to be in Galashiels on the 31st May for the launch of the Town Centre Action Plan.  Last Autumn I wrote about the Great Tapestry of Scotland and its stunning (now award-winning) setting in the heart of Galashiels.  It was great to hear how successful it has been and its role as a catalyst for further enhancements to the town centre.

The main business of the day was the launch of the Town Centre Action Plan by the Minister Tom Arthur.  He was joined at the initial part of the launch by myself and by the Chief Executive of South of Scotland Enterprise Jane Morrison-Ross.  We were then followed by an expert local panel, all ably chaired by Professor Russell Griggs.

Minister Tom Arthur MSP launches the Town Centre Action Plan

The whole event was live streamed by Scotland’s Towns Partnership and is available to watch again on their YouTube channel. There is also a short summary on the STP website.

To be honest the main presentations, and especially my piece, went over well known ground.  I spoke about how we got to this point (in towns and policy), the framework and approach of the revised Town Centre Plan and the importance of collaboration at local levels to implement the actions and produce real change.  Much of what I said could be predicted from my report and earlier blog pieces, so I am not repeating it here.

What was notable however was the enthusiasm and commitment of the local voices, groups, organisations and council to ‘grasp the nettle’ and to make a real impact in local towns.  Galashiels was a good illustration of this, with local groups working with South of Scotland Enterprise and Scottish Borders Council.

Is there more that could be done?  Of course.  A discussion on the unfair balance of VAT on new build and refurbishment/renovation chimed with so many people (as it did later in the evening with politicians at the Scottish Grocers Federation Convenience Retailing Cross Party Parliamentary Group), is one example of something the UK Government could act on quickly.

The main theme that shone through however was that of local commitment making a difference within a clear framework (with more strengthening and support for town centres to come).  That local activity is the focus of the series of roadshows on the Town Centre Action Plan being organised by Scotland’s Towns Partnership.  Confirmed dates (a mixture of online and F2F – and it was great to be back in person speaking ‘live’ in Galashiels) thus far are below and in each case a showcase of local action will highlight what can be done and the opportunities.

North East Focus

7 June                 2 – 3.30pm        Online                 

East Focus (as part of Scotland’s Towns Partnership AGM/Tea Party)

8 June                 2.30 – 4pm        Online  

Highlands and Islands

24 August          10am – 12pm    Inverness + Livestream         (in person attendance by invitation only)


31 August          10am – 12pm    Stirling + Livestream (in person attendance by invitation only)

South West

14 September    10am – 12pm    Ayrshire + Livestream (in person attendance by invitation only)

Posted in Government, Great Tapestry of Scotland, Local Authorities, Localisation, New Future for Scotland's Towns, Non-domestic rates, Place Based Investment Programme, Place Principle, Scotland, Scotland's Town and High Streets, Scotland's Towns Partnership, Scottish Government, Town Centre Action Plan, town centre first, Town Centre Review, Town Centres, Uncategorized | Tagged , , , , , , | Leave a comment

The Co-operative Group Results 2021

A few weeks ago I was asked to provide a short analysis on the Co-operative Group’s results for 2021. This has now been published in Coop News. I repost it below. If nothing else it shows the impact of the pandemic on retailing and the reverberations in performance vthat will still continue to be felt for some time.

“The period since early March 2020 has been a turbulent and traumatic one for everyone. Normal life has been disrupted through the onset and course of the pandemic and various legally enforced restrictions on movement and ways of behaving. Illness and death has affected so many families and communities. For organisations and businesses, and especially those dealing directly with the public, it has been a massive shock and disruption to normal activities and to pre-existing strategies.

Organisations have tried to keep going and have sought to adapt to the new and changing realities. In some cases, the trends and restrictions enhanced business models; in others trade completely disappeared. Even now, we are living in the aftershocks of the pandemic, with a high Covid-19 incidence in the population and consequent impacts on demand and supply and business operations, including distribution. “Living with Covid” is not as straightforward as some would make out.

The publication of the 2021 financial results for the Co-operative Group are thus of more than normal interest. Trading in turbulent times is not to be taken for granted. The pandemic affects the assessment of performance. What is the underlying operational and business performance and what are pandemic impacts, shocks or responses? Given the apparent endemic Covid-19 status, is our comparator the pre-pandemic “normal”, or do we accept that the world has been transformed and operations remain essentially short-term and reactive, so comparisons are less consistent?

