Rural Retailer www.ruralshops.org.uk
Issue 26 l Summer 2014
The Journal of the Rural Shops Alliance
■ Local Foods in a Symbol Group Store ■ RSA Special Offer on shop web sites ■ The Rise of the Discounters
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Contents... In this issue...
Cover photo: Edward White, Meeting customers needs in the Peak District - See the article on pages 6-10
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In my opinion, By RSA Chief Executive Your Action Checklist Meeting customers needs in the Peak District RSA SPECIAL DEAL: A Website for your Shop... The rise of the Discounters Tobacco Packaging Consultation RSA Views: 2015 minimum wage remit to Low Pay Commission; Employment Tribunal Cases; Plastic Bags: Government Knows Best; Safeguarding the Postal Service “Speedy Shop”: ... A way forward for smaller villages E-Cigarettes Workplace Pensions Legal Bits & Bobs: Right to request Flexible Working; Enforcement of the National Minimum Wage; Duties regarding Asbestos; Planning Law - Change of Use; Simplified Accounting for Micro-Entities The Great Escape
RuralRetailer ● Published by The Rural Shops Alliance. ● Printed by: Russell Press, Nottingham. ● Design: Kavita Graphics. dennis@kavitagraphics.co.uk
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In my Opinion... Will we be forced to become more like Europe? I recently went to a conference that brought together convenience store operators from across Europe. Talking to delegates from other countries, it was brought home to me very forcefully that elsewhere in Europe the sector is more consolidated, with fewer operators than is the case in the UK. In some smaller countries, there can be one fascia dominating the market. Obviously the UK is much larger than, for example, the Scandinavian countries but even allowing for this, the UK convenience store market is served by a plethora of symbol groups, wholesalers, buying clubs and retail fascias. Indeed, the number of different supply channels in the UK seems to be increasing rather than reducing. Within the convenience store sector, nonaffiliated independents continue to lose market share whilst the members of symbol groups are performing strongly. At first sight, this would seem to suggest the sector is in rude good health. However, for every wholesaler or buying group, there is the cost structure of a buying team, accounting systems and administration, even before the expense of warehousing, order picking teams and delivery vehicles is taken into account. There is a lot of duplication and that means extra costs. Those costs get passed to the retailer who in turn builds them in to their retail prices. At a time when even the largest supermarket chains are wondering how to cope with the rock bottom prices of the discounters, that matters. Aldi on its own is selling twice as much as the entire symbol and independent store sector. Tesco sales are roughly 14 times higher than the sector.
in the convenience store sector makes life hard. However good a buyer is at their job, the limited purchasing power they can wield means their negotiations are often conducted with a distinct handicap. The industrial logic for consolidation within the industry is overwhelming, but it is very hard to see how this might be brought about. Or is it? One development that could throw the pack of cards into the air is One Stop. They are now actively seeking to recruit franchisees, including convenience stores as well as CTNs and post offices. This fascia is of course owned by Tesco and with the parent company’s buying power behind them, this could be a massive development in the market over the long-term. Paradoxically, this initiative from Tesco could eventually force wholesalers to merge and thus make the convenience store market leaner and fitter.
It is therefore not surprising that rural retailers sometimes complain that their wholesaler’s cost prices can be higher than Tesco retail prices. Quite simply, the fragmentation of buying points
Issue 26 ● Summer 2014 ● RuralRetailer 3
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To obtain further information on any of these companies, please contact the RSA at info@ruralshops.org.uk or phone 01305 752044 4 RuralRetailer â—? Summer 2014 â—? Issue 26
Your Action Checklist for this issue... 1. SIGN UP TO RSA BENEFITS PACKAGE 2. REVIEW LOCAL PRODUCTS IN OVERALL STORE MIX 3. SIGN UP FOR RSA WEBSITE PACKAGE 4. REVIEW E-CIGARETTE RANGE AND MARKETING 5. GET UP TO SPEED ON WORKPLACE PENSIONS 6. CONSIDER WHETHER YOU CAN SIMPLIFY YOUR ACCOUNTING
p p p p p p
SEE PAGE 5 SEE PAGE 6 SEE PAGE 11 SEE PAGE 22 SEE PAGE 26 SEE PAGE 30
GREAT NEW DEAL ... In conjunction with our partners Bluefin Insurance, the Rural Shops Alliance is able to offer retail members access to their "Business Assist" programme at a heavily discounted rate. This is a web-based service which also includes a helpline. It provides comprehensive guides on best practice and compliance with all aspects of legislation.
information to cover every conceivable requirement. Aspects include fire assessment, grievance, redundancy and dismissal procedures, as well as recruitment and other HR needs. ■ Full details of the package, along with the exclusive offer to RSA members, can be found on our website www.ruralshops.org.uk or contact us at info@ruralshops.org.uk.
It covers all the areas owners or managers of a business will encounter with respect to managing people at work and health and safety in the workplace. It guides you through resolving issues and establishing best practice. The programme offers advice; template forms and supplementary
Issue 26 ● Summer 2014 ● RuralRetailer 5
Whiterose or Sparmani...
Meeting customers needs in Edward White’s family has owned a petrol station and SPAR forecourt shop at the traffic lights on the busy A623 at Calver in the heart of the Derbyshire Peak District since 1957. Over the ensuing 56 years, they watched the large building across the road change from a garage to a rival filling station, then a fish and chip restaurant, discount centre and café and, most recently, an outdoor clothing shop. Then, in January last year, the 2,500+ sq ft building came on the market at just about the same time that one of Edward’s ‘gut feeling’ business ideas came to fruition.
