Debenhams and Tesco

It is necessary to start this blog post by reflecting that underneath the news stories and headlines are real personal stories in which individuals are losing their jobs.  Too often it is easy to focus on the store closure and ignore the human cost.  We need to remember this, as it underpins both the retail stories discussed below.

It is hard to know what to say about the saga of Debenhams and the antipathy there seems to be between the various parties.  At one level, given previous stories, it is hard to like Mike Ashley, but at least he is trying to put some money where his mouth is.  Whether this is because he sees a retail or a property play is another matter.  But in the case of Debenhams this is now moot, as he has been finally rebuffed. Though as I write seems determined to try to sue someone involved.

So, for now, Debenhams is in the hands of the lenders.  Looking at the business it is hard to be positive.  Buffeted by the changing consumer interests and behaviours, in large spaces hit by the excessive town centre rates charges, the business is in real difficulty.  But considering the stores (and experiencing them) it is difficult to see their point of differentiation and the reasons for consumers to visit.  Stories of in-store confusion and poor service abound.  They have been losing their way for a while.

The current proposition seems to be to try to close some stores and rationalise the portfolio.  There may be some benefit to be had on rents as well.  But none of this really addresses the fundamental problem of the attractiveness to consumers.  A smaller chain still faces the same problem. What are the plans to sort out the offer to customers? And can they be made affordable?

This week Tesco produced their latest figures and seem to be on track to come back fully from their problems.  Dave Lewis has altered what the business does and refocused operations.  Some of this has involved closing stores (and cutting plans for openings), reducing staff, planning to cut some counter services and simplifying operations.  There is more to it than this of course, but the point to make is that slash and burn and simply cutting stores is not the answer on its own.  Tesco still have a long way to go, and some of their initiatives will not work in all probability, but there is far more of a sense of trying to satisfy customers than is yet in evidence from Debenhams. It is a simple reminder that the business must run for the benefit of customers or they will go elsewhere.

Posted in administration, Consumer Choice, Consumers, CVA, Debenhams, Department Stores, Employees, Rates, Rents, Retail Change, Retail Failure, Sports Direct, Store Closures, Uncategorized | Tagged , , , , , , , , | 6 Comments

Vacancies and Store Closures

Over the last few years, vacancies and store closures have not been out of the news.  Whilst vacancy levels may have dropped off from their peak a few years ago, there is a continuation of stories about the closure rates of stores across the UK.

This week is no different as the annual Price Waterhouse report on store closures, based on Local Data Company data, was published.  It painted a picture of a large number of closures – indeed the largest annual total in the series.

Sky store closures

Source: Sky News

The detail is not what particularly interests me here (some of my reasons for this can be found in my blog and the coverage when the data were released this time last year).  Instead it is some of the interpretation around it that puzzles me.  The BBC Scotland news was not untypical; the story focused on what could be done to reverse the decline.  I emphasise reverse as this is the tenor of so much of the coverage, and of individual views. There is of course an irony in this coverage, as PwC report that

“11 of the 12 parts of Great Britain the research covers had the worst year in terms of net store declines since 2013. (store openings – store closures = net figure). The only place where net declines were not the worst in five years was Scotland. Here the closure rate at the lowest it’s been over that period, the 5th consecutive year store closures have fallen.”

So Scotland is an outlier in terms of a better performance, something recognized by the BBC online

BBC Shop closures

There are so many problems in seeing the issue as simply as reversing something.  Now I know pining for the second world war is a current national (English?) phenomenon and nostalgia (mainly for things mis-remembered or in case of many MPs never experienced) is a current single solution to everything.  But, really, we need to have a good look at ourselves and the issue and realise we have it the wrong way round.

