Later on today (from 1815 on the 16th March to be exact) I will be presenting virtually at the latest Scottish Grocers Federation organised Scottish Parliament Cross Party Group on Local Convenience Stores. I will be speaking, together with David Lonsdale of the Scottish Retail Consortium who will talk about the policy, regulatory and tax context for retail and bring in what he can from the forthcoming Scottish Government retail strategy, and Craig Brown from JW Filshill and the SGF national executive, who will talk about convenience and how it is likely to move forward in the post pandemic landscape.
I was asked by SGF to dust off my crystal ball and look at the big picture impact of the last 2 years on retail and give some thoughts on what the immediate future looks like. My initial reaction was that anyone who still had a crystal ball could not be remotely serious – and that was before the terrible events of the last three weeks. But they twisted my arm and so I will try to say something sensible later on tonight.
I try to put most of my presentations up on this site, so that those who can’t attend, but are interested, can get something of the flavour of what I talk about. If you do want to attend then contact the Scottish Grocers Federation directly – it is a Teams session and is free.
My overheads – in the form of a pdf – can be found below.
What follows is a short summary of the points I hope to be able to make.
We have to recognise at the outset we have been living through remarkable, if not unprecedented times. There are many ways of looking at this but the sheer disruption to the SRC’s retail sales monitor for Scotland shows the dramatic impact on previous patterns from Covid. Some of this is an acceleration of trends that existed pre-pandemic. The most obvious and often shown is the relentless rise of the internet penetration of retail sales, but we were also already seeing a move to local and convenience retailing, shops having to move location to where people are and the rise of sustainability and to some extent peak “stuff”.
This can also be seen in recent John Lewis statements about their department store estate and sales, but we also see in many start-ups in the broader sustainability space, both online and in physical, local stores.
Covid has seen new patterns emerging. WFH is an acronym no one really knew in early 2020, the rise of digital across all aspects of society is clear and where people are choosing to live is altering. Covid has not gone away and for many remains a real concern, leading to calls for inclusive design rather than an assumption everything and everyone is fine. We are a long way off working through what this looks like and will mean – for retail as other sectors and places. And this is happening in a changing Scottish and wider context (of which the retail strategy is one small piece).
And into that has come a series of other issues, some Covid (and Brexit) related and some not. We are facing major disruptions in terms of energy and food costs, the climate emergency and net zero, reducing disposable income and the rising use of food banks. Inflation is predicted to be high for some period. All that predates the Russian invasion of Ukraine and the additional consequences that brings – though thinking in those terms given the loss of live and liberty seems wrong.
For retailers this means that operational costs including staffing and supply as well as energy are real concerns and that the volatility in patterns may get another shake-up, ending who knows where. There is thus a growing difference between what many retailers can offer and what many consumers expect (or can afford).
Is it any wonder my crystal ball refuses to come out to play?
So let’s try to summarise a few things. You can’t de-invent the internet, so online is here to stay. People’s needs and wants have changed, as have the country’s. Unprecedented change may be about to repeat – if that is possible. Many people are going to feel a lot worse off.
But even given that, a few themes might be discernible:
- Omni and multi-channel (including ship from store) is a permanent thing. Home delivery from (hyper) local stores (possibly dark ones) is demanded, but which models will work and be profitable remains to be seen.
- There are likely to be fewer shops overall – we knew this anyhow – but these will be polarised between functional and “experiential” (by that I don’t mean only the experience element but more the beyond pure price functionality element). The same may be true of places, and so location and knowledge of the local market becomes more critical.
- There will be further developments in smaller, local, sustainable aspects of both the producer and retailer ends of the channel. This is likely to be linked to a broader base of organisational forms to maintain authenticity.
It is important to remember though that retailing is a socially constructed sector and we can change its shape and future. A simple example of this is the banning in February of “dark stores” as local delivery hubs in Amsterdam and Rotterdam city centres. So when we think about National Priorities or things we want to see, there is a very real debate to be had about how we use all our levers to make this happen. If we want a national reduction in kms driven by car, there are obvious levers to use, and these could and should affect retailing. If we are serious about Community Wealth Building then it requires decisions about the types of organisations that are supported, encouraged and those that need to be discouraged. Twenty minute neighbourhoods require coherent sets of decision taking and not the sort of nonsense we have seen from some Stirling councillors recently.
So, the big question for convenience stores in Scotland is whether they are providing what consumers and governments want and need to see? If the key themes for the next few years are the cost of living, health and wellbeing of the population and communities and the drive for sustainability (in the widest sense) then how well are convenience stores doing? Despite all the turmoil, the volatility and the commercial pressures, success for me will be driven by a focus on getting these key aspects right. Scotland needs a thriving local, convenience sector, but it needs to deliver on key priorities. All the signs are that is does in the main, but as ever there may be more that can be done in these very challenging times.