“I was convinced that what the local area needed was a farm shop selling locally sourced produce – I knew there was a demand, but we didn’t have the capacity in our SPAR forecourt shop. I knew I needed to think bigger,” recalls Edward – a serial entrepreneur well known in the local area. “I decided to buy the building and by July, it was mine, but I knew I needed some expert support to get the feel of the new shop right.” So Edward took his idea to SPAR and was delighted with the response. “SPAR brought in some brilliant designers from London who really helped create a welcoming, high quality retail space perfect for the quality, farm shop atmosphere I envisaged.” The team set to work with Edward putting his own firm ideas into the mix and in August 2013, the new White’s Calver store opened with a fanfare, and business has since boomed. Edward’s commitment to locally produced and sourced goods is emphasised in the new-look, high ceilinged store, with shelf barkers promoting the name of the producer or farm
Edward White
Above: Discrete Signage, Right: The building is in keeping with its beautiful surroundings
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By Beth Whittaker
the Peak District The coffee shop provides a pleasant space
alongside food miles travelled. There are multiple points of difference including an instore bakery, meal solutions and a coffee shop.
Now locals, who visit in droves, have dubbed the shop Whiterose (instead of Waitrose) in recognition of its style and quality, and even SPAR-mani (Armani)! Alongside the local products, the shop also stocks a good SPAR range of groceries so it appeals to all purses. For SPAR, the new shop is part of a national initiative by the company to emphasise the role its stores play within communities. It is one of SPAR UK’s first independent ‘Differentiation’ stores, promoting the fact that it is owned by a third generation family business, committed to the local
Bakewell Bakery supplement the bakery offer, local Derbyshire wine merchants John Hattersley Wines supply much of the store’s wines, complete with tasting notes and recommended food pairings, in a section with original flagstone flooring. Local breweries including Peak Ales from the nearby Chatsworth Estate contribute a range of traditionally brewed beers, all supported with display materials telling the story of the brewer. Meat comes from nearby New Close and Castlegate Farm Shops, fruit and vegetables from Smyllies of Bakewell with a local dairy and cheese producer supplying a range of dairy products. “Because I know everyone around here, I really enjoyed contacting the very best local farmers, growers and makers to invite them to supply us – and they are thrilled to have a new outlet close by,” says Edward. “We are building quite a reputation and we’re regularly approached by new suppliers, but we are keen to maintain our very high standards.” The high ceiling gives a light airy feel
Issue 26 ● Summer 2014 ● RuralRetailer 7
Whiterose or Sparmani...continued Synergy between SPAR and White’s
community and the environment (the fit-out included the latest in energy saving chiller doors). The store appeals to all ages, with older residents and single people liking to buy their fruit and vegetables loose in the small quantities they need and children kept happy with the smaller sized trolleys to do their own shopping. “Everyone seems to be delighted – it was a bit of a risk, but I had one of my gut feelings it was the right thing to do,” says Edward. And he has every reason to be proud – his new venture has created around 20 local jobs in his home area and has already far exceeded his initial first-year turnover estimate of £30,000 per week. Edward has also opened a new Post Office Local within the store, and twice a week, he invites a fresh fish van to trade from the shop’s large car
This promotional space reflects farm shop values
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Local bread, well displayed
park. “This is proving very popular with customers from all around the local villages, as well as the healthy passing trade,” he says. “It means I don’t have the expense of having my own in-house fish counter, and the fishmonger is able to supply the freshest catch while knowing he is building a good, regular trade. His customers then come into my store to complete their shopping!” He admits that combining a SPAR convenience store with a farm shop offer was a challenge, but it is one he savoured, particularly as it has become a huge success. “As a family, we have been in business locally for 90 years, starting out with a coach company in the 1920s. I’ve always had an entrepreneurial spirit which I guess means I like taking a bit of a gamble, but I make my big decisions on gut instinct and that
It’s hard to forget where you are!
There is a marked emphasis on local products
seems to have worked so far! In business, you can never stand still; you have to keep coming up with ideas.” The prime location on a busy main road, a relatively wealthy local population, the size of the building allowing the space needed, excellent car parking and very long opening hours, all play crucial roles in the new shop’s success – as well as the professional support from SPAR. “It’s a good partnership with SPAR,” Edward reflects. “It’s good for the SPAR brand because it shows they are interested and supportive of local producers and it’s good for our customers, local farmers and suppliers too. But I was particularly impressed by SPAR’s designs for the layout of the store and some of their innovative ideas to really emphasise the local supply chain. I couldn’t have done that without that design support.”
The original forecourt across the road
The amount of refrigeration matches best convenience store practice
This has been a true partnership in every sense of the word. Edward, like many other of our retailers, benefitted from our co-investment programme whereby we will co-invest up to a third of the value of a refit, combined with a design and shopfitting service and the services of a dedicated business development manager. Our store programme develops stores that answer all the needs of the local community wherever they are. We work closely with independent retailers to really understand the needs of their customer and then design the store to meet those needs. In addition we can bring in brand partners such as the Post Office, Costa Coffee or Subway to further enhance the proposition. The store in Calver has been hugely successful, not only by delivering a return on investment but also by helping to move the convenience store back to being the lifeblood of its community. A number of our independent retailers are winning prestigious awards by adopting the principles first implemented here. Louis Drake, Development Director, Blakemore Trade Partners (A.F. Blakemore is a division of SPAR UK)
Issue 26 ● Summer 2014 ● RuralRetailer 9
Whiterose or Sparmani...continued “I am pleased to have been a part of this fantastic project to bring Edward’s vision of SPAR and local producers working together, to create this unique shopping experience.”
Extensive off licence section
Meanwhile, the White’s original small forecourt shop across the road is now focusing on food-togo, including a wider range of sandwiches, salads, hot food and coffees, as well as everyday essentials, including newspapers, bread and milk.