  1. We can not reverse the decline except in very particular circumstances. But more fundamentally we should not be trying to – that was the Portas approach. Instead we have to realise the world has changed and imagine what retail (and town centres – NOT high streets) are going to be like.
  2. There are a number of fundamental reasons for saying this. First, we have spent 50+ years building retail all over the place.  This has not been accompanied by space reduction.  Closures are a function of over-capacity derived in part from our own actions.  Secondly we have privileged these new spaces (out-of-town and internet) in financial terms and until we do something about it we will not see any real change in trends.  Thirdly we have forgotten what towns are for.  Towns are not solely retail (or commercial) spaces but spaces for all forms of exchange and life.  Our economic system has altered our conception of spaces for the worst.
  3. In our rush to development and with our mis-aligned financial system we have also forgotten about the consumer and what they want. This has, is and will change and our spaces need to keep up with this.  Those with nostalgic leanings are often those first to the very formats that destroyed the previous stores.  We have also forgotten that individual actions end up being collective ones.

This all sounds rather gloomy and as though nothing can be done.  That is not my point as anyone aware of our work in Scotland can see (and no, I am not taking credit for the better performance in Scotland, especially given the data in the report is on only eight Scottish places).  I will though reiterate that this is a place/town problem and not a retail one.  We need to focus on assets, homes, digital, workspaces, greenspaces and so on in towns; the retail will follow the people.  We need to tackle the taxation and other legislation issues that tie the hands of town centres.  And finally, we have to imagine the town space and the ‘high street’ ten or twenty years hence and not constantly try to ‘reverse’ or return the situation to what went before.

The store closures we see today (and lets not forget the human cost under that statement) are an inevitable consequence of our store building, decentralisation and tax polices of the past.  The point should not to agonise over the closures, but do something about changing the playing field and improving the future. I would like to think we are starting that in Scotland.

Posted in Closure, Competition, Consumer Change, Government, High Streets, Local Data Company, Places, Public Realm, Retail Change, Retail Economy, Retail Failure, Retailers, Retailing, Scotland, Scotland's Town and High Streets, Scotland's Towns Partnership, Scottish Government, Scottish Retailing, Shop Numbers, Store Closures, Tax, Town Centre Review, Town Centres, Towns, Uncategorized, Vacancies | Tagged , , , , , , , , , , , , | 2 Comments

Scotland’s Towns – a decade of learning (hopefully)

As this post is published (3 April) I am presenting at an event held to formally launch Scotland’s Town Centre Boost Fund of £50m. The Town Centre Fund has been set up by Scottish Government and COSLA and aims “to support councils to ensure their high streets are more diverse, sustainable and successful in the face of changing and evolving retail patterns”.

£50m sounds a lot, but once it is divvied up amongst the 32 local authorities, it is not really (though it might be leveraged or be followed by more in future years).  It is thus doubly important to spend it wisely, both as public money and scarce resource.

We have of course been here before.  In 2009 the Town Centre Regeneration Fund pumped £60m of capital into our town centres. Best characterised as ‘a lesson in how not to spend public money’ one can ask whether the TCRF had a lasting effect?

But over the last decade the towns landscape has been transformed.  2009 was a time of CSPP’s Towns Group, the emergence of BIDs and the onset of austerity.  It was followed quite quickly in Scotland by the National Review of Town Centres and the establishment of Scotland’s Towns Partnership to agitate, collate and amplify the towns work going on and to help deliver the Town Centre Action Plan.

The tangible activities of STP have resulted in a series of tools and approaches, including USP, Towns toolkit, demonstration projects and so on.  Others have brought developments such as the Place Standard, the Town Centre First and Place Principle and more recently the wider concept of Scotland and Community Improvement Districts.

All this has been done in the teeth of an austerity programme, financial issues including for local authorities, continued and accelerating retail restructuring and wider sectoral, social and economic changes.  Yet, at this point I am probably the most cheered about the situation in a decade.  I feel strongly that across Scotland we are seeing a focus on locality and local assets (people and physical), a recognition of the complexity of places and thus the desire for and need to work in partnership (including public and private as well as social).  There is a sense from the ground up that we can deliver change and we are demonstrating this place by place.

We seem to have learned the lessons that we need data and discussion to drive understanding about towns/places (and not prejudices), that various models (public, private, social, entrepreneurial) can be used to drive fundamental change (i.e. no one size, top down, fits all), that multi-functional places need to be built around assets, people and events and that we need all to be working and pulling together.  A local focus and energy is critical.

