The Perfect Storm?

Are the storms getting worse now that someone has decided to give them names? Certainly by the time Frank had finished with my garden, I’d pretty much got the swimming pool I always thought that I had not wanted. And I was one of the lucky ones.

One abiding memory for me for the last month or so has been seeing retailers on the news pumping out their shops after yet another flood, sometimes for the second or even third time this winter. Ruined stores, stock and livelihoods; both large and small retailers badly affected. With Christmas being so important for retailers in trade terms, for some, this will be the final straw. And with households concerned with their own homes, there has been little festive cheer in many places. A dreadful end to not a good year in retailing.

The run-up to Christmas is inevitably met with various media stories about its importance to retailers and predictions over whether it will be a good or bad Christmas. Equally inevitably, it is almost always both – for some retailers it is good and for others not so good, or downright bad. Springboard may have got it right when they reported that retailers they were talking to spilt one-third saying it had been good, one-third saying it had been bad and one-third somewhere in the middle. It is generally always thus, though the percentages may alter a bit. There are always such seasonal winners and losers.

But this year may be the point of no return for more retailers than before, and not just because of the weather impacts, though they have really had an effect on some. The almost incessant sales, the embedding of discounting,the continuing increasing costs burden,  the ongoing (accelerating still?) shift to online, including over the angst and trauma for retailers that was or was not Black Friday (day, weekend, week, month, whatever) and then the weather; all combine to make retailing less predictable and Christmas retailing much more significant but also much more volatile than before. The warmest and wettest December on record does not do much for some retail sectors and stock overhangs could be extensive. Great for consumers perhaps, if they are still in the mood, though bad for business. But performance all depends on how well organised and managed any individual retailer is, their ability to buy and sell at the right prices and to maintain cost control together with service and interest. A dose of good luck would also not go awry.

Like the weather, retailing is changing, and some will be better off than others for the change. But, has mainstream  (legacy?) retailing been too reactive (or dismissive in some quarters) or in denial for too long? We still have too much retail space in many parts of the country and too many uninspiring offers being outcompeted on the internet and on price. The stronger retailers have altered their mix and their approach to stores, stock, staff and customers. There remains though a long way to go, and retailing will continue to have to adapt to the new realities of the business and of consumers.

This week is the beginning of the Christmas “results” season. Comparability will be in short supply again as each business seeks to put its best foot (spin) forward. Winners and losers there will be; and the gap between them may be getting bigger. But for all, we might have to re-assess our expectations in this new world. Survival will be a close call for many retailers, small and some large. The retail perfect storm for 2016 may have begun with Frank, but that won’t be the last name we’ll remember.

About Leigh Sparks

I am Professor of Retail Studies at the Institute for Retail Studies, University of Stirling, where I research and teach aspects of retailing and retail supply chains, alongside various colleagues. I am Chair of Scotland's Towns Partnership. I am also a Deputy Principal of the University, with responsibility for Internationalisation and Graduate Studies.
This entry was posted in Black Friday, Christmas, Closure, Consumer Change, Costs, Discounters, Internet, Margins, Retail Economy, Retail Failure, Sales, Stock and tagged , , , , , , . Bookmark the permalink.

3 Responses to The Perfect Storm?

  1. John Orchard says:

    Leigh,
    As usual I agree with your analysis, especially about the winners and losers and that it was always thus. My reason for commenting is to take further your thoughts on Storm Frank et al.

    Mine is an odd background; I first became a retail manager in 1974 having already spent my youth and childhood living with my parent’s retail business. In 1999, having spent twenty years running the operations side of a small privately owned department store business, I set myself up in a specialist retail business which opened in October of that year. As a regular outdoors man I had already noticed that we were experiencing irregular high intensity rainfall in short storms during the summer period along with associated flooding events.

    In my particular trade the peak period was not at Christmas but at the point where the schools broke up for the long summer vacation. On the last Friday in July 2000 a high intensity rain storm commenced in my neighbourhood at around 14:00 hours. The resulting flood caused what might be described as akin to a tidal bore to flow through my store and across my newly laid laminate flooring, The latter then lifted creating a secondary health and safety issue above that of the flood itself. In direct consequence to this even I lost everything including my home; so I empathise entirely with the folk around the UK who are today suffering from flooding.

    I did find myself work and became a part-time degree student in my mid-forties. I took on the subject of human geography with a view to (amongst other things) learn about flooding, it causes, its impact and what may or may not mitigate its effects. I graduated in 2006, having witnessed further extensive flooding events during 2001, 2002, and 2004. The year after my graduation, in 2007, there was the series of flooding events that prompted HM Government to set up an enquiry which created the Pitt report. I decided to make a more detailed study of the issues of flooding as they relate particularly to retailers and concluded that this was a sector that was more than especially vulnerable to flooding events. Consequently I chose to initiate a study to examine to what degree retailers understood or prepared for flooding events. Bearing in mind that the Environmental Agency in that year stated that a business was then four times more likely to be flooded than they were to suffer a fire – yet we have mandatory requirements to protect life and limb and to some extent property in cases of fire, but absolutely no requirement to protect against flooding.

    As a geographer I was aware that retailers in traditional town centres were very often more ‘at risk’ than others by virtue of the ancient desire to establish towns at crossing places in river valleys or otherwise along highways that followed these valleys. What I could not tell, in the light of the Pitt report, was what retailers were doing about it. I developed a questionnaire with which to
    carry out a survey of retailers that had already experienced a flooding event, which I made available on-line and by personal interview. I was shocked.