Alan Rumsey, SPAR Account Manager at A.F. Blakemore & Son Ltd, returns the compliment:
Palmers Café, named after a former owner of the site
Local credentials to the fore
The RSA view We were very much looking forward to visiting this business. For years, we have highlighted the desirability of local village shops combining a price competitive convenience store with elements of a farm shop offer. Customers want it but it is very hard indeed to do well in a limited sales area. Here is a business that has addressed this dilemma head-on. The result is about as close as we’ve seen to meet the conflicting requirements under one roof. Edward White’s vision of his ideal shop has created a space with all the parts of the jigsaw in place. In places there is a visual tension between the SPAR and Whites branding but overall it works exceedingly well. This project highlights the benefits of belonging to a symbol group – their support was clearly massively important to the success of this store. 10 RuralRetailer ● Summer 2014 ● Issue 26
Certainly there is little reason for locals to consider shopping anywhere else. We also saw a very high percentage of passing vehicles pulling into the store – having 30 car parking spaces obviously helps, but this shop seems to have the best “hit rate” we have ever seen. The village is in the Peak District National Park and not that far from Chatsworth, a location that provides significant extra tourist business. The combination of convenience store, farm shop, post office, coffee shop and forecourt meets pretty well every need. We can only congratulate Edward White for his vision, his perseverance in making it happen and the courage to invest the considerable sums of money needed. The results speak for themselves. This is a superb rural shop that is well worth visiting if you are in the area.
RSA SPECIAL DEAL
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This is ideal for retailers entering the World Wide Web (internet) for the first time who do not want the cost and effort of a more complicated website. This comprehensive package includes setting up your web page: ■ Your own subdomain on the RSA website i.e. www.yourshop.ruralshops.org.uk ■ A picture of your shop or locality ■ 100 word description of shop and services offered ■ Opening Hours ■ Google Map of location ■ Links to any existing Facebook or Twitter feeds ■ A “contact us” section with telephone number and the ability for customers to send a message to you by email ■ Fully inclusive of 1 year’s webhosting and maintenance
Issue 26 ● Summer 2014 ● RuralRetailer 11
RSA NATIONAL MEETING
The rise of the Discounters At the last RSA National Meeting, we discussed responses to the rise of the discount chains. Here are a few ideas…. The Big Four supermarket chains are facing static or even declining sales for the first time. Morrisons in particular are making staff redundant, whilst all of them to varying degrees are refocusing on the growth areas of convenience stores and home delivery, rather than investing in more large superstores. The financial analysts in the city, who always seem to know far better than companies’ own managements how they should be run, are calling for ever deeper price cuts to compete with the discount operators Aldi and Lidl. The only supermarket chain delivering good sales results is upmarket Waitrose. This is a
Some stores like this Lidl are shed-like
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problem that will only get worse as the discounters implement their ambitious expansion plans in the UK. It is a big problem for the big supermarket chains. As the incumbents, with large market shares, deep price reductions cost them many millions of pounds of profit, without any guarantee that customers will respond, particularly when their rivals immediately respond in kind. Already the impact of these lower food prices can be seen in lower price inflation in the economy.
The discounters Price competition is not new. In the 1990s, Kwik Save was seen to be the threat, but ultimately faded away. However, this time it is different. Historically, more affluent customers would buy from upmarket chains, whilst the poor would frequent the discounters. Tesco broke that mould by appealing across all sections of society. Nowadays a significant section of the population is happy shopping in a wide range of stores. The same person visits Waitrose to buy some items, Aldi for others, uses their local convenience store for top ups and occasionally orders a home delivery from Tesco. This is causing a marked discontinuity in the grocery market. Historically, market research would tell us that middle-class customers would not be prepared to sacrifice wide range, ambiance and service for price. Today many customers accept compromises and demand different things from the range of stores they use. They do not expect Waitrose to be cheap but do expect a pleasant environment, very good staff plus interesting and good quality products.
... and what to do about it They expect Aldi to be cheap, so-so in terms of staff and environment, a limited range including specific good products, such as continental cheeses and meats, and some exclusive brands. They also find a changing range of one-off deals to add interest. Customers do not expect Aldi to necessarily have the brands they would ideally want to buy or to have a chat with the checkout operator.
FAMILY SHOPPER
Aldi does provide quality alongside cheaper prices. It stocks a number of very high-end products, including Wagyu beef and Grand Cru Champagne. It also has a ‘Specially Selected’ range of produce designed to appeal to middle class shoppers. And many of their new store openings are targeted at wealthier towns and more upmarket customers.
● Simplified range removing duplication (1100 lines) ● merchandised in full trays ● permanent discount prices ● strong promotional programme ● £1 aisle ● non-food discount ranges
Rural convenience Stores Aldi and Lidl are cheap, very cheap. Their business models are designed to deliver low prices, with costs ruthlessly stripped out. To be blunt, it is almost impossible for any rural convenience store to match them on price. However, they would not be so successful if
A Mercedes convertible does suggest a more affluent shopper!
Part of Booker’s response to the rise of the discounters has been the launch of their new Family Shopper format. This is intended for stores of over 1500 sq. ft. (140m2). Key elements are:
The intention is to combine symbol retailing with the price proposition of the discounters. Since November 2013, eight stores have been opened in this format by their owners. ● See: http://www.familyshopperstores.co.uk their attraction to customers lay just in their prices. Rural retailers can learn from some of their other features that attract customers. The trade-off between strengths and weaknesses is different. Not necessarily better or worse, just different. In the same way as Waitrose can coexist with them by building on strengths, so can rural convenience stores. But you must have those strengths – convenient location will only take you so far. The first lesson is to have a very clear message that customers can understand and relate to, so that they know precisely what you stand for and what to expect. For a rural convenience store, this will normally be to do with community values, convenience, good friendly service and
Issue 26 ● Summer 2014 ● RuralRetailer 13
RSA NATIONAL MEETING...continued stock availability. Time and time again, market research shows that efficient and friendly customer service really matters. Customers are buying into the proprietor and their staff; having a personal relationship with customers is an enormous strength for any business. Convenient opening hours are a must, lean and bright ambiance, the right range mostly in-stock. Prices are super cheap but not at rip-off levels.