So then, in the light of this uncharacteristic optimism, why am I a little nervous about the Town Centre Boost Fund?  I just hope that these lessons have really been learned and that this £50m gets spent wisely.  We need councils to use this money to stimulate wider investment in the selected towns .As Phil Prentice, CEO of Scotland’s Towns has said, we do not need more hanging baskets, pavement repairs and street furniture.  £50m can never solve the situation our towns and places face, but it can spark change, by focusing on projects that are:

  • Linked to a long term strategy or vision based on local distinctiveness
  • Maximising sustainability, impact and leverage by working with partners and repurposing spaces
  • Based on low carbon and sustainable interventions and strategic digital infrastructure
  • Acquiring assets to create new uses
  • That consider human and environmental infrastructure as well as hard investments.

So a plea; can we please look to the wider and longer term with this £50m and not to prettification or trying to save retailing?  If it looks as though it is working other funds may be generated from a variety of sources so this is really vital, place by place.

Post-Event Update

A packed house at COSLA heard from Susan Bolt of the Scottish Government, myself (as above) and Phil Prentice of STP about the Fund and the ambitions we have.  The most interetsing part of the session though was the “elevator pitches” from eleven possible partners for the Local Authorities spending their awarded money. The partners were chosen as they are already investing in town centres and by aligning the Town Centre Fund with their partner spend more potential could be unlocked. This “leverage funder” exercise included public and private organisations, though more of the latter are always welcome.

The buzz around the room, the discussions about details and applications and the real sense of opportunities being unlocked gives optimism, if not for this year, then certainly for the medium term. a really encouraging afternoon.

If anyone wants more details then please contact Scotland’s Towns Partnership.

Posted in Government, High Streets, Place Standard, Places, Regeneration, Retail Change, Scotland's Improvement Districts, Scotland's Town and High Streets, Scotland's Towns Partnership, Scottish Government, Town Centre Action Plan, town centre first, Town Centre Living, Town Centre Review, Town Centres, Towns, Uncategorized, Understanding Welsh Places, USP | Tagged , , , , , , , , , , , , , | 1 Comment

Herkku Food Market Delicatessen – Helsinki

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Visiting Helsinki for a couple of days (see blog here) allowed me also to experience a guided visit to the S-Group’s Herkku Food Market Delicatessen in the basement of the Stockmann Department Store.  Stockmann is an institution in Finland, being a grand, historical, store.  Visiting a country for a couple of days can be a recipe for completely misunderstanding the retail scene, but the chance to visit the new Herkku concept was a great opportunity.

At around 5k sq.m and c20k lines, this is not a small store, but it did feel quite intimate, if a little unclear as you descend the escalator.  The store entry sees a large bakery (bake-off) on the right hand side and fruit and vegetables on the left.  Both have high impact and an impressive range.  The potato cellar was interesting and seemed to be well used.

 

Following round the back (?) wall after the bakery are a series of serve-over counters including a pizza area with pizza oven and a fresh and juice bar.  All operate a queuing system, which can be entered and checked by mobile phone.  The displays and range are first class with a particularly impressive display of fish (the store has its own smoker).  A small bistro offers a range of light meals and is complimented by a rather small café and coffee shop.

 

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The core of the store has the normal displays of ambient product.  Some Tesco products (Finest) were notable and I did spend some time in the beer section, with its brewery like piping design.

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All in all it was a really interesting and attractive store.  I suspect is has a price premium and it is focused on a certain demographic.  We visited on a Friday lunchtime and it was busy, though the customers were on the older side.  Baskets and small trolleys dominated.  I could see myself shopping there – especially for bread and fish – but it would not be a main shop.

A few things struck me as curious.  The queuing system was interesting but the ability for mobile phone checking and the placement of some chairs to sit on near the fish display (see the prepared meals photo above) hint at some issues at certain times.  Some of the fruit and vegetable displays seemed a little unclear with displays on pallets rather than better quality “shelving” – on asking I was told they were ‘best sellers’ so had been put in a separate display.  I guess you know this if you are regular customers, but it puzzled me.

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I was also taken by the small size of the ‘restaurant’ (Bistro – great fish soup and prawns by the way) and the coffee shop.  Both seemed busy and at peak times I could see them being well under-sized.  When you look at UK stores with such concepts, they would be much larger in scale.