    The majority of respondents felt that they were not responsible for any kind of protective action for their businesses or the people associated with them. They blamed the ‘authorities’ for the event and the lack of protection. They were almost universally unable to describe the probable cause of the flooding, beyond a vague “it was heavy rain”. In consequence of all these things they did not believe that they had any responsibility to take action, and in any case they were mostly ill-equipped with the knowledge to plan or carry out any such actions. In some further questioning after several more recent events I can say that this situation has not improved much.

    Anecdotally I spoke with one retailer whose reason for not putting any sort of plan into effect was that he had already been flooded, and was working on the basis that lightning did not strike in the same place twice; ignoring entirely that it had already happened to him twice. I monitored the impact of a well-known shopping centre that suffered a nearly six feet depth of water at their lowest shopping level. They cleaned and re-opened very quickly, but without, in my opinion, doing anything to mitigate future events, and also without completely sanitizing the sub-stratum which I believe will be an issue that comes back to haunt them.

    I have been in conversations with the insurance and banking industries, who feel that they are dealing adequately with the problems associated with flooding – but with no strategy for ensuring that people are safe in or near premises that are vulnerable to flooding. HMG just seem to think that a few more miles of built defences will be the panacea, without truly acknowledging that statistical certainty that our weather system is changing and that these events will become more regular and more intense – at least until the ice cap melts entirely in the Arctic and we lose the warming effects of the Gulf Stream – at which point we will have greater ice accumulation and the rather different flooding impact of seasonal melts.

    I am astonished when talking to people in responsible positions in local authorities, retailers and others where they may entertain many members of the public. They have just one evacuation plan – that’s the one for a fire event. I pointed out to more than one of these that the assembly points in their car-parks were likely to be over two metres deep in water and hardly the safe haven intended! They had not considered flooding mitigation within their buildings, or safe zones on their upper floors. The retailers that I have heard smugly tell me that they won’t be affected by flooding are too legion to count – ignoring the fact that a shop does not need have had water ingress to have its entire business stymied – staff, customers and goods not being able to get to the store; electricity and other utilities compromised disabling electronic equipment, toilet facilities and other similar matters.

    To my mind the only worry is that no-one seems particularly concerned or empowered to carry out sensible planning and other actions to deal with the effects of flooding. Whether a business gets wet or not, every business can be vulnerable to flooding events – even if it is because their primary supplier is inundated fifty miles away – anyone without a plan will suffer!

    So, my answer to your question is that these things will become more regular and probably with noticeably growing intensity in the short to medium term. Is it possible to prevent floods -no, and any amount of spending on ever great flood defences will not stop floods, but rather it will deflect the problem elsewhere, presumably leading to ever greater calls to build still more defences. What I have come to believe is that whereas we cannot stop floods, we do already have the technologies for mitigating all but the very worst effects of flooding events (where the foundations of a building are washed away!), so that any business might be interrupted for the least possible time and could return to trading quickly – but this will require investment and a culture change in shop planning. I was mightily impressed, for example, in the man in his fish and chip shop who had been flooded more than once. He invested nearly £50,000 in a mechanical lifting device to raise his entire fish frying range in a matter of minutes to around 2 metres.

    The insurance industry needs to be more proactive in seeking solutions without being bullied into action, and the banking industry also needs to consider its position as bankers and lenders of first resort to retailers.

    • Leigh Sparks says:

      John

      Thanks for taking the time to comment so fully and for sharing your personal experiences. You have clearly been affected more directly and thought harder about this than have I. I was particulary interested in two dimensions of your comment

      1. that we have statutory fire defences but not statutory flood ones. I guess this is to do with comparative risks and speed of events. But floods are becoming more common and can happen very quickly. Maybe there needs to be more of a rethink?

      2. The balance that you point to between prevention and mitigation and that relative volume of each. Again, this seems very a very sensible area to look more closely at.

      I notice that the Scottish Government is to provide relief to shop owners affected by the floods in Scotland and in the announcement pay tribute to the community efforts that retailers and other businesses have made over the last couple of months and weeks. Whilst I still think there will be real issues for many retailers and businesses for some time, it is good to see that the efforts made are noticed and recognised. In my original piece I underplayed this role of retailers, whatever the state of their business, and I should not have.

      Leigh

      • John Orchard says:

        Thanks for the response Leigh. I perhaps failed to emphasise the point that retailers are amongst the most vulnerable businesses in terms of flood risk. They primarily operate from the ground floor, and are therefore obviously vulnerable to water ingress into the core of their business. They are further particularly susceptible to disruption of roads and public transport; so any flooding event that disrupts roads or bridges anywhere between the store and its customers or suppliers will affect the business. Which means that floods in Carlisle may well have had an impact on retailers in Ayrshire if they were reliant, for example, on a Carlisle based supplier of transport contractor.

        I heard the First Minister’s announcement of the financial help for flood affected retailers, and I find myself reacting with some ambivalence to it. There is no legal requirement for governmental authorities at any level to provide support to businesses in these circumstances. On the one hand you must applaud the First Minister for her initiative, but on the other hand wonder whether this is a Pandora’s box. By making this gesture it will assuredly reinforce in the minds of many small businesses that this kind of support is a right with a commensurate raising of expectations across Scotland and possibly in England and Wales also. It might have been more sensible if the First Minister had made these grants conditional, that is to say, with a requirement that they use it to underwrite the costs of sensible cost-effective mitigation actions against future flooding. My guess that as things stand, these businesses will be no more prepared for the next flood than they were for this and governmental spending will not run to a regular subsidy.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s