To example the issues, the 2021 sales figure for the Co-operative Group is £11.2bn. This is a decline from 2020 when the figure was £11.5bn.  On the surface this is a disappointing level of trading. But 2020 was a very strong year for all locally focused and convenience stores as lockdowns, forced business closure in hospitality and other restrictions favoured the local store model. The last pre-pandemic year (2019) saw sales at £10.9bn which was itself up from £10.2bn in 2018 (due in part to the NISA acquisition). What is the appropriate benchmark year given all the implications of a continuing global pandemic? More critically perhaps what should our expectations be in this changed world? Should we be disappointed in not holding on to the sales gains of 2020 or should we accept it was never likely to be sustained as consumer behaviours in the UK returned “closer to normal”?

Table 1 (provided at end of the post) provides the numbers for the (self-identified) Key Performance Indicators (KPIs) for the Group. In this table the data is taken back to 2018 to allow for a short pre-pandemic trajectory as well as two years (differentially) impacted by Covid-19.

At the general level the data in the table, and especially the purely financial ones, show two issues.

First, on every measure the results show that 2020 was an exceptional year for the Group. Sales and profits boomed, and debt levels were reduced. The controversy over the decision not to return business rates relief needs to be seen in this light (in 2021 business rates relief was not taken and furlough relief was returned, showing how comparisons are difficult). What caution there is for 2020 comes in the non-financial figures, where active membership numbers fell, as did rewards spending (though the base rate reduced in October 2020).

Secondly though, there is the question of considering 2021 against this 2020 performance and/or the years before. Here the story is not as positive, with figures generally returning to at, or below, the 2019 and 2018 levels. Whilst as noted earlier, sales are greater in 2021, all profit measures are lower, and debt is now much higher. A 10% increase in Group sales over three years has not really resulted in any overall financial improvement. Non-financial measures continued to decline, as for example in active membership, rewards and colleague engagement.

Almost 69% of the Group’s sales are in the food sector, with a further c15% each in the wholesale and the federated components. Food remains the driver of the Group’s performance, though the dependence has fallen from almost 80% in 2017. The store estate is being remodelled (50 new stores in 2021, plus 87 stores renewed, 25 relocations and 15 extensions), but overall store numbers fell (by 29) and sales floorspace is at its lowest level in at least five years. There have been investments in branding and pricing, supply chain (a new depot) and colleague remuneration (Real Living Wage), whilst Covid-19 costs continued (c£30m) in 2021.  The supply chain though has struggled to deliver, especially in the latter half of 2021, possibly due to new systems (issues with that described as “inevitable”), but also to wider global pandemic related issues and the consequences of dealing with fluctuating production and demand. The amount of stock in the Group had been reducing (from 16.4 stock days in 2018 to 14.6 in 2020), but it increased in 2021 (to 16 stock days). The e-commerce food business saw tremendous growth (reaching £200m sales in 2021 from £4m in 2019) but from an exceptionally low base. Roll-out of store focused e-commerce, micro distribution hubs and the links with Deliveroo, Starship and (more controversially) Amazon and Amazon Prime, would seem to be sensible given the pandemic surge in the local and online channels. The strategy seems clear.

In presenting the 2021 results, the Chairman accepts that this has been a challenging year but claims the “continued planned strategic investments mean… (we) are well placed to ride out the storm and prosper beyond”. The incoming Chief Executive pointed to the long-term strategy, investment in the business and the values of the Co-operative Group as being the building blocks for the future.

However is the Co-operative Group with its focus on the local community and convenience market as well placed as it might be, or thinks it is? This was clearly working in 2020 as circumstances swung in the model’s favour. The beginnings of a return to previous patterns, as well as continuing disruptions, would have been expected to have had an impact, but it might have been hoped that a stronger 2021 operational performance should have been generated. The figures and comments point to some internal operating issues in addition to the impact of wider macro sector effects. Uncertainty hit cashflow and stockholding, adding to debt and losing sales.