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It was also noticeable that a lot of in-store merchandising and display building was taking place.  Doing this at a peak customer day and time seemed strange.  Apparently the Stockmann ‘Crazy Days’ sales was about to happen.  This is a huge event and another institution and thus explained the trolleys, people and boxes in the aisles.  It still felt odd though!

Finally, given probable developments in Scotland (and perhaps the UK as a whole) I did notice the Deposit Return/Reverse Vending Machines near the entrance.  The fresh juice bottles (returnable) show the deposit and the return.  Whilst I didn’t linger long, I did see a few people bringing bottles etc. back for return.

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A really interesting couple of hours in a very attractive central urban store.  I hope it does well, though I suspect it is an expensive place to operate.

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What greeted me as I left my hotel room.

Posted in Consumer Lifestyle, Cooperatives, Customer Service, Delicatessen, Deposit Return Scheme, Finland, Food, Food and Beverage, Food Retailing, Format, Herkku, Merchandising, Restaurants, Retailers, Retailing, Service Quality, Town Centre Living, Uncategorized | Tagged , , , , , , , , , , , , , , , , , | Leave a comment

Policy Interventions for Healthier Diets: Insights from Scotland

Last week I was in Helsinki at the invitation of Hannu Saarijarvi to present two sessions to selected Finnish Ministries and to the S-Group. As noted before in this blog I have co-authored a book chapter with Hannu and Sonja Lahtinen on Transformative Food Retailing. Hannu is doing interesting work with loyalty card data and Sonja is completing her Phd on Transformative Sustainability.

The topic they wished me to discuss with policy interventions for healthier diets and to draw on the developments in Scotland and our review a year and a half ago for Food Standards Scotland. I have covered the Review in this blog before (and have presented on the review to retailers – Are retailers social engineers?) but these presentations were an opportuinity to reflect some months on and to bring things up to date with the recent consultation and other papers on this subject from the Scottish Government.

Below is a summary of what I said, prepared for translation into Finnish, and at the end of the blog you can find the overheads I used if you are so minded. Comments welcome via the usual channels.

“There is a crisis in obesity, diet and health amongst western and developed economies. Our food consumption has switched to a diet focused on unhealthy processed products. Our response to this has been to emphasise personal responsibility and choice and to focus attention on education and advice and then medical interventions when these fail.

What we eat however is much more complex than personal choice, being the outcome of varying personal, societal, cultural, government and business influences. It is a highly valid question as to whether personal choice can be exercised in what is an unfair environment. In retail stores this is seen clearly in the promotional, positioning, pricing and product mix that privileges unhealthy over healthy products. The outcome is both societal and locational health inequalities.

Government responses to date have tended to focus on better information, labelling, education, advice and promotion of the benefits of eating healthily and having a good diet. This has sought to rebalance the environment, by emphasising the benefits of a good diet, but has had limited success. It is now the time to consider if a more restrictive and interventionist approach to the environment, including retailing, is required. Rebalancing needs not just to involve enhanced spending by government on positive messages, but reduced spending by industry on the negative messages.

The diet in Scotland is poor and has not been improving. As a consequence the Scottish Government has begun to lead on intervening in the retail environment, as seen with restrictions on tobacco (displays and packaging) and alcohol (including promotional and sales time restrictions and most recently Minimum Unit Pricing) and positive support for healthy eating displays and information in smaller stores. In hospital settings, the Healthcare Retail Standard has restricted the amount and promotion of unhealthy products. At the same time UK government interventions, such as the Soft Drinks Industry Levy (the “sugar tax”) have also been introduced and seen product reformulation.

In 2017, we published our review for Food Standards Scotland on policies that could be developed to intervene in the in-store retail environment. The approach suggested was to focus on disrupting and altering the context and choice architecture faced by consumers in retail stores. By better understanding how retailers construct the in-store environment (“what consumers see”), the possible steps to intervene to improve the choice architecture and situational context can be understood. There are a range of possible interventions that can be developed, but real issues in the scope, scale and practicalities of possible policy, as well as its acceptance.