NETTO The third continental discount chain in the UK market sold out four years ago. Netto discount stores in the UK were sold to Asda in 2010. However, their owners, Dansk Supermarked, are set to return to the UK market in partnership with Sainsbury's. Initial plans are for the opening 15 new Netto stores. Sainsbury's will provide product sourcing and property expertise, whilst Dansk will provide the systems, infrastructure and low-cost operational model. The concept includes a strong fresh food offer including an in-store bakery, inevitably offering Danish pastries. ● See: http://www.netto.co.uk
Beyond their basics, the discount chains highlight the attractions of having an interesting product offer. You do not know what they will be stocking as a special this week when you enter through the door. That makes boring shopping more interesting. But in addition, they have certain lines where they have particular strengths, providing a logical reason to visit. In a rural shop context, this means really getting behind your wholesaler’s special offer programme but also making a real effort to seek out and stock local products unavailable in the competing supermarkets. Both then need the good displays and show material to bring them to the customer’s attention. It is hard to say what the CEO of Tesco should do to meet the challenge from the discounters. For the owner of a rural convenience store, it is actually far more straightforward. We know what customers want. In every edition of Rural Retailer, we profile retailers successfully delivering it and try to explain how. It may not be easy to implement everywhere, but as an industry sector, between us we do know the answers!
TOBACCO PACKAGING CONSULTATION The Government has announced their latest consultation on plain packaging for tobacco. We would encourage as many retailers as possible to put forward your views, The deadline for submitting your views is August 7th 2014. ■ For full information, see https://www.gov.uk/ government/uploads/system/uploads/attach ment_data/file/323922/Cons_doc.pdf
14 RuralRetailer ● Summer 2014 ● Issue 26
RSAViews Summer 2014
Government sets out 2015 minimum wage remit to Low Pay Commission The Government has asked the Low Pay Commission (LPC) to conduct its annual review of National Minimum Wage (NMW) rates and recommend the levels to apply from October 2015 onwards. Alongside this request, the government has asked the LPC to make recommendations on 2 new areas this year. One is to simplify the complexities of the apprentice rates.
set the NMW based on solid economic evidence. We very much hope that the LPC will be allowed to do its job properly.
For the other, Business Secretary Vince Cable explained: “The National Minimum Wage provides vital protection for low paid workers and a real incentive to work. “From this October 2014, low-paid workers will enjoy the biggest cash increase in their take home pay since 2008. As the economy continues to strengthen, I want more workers to share the benefits of the recovery. “This is why I am asking the LPC to once again look at whether the economy is strong enough to support above inflation rises, helping those on low pay get a fairer deal”. This sounds like a potentially loaded question. The whole point of the LPC is to remove this potentially powerful vote winner from political interference and to
Business Secretary, Vince Cable
RSAViews
Employment Tribunal Cases The number of cases being taken to employment tribunals has plummeted since fees were introduced for claimants. The latest available figures show a 59% drop in the number of claims in the first three months of the year (13,739 in 2013, 5,619 in 2014). It seems obvious that the new fees have deterred many workers from taking their employers or ex-employers to court.
There was an 85% fall in the number of claims for unpaid wages, a 62% drop in unfair dismissal cases, while sex discrimination cases were down massively from 6,017 to just 1,222.
Dave Prentis, general secretary of Unison, has said: “This downward spiral in the number of employment tribunal cases shows only too clearly that workers are being priced out of a fair hearing.”
It was clear that the previous system, under which the employee had little to lose by taking an employer to a tribunal, did work unfairly against small employers. Often it was cheaper and certainly less time-consuming to concede a case rather than fight it.
“The figures make shocking reading because individual claims are now at a perilously low level. While Unison and other unions continue to lodge claims on behalf of groups of members, it is clear that the introduction of fees is undermining the whole tribunal system.”
Hence the massive drop in cases is clearly good news for employers. However, employees’ organisations have argued that the measures have gone too far.
Unison lost a High Court challenge over the introduction of fees but has lodged an appeal, saying that the statistics added “significant weight” to the union’s arguments that workers were being “priced out of justice.” Justice Minister Shailesh Vara said: “It is in everyone’s interest to avoid drawn- out disputes which emotionally damage workers and financially damage businesses. That’s why we are encouraging quicker, simpler and cheaper alternatives like mediation and arbitration. It is not fair for the taxpayer to foot the entire £74 million bill for people to escalate workplace disputes to a tribunal, and it is not unreasonable to expect people who can afford to do so to make a contribution. As for those who cannot afford to pay, fee waivers are available.” The vast majority of rural shopkeepers are good employers, who in the past have been afraid of being taken to a tribunal unfairly by a disgruntled employee. For employers like this, these figures are excellent news.