The competition is not going to lessen in the sector, so it is critical that elements under the Group’s control are made as effective as possible. If 2021 was, in the words of the outgoing Chief Executive “an important and defining year”, then it is hard not to see 2022 as being even more so. Yet, of all the years, 2022 is not likely to be a stable one. The pandemic has not gone away nationally or globally. The full implications on supply chains of Brexit remain to be felt, though they are becoming increasingly apparent. The war in Ukraine has impacted peoples’ lives there, and caused a range of human and business impacts there and elsewhere, the full dimensions of which remain unclear.  Together these are producing massive concerns over high energy prices, disrupted supply and cost pressures leading to increased inflation, exacerbated by UK government induced lowering of disposable incomes for many consumers. Individuals, communities and businesses are being pressured through the impact of rising costs and altered demand. The business need to be agile, resilient and flexible in the eye of these various challenges is heightened, but in an environment the like of which most have not experienced either as individuals or business managers.

It is not clear how people will react to these pressures, problems and difficult times. One would hope that values and strengths of communities and locales would come further to the fore, as they did in the initial stages of the pandemic. In this regard the Co-operative Group is more than a food retailer of course, and such values and behaviours help people and the planet. The financial performance is obviously important to allow this investment in operations and activities within this wider context (Co-operating for a Fairer World). More than ever the balance between these aspects of the Co-operative Group, as exemplified in the Chief Executive’s reflections on 2021, needs to be borne in mind. In the final analysis though, if business operations do not produce enhanced results, then difficult times and decisions lie ahead.”

Table 1: Key Performance Indicators for the Co-operative Group

Underlying Pre-tax Profit (£m)£-32m£100m£35m£33m
Underlying Operating Profit (£m)£100m£235m£173m£97m
Debt (incl leases) (£bn)£2.4bn£1.97bn£2.16bn£0.8bn
Debt (excl leases) (£m)£920m£550m£695m£764m
Revenue (£bn)£11.15bn£11.47bn£10.86bn£10.16bn
Operating Profit (£m)£64m£207m£173m£90m
Profit before Tax (£m)£57m£127m£24m£83m
Active Members (mn)4.2m4.3m4.6m4.6m
Community Reward (£m)£19m£13m£11m£12m
Member Reward(£m)£21m£45m£57m£60m
Members Sales in Food (%age of total)29%30%33%33%
Colleague Engagement (%age)72%76%76%76%
Posted in Availability, Community, Cooperative Group, Cooperatives, Covid19, Food Retailing, Membership, Retailing, Supply Chains | Tagged , , , , , , , | 2 Comments

Why is Historical Research Important in Marketing?

A couple of years ago I was invited by a good friend of mine to contribute to an inaugural special issue of a journal. Professor Kazuo Usui (Saitama Gakuen University), a frequent visitor to Stirling and Edinburgh (where he is an Honorary Professor) was putting together a special issue for a new journal – the Japan Marketing History Review, supported by the Marketing History Society of Japan.

It was one of those invitations; you feel honoured but not a little apprehensive given the topic (Why is historical research important in marketing?) and also the calibre of those being approached. Then the pandemic hit, deadlines slipped, other things took over and visits between Japan and Scotland were halted. Eventually though the project got back on track and I (we) put together an article which we were very pleased to have accepted.

In April 2022 the issue has finally been published and as this is an open-access journal, all the papers are available to download. Our paper – more on this later – can be downloaded from this blog, as can the full list of the issue contents from here.

The contents list makes for interesting reading with the issue having brought together some serious scholars of marketing and retailing history (whereas I dabble in it). It is a privilege to be in the same collection as Kotler, Keep, Fuat Firat, Witkowski and Belk amongst others from the USA, as well as leading Japanese and European scholars on a range of historical topics in marketing and retailing. As can be seen from the contents there are four specifically retail papers which caught my eye, and I am looking forward to reading.

Our paper (Maria Rybaczewska and myself) entitled “Twenty-one years of going shopping” considers the difficulty of placing the consumer voice in the business, corporate, marketing and retailing history space. The paper takes a serendipitous donation of a long-run (1977-1999) series of shopping diaries, reporting one individual’s every shopping trip and retail purchase over this period. This is an unique (as far as we know but happy to be correcgted and to accept further such donations to the University) but authentic data record of “everyday shopping” in a period in the UK marked by rapid retail (and social) change. We have much more to do to analyse the diaries, but this paper hints at the gaps in our knowledge, the potential, and the difficulties. You can make up your own minds about the value of such a source and future analyses.

