Under the headline “Retailers urge Holyrood policy change to stem decline”, Scotland on Sunday on the 11^th September (article here) reported on a ‘call to arms’ from the Scottish Retail Consortium (SRC) arguing for more support from the Scottish Government for retailers.  This is a version of a theme the SRC has been pursuing for some time – the cost of doing retail business and the fiscal drag on the sector – though in this case more on the imbalance of costs between physical and digital and the changing structure of the sector.  The SRC probably didn’t write the headline nor the opening paragraph claiming ‘a severe haemorrhaging of Scottish retail jobs and shops’ but the turns of phrase were eye-catching.

My curiosity was piqued as I did not immediately recognise the data source. I blame the recent warm weather in Scotland for distracting me from the late August publication of the Scottish Annual Business Statistics 2014 (yes 2014, so we are talking “recent” data here). Please take care if you download as it is 292 pages of numbers. This source provides a time series from 2008 – 2014 at SIC07 level, disaggregated in various ways.

The Scottish figures for the retail sector are as follows:

Note that employment here is headcount (including self-employed, owners etc.) and not FTE or labour input.  There are also figures on GVA, but the article did not pick up on these, so I am ignoring them here.

These national figures got me thinking.  Their characterization in the newspaper article was as:

• “Severe decline”, “haemorrhaging”
• Worthy of policy to stem this decline
• ‘Unfair’ (my word) given the growth of the internet.

But, is this what the data tells us?  Four main things emerged from my mental gymnastics on the numbers:

1. The period covered is 2008-2014 i.e. effectively the period of the onset of the ‘great recession’. During this period Scotland lost 6.8% of its shops and 3.8% of its retail headcount.  But, and here’s the thing, during this same period sales on the internet as a proportion of all retail sales in Scotland rose from c3% to c11%.  Given this switching of behaviour should we not have seen a much bigger loss of stores and jobs?  Has physical retailing really been that badly hit?  Is this decline actually ‘severe’ or unexpected? We have in Scotland seemingly lost 10,000 jobs (actually headcount) in the six years here which cover the greatest recession we have ever seen and in internet retailing the fastest switch in consumer behaviour patterns ever known. This seems like a reasonable trade-off to me.
2. Linked to this, if we spent the period from the 1970 to the 2010s rapidly expanding retail floor space, which we did, then should not the adjustment in this latter period given internet switching and the recession be more than we are seeing in these figures? In other ways is the characterization as a “haemorrhage” valid?
3. Finally, I simply do not know how the internet is treated in these figures, if at all and could not find out in any of the 292 pages of the publication (I am happy to accept my eyes might have glazed over at some points and so I might have missed it, so please correct me if you can). The treatment of the internet worries me. If I buy a book online (heaven forfend), while I am in Newcastle, via say, the John Lewis website , but ask to have click and collect in the Stirling store, where is the sale logged? England, Scotland, Newcastle, Milton Keynes, Stirling? Have internet sales been captured  appropriately or at all  in these data?
4. The data also says Scottish retailing has grown over this period as a proportion of UK retailing turnover from 7.1 to 7.7% which seems at odds with other sources, for example the Scottish Retail Sales Monitor published by the SRC.  However if true, has Scottish retailing done that badly and why therefore would we need a policy change?

These data are interesting if a little perplexing, and raise a few questions.  It is clear, as the SRC state in the article, that we are in a period of structural change.  As yet, we have not fully understood either its dimensions/impacts or how we embrace it correctly in tax and other (eg data) terms.  Our levers are mainly on the sectors/places under strain, and in that the SRC is surely correct as seen in the taxation and rates issues.  We have to consider continuing and accumulating stresses on the sector, and that these data say nothing about profit and there could be tipping points/cliffs ahead.  Retailing is challenged, and I am not sure this has fully worked through the system yet.

The data should give us pause for thought and then considered action.  But I don’t feel they are as dramatic as has been stated here – for example I don’t see -6.8%, -3.8% or even +16.6% as haemorrhaging.  Trying to stop the internet seems a futile endeavour and thus we are likely to see more closures and floor space reductions as well as sectoral shifts.  Where I do agree with the article and the SRC is that the current playing field is not level; the more interesting question is whether we wish it to be so?  Perhaps after all these data show a sector embracing technological change and working through it?

I will follow up this post with one looking at local authority data for retailing from this source.