RSAViews
Plastic Bags: Government Knows Best There really are times when it is difficult not to be cynical about the UK government and to envy Wales and Scotland their devolved assemblies. The Government is ignoring calls to include all retailers in its disposable plastic bag charging scheme, whereby stores charge five pence for them. The Government’s proposals for England only apply to plastic bags. Unlike the rest of the UK, the charge will not apply to paper bags, which are distributed by some High Street stores. Therefore, a shopper could be faced with having to pay for a bag in some stores but not in others, depending on which material was used and the size of the store. We find this particularly galling, since this is an issue on which the RSA has looked at the evidence and changed its mind in consequence. Originally we were in favour of exempting small stores from having to charge five pence for plastic bags, on the grounds that customers carrying out a local top up shopping trip would be less likely to bring a bag than people carrying out a large supermarket shop. This is now an area where there is excellent evidence of how customers actually behave, since such charges have already been implemented in the Irish Republic, Wales and Northern Ireland. None has an exemption for small retailers and have worked well. The results show that our fears were unfounded and that the measure had a dramatic impact on the number of plastic bags being used – an excellent result. When rational individuals get new information they use it to make better decisions. If the RSA and other retail organisations are able to change our minds in this way, why cannot government? Indeed, the Parliamentary Environmental Audit Committee has looked into the issue in depth. Chair of the Committee, Joan Walley MP, has said: “The 5p bag charge is the right solution — it will reduce litter, cut carbon emissions and reduce waste. Despite our Committee’s recommendations, the Government has decided not to apply the charge across the board, but to go ahead with its proposed exemptions. That risks diluting the benefits of the charge. The decision to only
include large retailers is particularly short-sighted and ignores calls from all of the main small retailer organisations to be included in the scheme. I am pleased, however, that the Government has conceded that the proposed exemption for biodegradable plastic bags could cause problems for the UK’s recycling industry and will now not be included when the charge is introduced next year.” The Government has claimed that, “Some SME representative bodies are in favour of being included in the charge while others are opposed”. It does not name which trade bodies are in favour and we are unaware of any of our colleagues who have argued against the charge applying to small shops. Joan Walley MP continues: “The Government should think again about an exemption for small businesses. The Government says simply that some trade bodies are opposed. The Government should tell us which trade bodies are against, so that we can see exactly what the evidence says for ourselves.” That seems an excellent question for Environment Secretary, Owen Paterson MP. He needs to tell us which retail trade associations are in favour of the small shop exemption. We would also like an explanation as to why good solid evidence from elsewhere in the British Isles has such little weight when it comes to making decisions for England. Notes: The government has put on hold an exemption for biodegradable plastic bags, basically because bags to an acceptable specification do not exist. Paper bags use a lot of resources to make.
RSAViews
Safeguarding the Universal Postal Service The Rural Shops Alliance has a considerable interest in the health of Royal Mail.
A high proportion of our members operate rural Post Offices. Over the years, sub postmasters have seen their income from providing government services fall away, whilst the rise of online services such as EBay has increased the importance of postal services to them. Today, about one third of sub postmasters’ incomes come from postal services, whilst in some rural offices it is even higher than this. The health of Royal mail and its ability to pay a reasonable fee for the services provided by sub postmasters is therefore a crucial factor in the long-term survival of the rural Post Office network. Royal Mail is now a company separate from government but it is still subject to various requirements that are a
legacy from its time in public ownership. In particular, it has to provide a six days a week, one price goes anywhere universal postal service. Inherent in this requirement is the assumption that deliveries in densely populated city centres, which can be efficient and profitable, cross-subsidise loss-making deliveries in sparsely populated rural areas. That has been the deal for decades. This unspoken deal is now being blown wide open by direct delivery competition. This allows providers other than the Universal Service Provider (Royal Mail) to deliver mail directly to individual addresses. TNT Post UK is providing direct delivery in Liverpool, Manchester and areas of London. They are delivering just the easier-tohandle business post in dense urban areas at a lesser frequency than Royal Mail. Without regulation, this is an obvious strategy for a new entrant to the market to take, to cherry pick the profitable business and leave the incumbent with the loss-making elements. It would seem clear that the regulator, Ofcom, should investigate this issue as a matter of urgency. Ofcom has said that it will conduct a review before the end of 2015. Quite simply, in a fast moving customer facing environment, that is not good enough. There really is no reason to delay. The longer this investigation is put off, the harder it will be to implement any remedies. This is not a difficult problem; the issues are quite clear and lack of resource in the regulator should not be an issue. The RSA is calling on Ofcom to undertake a review of direct delivery and then to implement any regulatory changes needed to protect the universal service as a matter of urgency.
“Speedy Shop”...
... A possible way forward for smaller villages Village retailing comes in all shapes and sizes, but the “Speedy Shop” is something quite different. Instead of a normal shop, this is a vending machine that stocks a basic convenience store range of 80 items. The first operational unit is located in the car park of The Cock Inn in the village of Clifton in Derbyshire, although its inventor, Peter Fox, hopes this will be the first of many installations.
The machine occupies limited space in the carpark. Other finishes other than imitation brick are available
The business started in 2011, as a mission to provide a basic offer in smaller villages without their own shop. Unable to find a suitable automated retailing solution, Peter’s company designed its own machine from scratch in their manufacturing facility in Ashbourne. Along the way, the project generated a number of patent applications. Andrew Garside, the landlord of The Cock, recalls his first introduction to the concept, “Clifton village has not had a shop now for 14 years and we had considered turning our dining room into a sort of shop facility. However, the costs involved and potential lost revenue to the pub caused us to scrap the idea. Then I spoke with Peter Fox one cold snowy winter’s night and he said that he had got an idea that might provide the ideal answer. Hence The Clifton Village Store was developed and installed on our car park.” The unit occupies a space typically equivalent to one car parking bay. It is entirely self-contained, just needing an electrical supply. It has space for about 80 products. The unit monitors its stockholding and provides this information remotely to the operator, allowing for efficient restocking and allowing their website to display the in-stock situation Customers key in a short numeric code to tell the machine what item they want to buy, whereupon the item is positioned onto a moving shelf which lowers it gently, to be retrieved through a slot towards the bottom of the machine. Payment can be made in cash or by credit or debit card.