It is clear that the current situation is unsustainable and that emphasising personal responsibility in such an unfair context will not work. The environment need to be rebalanced and it is clear that this will not happen voluntarily.

Thus, between October 2018 and January 2019 the Scottish Government consulted on possible restrictions on promotion and marketing in retailing (and other out of home consumption sites) of foods that have next to nil nutritional value. This would constitute a ground-breaking set of interventionist policies on retail (and other sector) operations and if taken forward into policy would rebalance the retail environment. It would restrict the ability to promote (in the widest possible sense, and including price, place, position and visual merchandising) many unhealthy discretionary food and drink products.

There will be resistance to this approach, both from consumers (“the nanny state”) and the various industry sectors involved in the supply chains. Policy has to be drafted carefully to minimise unintended consequences e.g. on small stores, sectors and the internet. It is also clear that such policy alone is not the answer; food consumption is a multi-faceted construct and needs to be addressed accordingly. However it is clear that the current state is unsustainable and has to be challenged and that a reconstruction of the in-store environment would be a major step forward.

Scotland is not unique in having these issues, though it has distinctive problems. The steps that have been taken and are potentially in the pipeline are strong responses to these problems. But, they are necessary to address our health crisis. There are potential lessons for other countries, though they will undoubtedly have to be tailored for specific situations.”

The overheads can be found here:

Policy Interventions for Healthier Diets: insights from Scotland? – pdf here

Retailers as Social Engineers – pdf here

PS: Great place to present  – the House of the Estates

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Posted in Consumer Lifestyle, Cooperatives, Diet and Health, Food Retailing, Food Standards, Government, Health, Healthcare Retail Standard, Healthy Living, Labelling, Legislation, Loyalty Schemes, Policy, Retail Policy, Retailers, Retailing, Scotland, Scottish Government, Social Inequality, Uncategorized, University of Stirling | Tagged , , , , , , , , , , , , , | 1 Comment

An Aide-Memoire for Towns

Guest Blog by Matthew Hopkinson

Aide 1

In December 2018 I decided that to try to help Towns better understand the challenges they face; there should be something that could be an easy reference document. This came about from completing day one of a #CreatingBetterTowns Masterclass for the Local Government Association with 24 councils and from thinking back to my military days where as a young platoon commander I had a Tactical Aide-Memoire (TAM) that provided all the key information and considerations to do my job. Without it you would have been lost on many occasions especially when situations called for quick responses. From these two encounters the #CreatingBetterTowns aide-memoire was born! I see it as a document that will evolve and change, based on how it is used and how towns change over time.

The aide-memoire aims to address key areas that people involved in towns should understand, think about or consider. There are 13 core sections.

The definition of what a town is and what the National Planning Policy Framework says about Town Centre First and what the sequential and impact tests actually are.

Decision-making is critical and many towns and businesses do not understand where data lies or what data is versus information and evidence. From these one is able to derive knowledge as an individual and wisdom as an organisation. The former three will increasingly be machine driven and the latter two human – combining the two is called Augmented Intelligence.

Base knowledge of a town is key as it is the starting point and by this one needs to have a very good understanding of how residents, visitors and workers use it today and how they might use it in 5, 10, 15 years and beyond.

How one approaches many things in life can often determine how successful you will be and as such considering one’s approach is key. The two key approaches that I think should be considered is ‘Seek to understand before being understood’ (Stephen Covey’s 7 Habits of Highly Effective People) and always looking at why you SHOULD do something rather than why you SHOULD NOT.

Next up is being clear on what you are trying to achieve which is broken down into the What?, the Why?, Who is required to do this? And How will you go about it and measure that change?

Tied into both of the above is The Place Principle developed by the Scottish Government and COSLA which is a succinct summary of why collaboration is critical to success.

Like any business or organisation a Town should have a Vision which engages the heart and spirit which is executed through a strategy which covers the People, Execution and Structure required to deliver which then creates a plan with a number of objectives, each with its own set of milestones.

Clear and achievable objectives are critical to success and the aide-memoire covers a process for how to identify an objective, factors that influence the objective and ultimately how to select the best course of action to achieve that objective (the execution). It also covers the reality of what happens when things don’t go to plan – do you continue, challenge or cease? Throughout the process data underpins the execution through tracking change.