More importantly though the other papers collectively make a fine edition and address in novel and interesting ways the question posed in the title of this post. Historical research is interesting, fascinating and informative for marketing and for retailing, as these authors and papers demonstrate.

If you are at all interested in this broad area, you should check out the website hosting the papers in the special issue.

Posted in Academics, Consumer Change, Consumers, Data, Diaries, Food Retailing, History, Retail Change, Retail History, Retailers, Shopping | Tagged , , , , , , , , | Leave a comment

The Small Business Bonus Scheme

One of the recommendations of the 2017 Barclay Review of the Non-Domestic Rates System in Scotland was that an evaluation of the Small Business Bonus Scheme (SBBS) be undertaken. Five years on, it has finally arrived, all 232 pages of it. The Fraser of Allander Institute has laboured mightily – and lengthily – to produce its evaluation. And whilst not being unkind, after all that the answer is that we don’t know what, if any, effect the SBBS has. It is not that there is no effect, we do not know if there is one.

Review of the Small Business Bonus Scheme – available for download here

Now this is not the Fraser of Allander Institute’s fault. In glorious detail the authors take us through both the data difficulties in addressing their core – and on the surface simple, – questions and the extreme and frequent ways their research was delayed, particularly by the Covid19 pandemic and the lockdowns and work disruption caused. One can only imagine and sympathise with their frustrations, which come dripping off the pages.

The evaluation set out to find out who is getting the relief, its impacts and wider benefits and costs and if the current scheme could be improved. This matters, because non-domestic rates generally are a hot topic of contested debate (not least by me, though the 2020 Parliamentary “spat” showed people were interested, including in the SBBS), the SBBS is seen as something of a flagship scheme for small business and that in 2020 £279m was spent through the SBBS on qualifying businesses.

The six key findings of the Review are:

  1. Coverage of the SBBS in broad and usage has increased over time
  2. There is no evidence of enhanced outcomes from SBBS, but businesses perceive there to be benefits
  3. Businesses with similar rateable values vary substantially in size and other attributes
  4. The eligibility thresholds in SBBS are reflected in “bundling” in the Valuation Roll
  5. Data challenges preclude drawing robust conclusions
  6. Suggestions for data collection improvement to facilitate future evaluation are provided.

There are five recommendations which I won’t repeat here. Fundamentally the say don’t start from this position, we need a business not a property register, undertake appropriate, preferably legally enforced data collection on a regular basis and look out for any “game-playing” (my interpretation).

Now this all goes to reinforce a number of my prejudices. My concern about data is long-standing and the suggestions here, especially if geo-location is part of the data and the register being at least partially public, would be a huge step forward.

Secondly, this would also encourage a focus on the aims of this policy and a possible revision. Could we see a revision of SBBS made simpler for users and based on geography, size, sector and organisation type to help meet our wider national ambitions? After all the Barclay Review of five years ago did suggest a closer look at the Northern Ireland system (mentioned again in this Review) which provides a tighter focus.

Finally, hopefully it is another nail in the apparent untouchability status of the current approach to NDR – they really are unfit for so many reasons and purposes. We have to ask the questions Barclay was not set up to do and really question the relevance, balance and appropriateness of NDR’s as part of the fiscal mix and levers. Supporting particular types, sizes and locations of organisations would be so much more effective if we did this. Though to be fair to Barclay it did raise the the potential of introducing primary legislation enabling councils to use NDR to tackle out of town development and online development – this of course has not been taken up. With the recent publication of the Scottish Government and COSLA response to the Town Centre Action Plan Review which commits to looking at NDR and whether it is aligned with government policies, most notably in terms of the climate emergency, perhaps things are changing. As I have noted before for every encouragement (revised and targetted SBBS) there should be an equal discouragement (revised and targetted NDR system).

Posted in Barclay Review, Government, Internet, Large Store Levy, Legislation, Local Authorities, Non-domestic rates, Online Retailing, Out of Town, Public Policy, Rates, Scotland's Town and High Streets, Scottish Government, Small Business Bonus Scheme, Small Shops, Tax, Town Centres | Tagged , , , , , , , , , , | Leave a comment