Issue 26 ● Summer 2014 ● RuralRetailer 19
“Speedy Shop”...continued Before we saw the machine operation, we have to confess that we were somewhat cynical that a small engineering firm in rural Derbyshire could produce something as sophisticated as this. Seeing the machine in operation dispelled our qualms. The machine accepted our credit card payment without a hitch and delivered the goods faultlessly. A box of eggs was lowered gently from the top shelf without any risk of breakages. It is genuinely a very impressive piece of kit. Peter Fox is confident, commenting, “The Clifton machine is paying for itself – which is quite something when you think this village is only 2 minutes from the edge of the town and an M&S and 99p store. A further 2 minutes away is a Sainsburys and Waitrose, so we are very pleased. (The choice of such a close village to town was so that we could access it quickly if there were any problems – this was our first machine after all). We expect our next machine to be very busy as it’s going into a truly ‘remote’ village (Brassington) which is larger, and is 4 miles from the nearest shop by poor roads. At Clifton, the bestselling lines have been a real mix – staples such as milk, bread and eggs are steady sellers, but also ‘treats’ such as confectionery. We also have a steady flow of household items (bin bags, shampoo etc.) and a good range of basics that we suspect are being bought in an emergency – such as custard and gravy on Sunday lunchtimes and baked beans on weekend mornings!” Andrew Garside has seen the benefits for the pub, “It is well used by the local community and passing trade. We have seen an increase in trade at the pub because of it, especially at weekends and Bank Holidays. This is definitely proving to be the ideal solution to the lack of a much missed local amenity”.
The machine is easy to use. The yellow panel is the card reader.
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Peter reports that there have been several thousand transactions already at the site. He is at pains to stress that he does not see his machine
Peter Fox
considering a community shop but lacking the resources to do so, or even an interim solution before a full shop is opened. The customer can only access the goods once the machine unlocks the access doors
as a threat to existing shops, being intended for sites where a conventional shop is not viable. “We set up to initially service our local area in order to prove the technology and the concept. In the longer run we’d be supplying machines to areas beyond our local reach, so others would be filling the machines on an independent basis or under a franchise arrangement. We expect to continue to operate locally for the rest of this year with 3-4 sites, and then our ‘plug and play’ model should start to come on stream for sale or lease across the UK”.
For further details, see: ■ http://villagevending.com For a selection of unusual vending machines across the world, including one selling live crabs in China and another providing caviar in America, see: ■ http://www.buzzfeed.com/arielknutson/ vending-machines-you-wont-believe-exist Meanwhile, Tesco in Korea has gone one better than having just a vending machine, setting up virtual grocery stores at railway stations: ■ http://thesource.metro.net/2011/07/06/cleveridea-in-korea-virtual-subway-grocery-store
It is too early to say how financially viable the machine will be. Obviously the cost of the machine plus the time and effort required to replenish it from a distance needs to be set against the profits from the goods sold, credit card transaction fees etc., not to mention wastage and maybe even an allowance for the occasional foreign coins in the slot. An interesting possibility would be for an existing retailer to install and operate a machine in one or more neighbouring villages as satellites. As with Post office Outreach, this would work best if the operator gears up to run several units – this is much more efficient than having the systems, van, staff etc. to run just one. It could also be an option for villages
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E-Cigarettes...
Dozens of brands – But where market going? A Litejoy rep convinced Sam Samuels at East Tisted Village Stores in Hampshire to stock its rechargeable e-cigarettes about a year ago on a sale-or-return basis, but after an initial rush, sales dropped off and Samuels decided to ditch the products. Once customers had paid out £35 for the starter pack, refills worked out at a very reasonable £5 for 80 ‘cigarettes’, but Samuels reckons they might have just decided to stop smoking instead. “It might have been the wrong brand,” he muses, “but the choice is so overwhelming that it’s hard to know what to stock. It’s a shame because at 40%, margins are really good but it’s not my job to convince people to buy them.”
Similarly good margins make it worth stocking Nicolites at Orleton Post Office & Stores in Herefordshire, despite the fact that only one customer regularly buys refillable e-cigarettes, along with occasional casual shoppers, says owner Andrew Summers, who spent £150 on the initial display unit which included 10 each of nine different single-use and rechargeable Nicolites products. Other retailers might also question whether they’re stocking the right brand if sales are disappointing, but with literally dozens of ecigarette brands out there - and little ready advice - many are just going with whichever rep happens to pop into the store (although reps are pretty rare these days in rural locations). Nicolites MD Nikhil Nathwani admits: “It’s difficult for a retailer sometimes to know which to choose,” but adds: “We offer retailers magnificent POR margins and support from our customer service team, as well as our field sales team, whenever they need it.” Blu (the best-selling American brand, just launched in the UK) recommends stocking brands with the CE mark and other quality control markings on the packaging. “Check that any brand stocked is a member of the Electronic Cigarette Industry Trade Association (ECITA),” says CEO Jacob Fuller. He believes these are quality brands which invest long-term in their products. “Also, look to stock brands which are investing in marketing activity and TV advertising, as this will ensure the product is noticed by consumers.”