The final two related areas are on understanding what Place Marketing is and being clear about your unique proposition is and making sure it is aligned with the community. Reinforcing this is the increasingly important digital profile and footprint required to put you on and keep your light burning bright on the’ map’.

The physical space of a town determines its character is another key consideration. From how buildings are used and the increasing need for more diverse building uses to the public realm that people value, engage with and maintain.

The aide-memoire can be downloaded HERE.

All amendments, additions, deletions and extensions are welcome. Please contact me (Matthew Hopkinson) by email (matthewh@didobi.com) or via Didobi

Posted in High Streets, Places, Planning, Public Realm, Scotland's Towns Partnership, town centre first, Town Centres, Towns, Uncategorized | Tagged , , , , , , , | Leave a comment

The Next Ten Years of Grocery Retailing?

Given we are less than 10 weeks away from Brexit and the possible end of the grocery world as we know, writing a post about retailing a decade ahead seems foolhardy (spoiler alert; it is).  But bear with me.

Let’s assume that our UK politicians stop behaving like village idiots before March 29th. (yeah, I know). Perhaps for example they could, just for once, heed the voices of those who know what they are talking about.  In this case the retailers staring at the destruction of their supply chains with no alternatives being put in place that don’t jeopardise product supply and raise costs and prices, perhaps significantly.

So let’s forget Brexit and assume grocery retailing as normal is to continue.  The Asda-Sainsbury merger decision is due in late Spring now, but otherwise let’s assume things are as they are now.  Which is not a good thing! Food retailers are in quite a lot of difficulty; not across the board but in many cases. There is a sense that the “legacy” retailers need reviving. The question is how?

I recently read a December 2018 report by McKinsey on Reviving Grocery Retail (in the UK and the US).  To some extent it covered known ground, but it did it quite succinctly.

McKinsey note that the mainstream grocery retailers have been in an era of value destruction brought on by changing consumer habits and preferences, the emergence of aggressive competitors and of ecosystems (Amazon, Alibaba) and the onslaught of new technologies.  They recognise such trends are often present but point to the sheer pace and intensity of their interactions at this current time.

For McKinsey there are six areas where legacy mainstream retailers can fight back:

  1. Define a distinctive value proposition; convenience, inspiration, value for money
  2. Shape your ecosystem – and either go big or get out
  3. Put technology to work in every part of the value chain
  4. Win back lunch and dinner
  5. Rethink all of your real estate
  6. Innovate ten time faster.

Again, to a degree, there is nothing that new here, but instead it is the combination of these that is critical.  These six areas are really responses to the three drivers mentioned earlier.  And it would seem that for long-standing retailers it is much harder to adjust than for new and more focused retailers.

So what we seem locked into in the UK is a downward spiral of cost-cutting.  Where Tesco and its delicatessens and fish/meat counters being cut back and indeed the whole rationale for the Asda/Sainsbury merger. We have endured this cutting over quite a number of years now. Yet after all of this can we really say that any of our ‘leading’ food retailers has yet made real inroads to the competition or to these six imperatives? To some extent they are still in the denial game and playing the tunes of the new competition.

Are any of them inspiring, truly convenient for consumers and with innovation for the customer at their heart (and innovation which actually helps the customer rather than being for technology or cost cutting sake)?  I struggle to see where?  Even on real estate and the store portfolio where there has perhaps been the the most movement, has this been clear or focused enough yet?  Or simply rather serendipitous?

There is  a long way to go, both in terms of the actions needed by the leading players and in the freedom of action currently allowed to the discounters and others.  That’s why ten years ahead is foolhardy – we might just be at the tipping point for radical reinvention.  But only if we have the retailers able to grasp the existential threat they are under.

Now we just have to get out from under the other existential threat of Brexit and the harm it potentially can do.

Posted in Amazon, Asda, Brexit, Competition, Consumer Change, Customer engagement, Food Retailing, Property, Reinvention, Retail Change, Retail Failure, Sainsbury, Store Closures, Tesco, Uncategorized | Tagged , , , , , , , , , | Leave a comment