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By Helen Gregory
is the E-Cigarette
Bill Bowers, who runs Much Marcle post office and stores near Ledbury, still has a lot of unsold flavour capsule ‘click’ cigarettes sitting on his shelf that didn’t live up to the initial hype, so is not enthusiastic about stocking e-cigarettes. “People just haven’t asked for them so I’ll wait until there’s demand,” he explains. “Although as a lot of our clientele are big hulking builders and farm workers I can’t see them giving up their usual brands.” But are rural retailers missing a trick? After all, Euromonitor International estimates the UK market for e-cigarettes is worth about £298m and growing steadily, with about 99.9% of users current or former smokers, mainly trying to
quit, cut down or ‘smoke’ more cheaply. According to ASH, about half of UK smokers report having tried e–cigarettes, with an estimated 2.1 million people currently “vaping”. The number of young people within this figure is very low indeed. Research agency Him! reports that cigarettes are a footfall driver for small stores. Indeed, it says one-third of smokers’ main reason for using a convenience store is to buy cigarettes, with these shoppers also visiting convenience stores up to 4.4 times per week, compared with the average shopper who visits 3.7 times. Insights manager Jenny Pratt reports that convenience stores are the favoured channel for e-cigarettes
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E-Cigarettes...continued and a real profit opportunity. “It’s predicted to be a heavily brand-loyal category,” she says, “and as these new brands develop, retailers who invest in understanding which brand and price mix is right for their customers will be able to capitalise on the opportunity the most.” But again, that’s not easy without a bit of guidance and so far, symbol groups don’t seem to be very forthcoming on the subject. Booker currently lists five brands of e-cigarettes - ELites, Blu, Nicolites, Njoy and Bull – and has also added Blu Tanks and Clearomisers and liquids to its range. Steve Fox, Sales Director – Retail, says as larger suppliers become established it is starting to see investment in field sales to help retailers understand the opportunities in the category. “Most purchasers of electronic cigarettes are already tobacco smokers...as such growth in electronic sales is likely to come at the cost of a decline in tobacco volumes,” he says.
“With around half of the UK tobacco market being purchased via symbols and independents, it is essential that independent retailers have a credible offering in this category.” Choosing which brands to stock should become easier as Euromonitor tobacco analyst Shane MacGuill believes the market is starting to consolidate as smaller brands get bought up by bigger companies. He also points to the recent key trend in the US, namely the popularity of the more economical tank systems and decline in ‘cig-a-like’ products, which currently dominate in the UK. “Retailers must begin offering tank-style systems or risk losing out to online merchants who sell a bewildering array of devices and e-liquids,” advises McGuill.
There are three basic types of electronic cigarettes:
While avoiding the heavy tax burden of standard cigarettes, e-cigarettes haven’t completely escaped law-makers’ attention as this autumn there will be a ban on their sale to under-18s, and as part of the new European Union Tobacco Products Directive, they will have to adhere to strict nicotine content and labelling rules by 2016.
1. Disposable products (non-rechargeable) imitating cigarettes in appearance – “cig-a-likes” 2. Electronic cigarettes, rechargeable with replaceable prefilled cartridges 3. Electronic cigarettes, rechargeable through a tank or reservoir which is refilled with a liquid containing nicotine and flavouring.
However, next April, while all cigarette products will disappear behind blinds in England, Wales and Northern Ireland, e-cigarettes can stay on display. Surely this will prove a boost for the products, as they’ll be more visible? “Absolutely”, says Blu’s Fuller: “Our branding will grab consumers’ attention on countertops while tobacco cigarettes are hidden from sight.”
Some have a glowing LED at the end to imitate real cigarettes. The refillables with tanks usually have longer battery life between charging; and are voltage variable, which means the user can alter the power to create more or less vapour.
But then again, maybe not, as Summers, at Orleton Post Office & Stores, explains that while he plans to carry on selling e-cigarettes: “I’ll probably stick them behind the shutters when the display ban comes in - it’ll give me more space on the counter for other lines.”
Types of e-cigarette
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The RSA view The market for e-cigarettes is very new, developing very fast and very hard to fathom. The number of users has trebled in the last two years; this is a product category that is rapidly becoming mainstream. There is a large number of companies vying for market share, offering a variety of different products to the consumer. Only a limited number of these companies will survive in the long-term but at this stage it is very hard to pick the winners, although many of the large tobacco companies have e-cigarette brands and these are likely to emerge amongst this group. For retailers, this new market represents both a threat and an opportunity. Customers buying conventional tobacco are often very loyal, coming in on a regular basis and buying other more profitable items alongside their cigarettes. The danger is that e-cigarettes are purchased differently, often requiring far fewer visits to the shops for refills. E-smokers buying refills online is also a development that is not good news for bricks and mortar retailers. Internationally, the older brands have emphasised health and cost benefits, whilst newer entrants are more likely to emphasise the choice of flavours available. If this behaviour is replicated in the UK over the next few years, then the market is in for some major changes. The evidence at present certainly suggests that tank systems are the way to the future and that it is important to offer a range of flavours.
How people behave in the USA is often a good guide as to the way markets are likely to develop in Europe a few years later. The market in America is advancing in quite extraordinary ways. The State and Community Tobacco Control Research Initiative found in a recent survey that as of January this year there were over 460 brands available online, offering a colossal range of 7764 unique flavours. Predictably, tobacco and menthol are the most popular tastes, but flavours such as fruits, sweets, alcohol and food are also popular. Bizarre ecigarette flavours include bacon, black pepper, Worcestershire sauce and rhubarb & custard. The fact that the vast majority of users are current or ex-smokers suggests that in the long run there is a limit to how much this market is likely to grow. Many are using e-cigarettes to help them give up and the evidence suggests that this route is quite effective – good news for the nation’s health but not so for tobacconists. The other major constraint could be new regulations emerging from the European Union - at the moment these have not kept pace with the development of this new product category. How should rural convenience stores in the UK respond? It is clear that this is a market maturing rapidly and that it is only going to expand, mainly at the expense of conventional tobacco products. It is a market that should not be ignored. The key objective has to be to help customers to develop a habit of buying their refills from your store, rather than online or from supermarkets. You need to be in this market for the long-term. We suggest that you display the products prominently, provide a choice of flavours and promote them hard. Make sure that as the market develops and leaders start to emerge, that you are not left behind with a no-hoper brand but are stocking the products that customers are going to want to refill again and again into the long-term. Above all, this product category is here to stay and although short-term sales may be unexciting, quite simply you cannot afford to get left behind. Issue 26 ● Summer 2014 ● RuralRetailer 25
Workplace Pensions...
Workplace Pensions Workplace pension law is changing. Legally, every UK employer will soon have to comply with the new automatic enrolment scheme.
don’t want to be in the pension scheme, they must then opt out.
When will I have to do it? Employers must enrol certain workers into a qualifying workplace pension scheme and make contributions towards it. This guide is designed to give information on preparing for automatic enrolment and identifying the eligible jobholders working for you.
Your automatic enrolment duties start from your ‘staging date’- this is based on the number of people in your PAYE scheme. You can find out your staging date by visiting; ■ http://www.thepensionsregulator.gov.uk/ automatic-enrolment.aspx
What is automatic enrolment?
and entering your PAYE reference (from your P6 / P9 coding notice or your P30BC yellow payslip booklet) into the Staging Date Tool.
The good news is that on average we are living longer. The bad news is that the government cannot afford to fund a state pension to provide the standard of living we would aspire to. And in general we are not saving enough for what could be a long retirement. The law on workplace pensions now makes it easier for people, particularly those on lower incomes, to build up a pension. Automatic enrolment means that, rather than actively choosing to join a pension scheme, staff are signed up to one by their employer. If they
You have two key dates. Firstly there is your staging date - the date when the law is ‘switched on’ for your business. Secondly, you have a registration date, when you have to provide information to the regulator (this is 5 months after your staging date).
What do I need to do? You must automatically enrol all staff who are: ■ aged 22 to state pension age ■ working in the UK ■ Earning over £10,000 a year. To comply with the legislation, you must work out who is affected and choose a pension scheme for them. You must communicate changes, enrol your workers into your scheme and make contributions. Employers are required by law to communicate with all workers (except those aged under 16 or 75 and over) explaining the process of automatic enrolment into a workplace pension and what it means to them.
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– Act Now! Some staff who do not meet the criteria above are able to opt in to the pension scheme you’re using for automatic enrolment. You must put them in if they ask. Registration of eligible workers for automatic enrolment should be done within four months of your staging date. The Government Gateway is the location to register securely and online. It is your duty to complete registration, but you may authorise someone else to carry out the task on your behalf. For example, you may choose to use your accountant or bookkeeper if they already deal with your tax affairs and payroll scheme. You have to pay a minimum employer contribution for all staff you put into this scheme.
Existing pension schemes and auto enrolment If you have an existing scheme in use or one that can be adapted for automatic enrolment, you need to ascertain whether it meets the minimum criteria. The Pensions Regulator’s qualifying DC schemes tool will help establish whether your existing scheme can be used.
Associated costs The main costs are the compulsory employer contributions. You must pay a minimum employer contribution for everyone automatically enrolled and anyone who opts in. The minimum amount is being phased in,
starting at 1% and rising to 3% of the employee’s qualifying earnings. The interactive tool on the Pension Regulators website enables you to work out the gross earnings of an individual staff member and the lowest possible amount that your employer contribution will be for that individual. Other costs will vary depending on your provider and the scheme you choose.
Getting the right business software You’ll need software in place that can handle the requirements of automatic enrolment. This will usually be your payroll system. Speak to your payroll provider about what they can offer. You may have to pay for any upgrades to your existing software. If an upgrade is not available, you will need to decide whether to get new software that’s been designed to handle automatic enrolment. Some pension providers may offer this service instead.
Timescale You may be able to carry out all of the preparations in-house, in which case the main cost to your business will be time. The extra time required will vary between employers, but if you decide to speak to a financial adviser, there will usually be a fee. The main area in which you may want to seek financial advice is finding a pension scheme that’s most suited to your business. Firms with fewer than 50 workers will not start enrolling their staff until June 2015 at the earliest, but even the smallest employer will eventually be obliged by law to enrol their staff.
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Legal Bits & Bobs...
Legal Bits & Bobs... RIGHT TO REQUEST FLEXIBLE WORKING The government is extending the right of employees to request flexible working hours. From June 30, any employee with 26 weeks continuous service can request flexible working, without having to provide a reason. Flexible working can involve changes to the employee’s daily or weekly hours and can include aspects such as term time only working, part-time hours and even a job share. Employers then have a duty to consider all such requests in “a reasonable manner”. An employee can only make one request per year. This means that the employer must deal with the application as soon as possible, deal with it in an objective manner, fairly and without any form of discrimination. This will usually involve
a specific meeting and the employer should consider the request by weighing up the benefits to both the employee and to the business. It is possible to come to a compromise between the employees request and the needs of the business. It is also possible to suggest a trial period for the new arrangement. The employee does not have an automatic right for the request to be granted. You should communicate your decision in writing. If you are refusing the request, do provide clear business reasons for the decision. If you agree the request, then this permanently changes the contract of employment. The act is intended to help people achieve a better balance between home and work lives. It is argued that agreeing to employees’ requests can improve staff motivation and loyalty. On the flipside, employees that have been turned down may be able to bring a legal claim if the refusal was not based on good business reasons. In practice, most rural retailers do already tend to be as flexible as possible in allocating shifts and balancing the needs of the business with their employees other commitments. We do not expect this revised approach to flexible working to have much impact in our sector.
ENFORCEMENT OF THE NATIONAL MINIMUM WAGE The penalties for not paying employees the national minimum wage are rising. HM revenue and Customs will issue a notice of
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underpayment setting out both the arrears payable to the employee and also a penalty, which will be related to the value of the arrears. Errant employers will be named and shamed, whilst there are provisions to enforce payment of the notice, including civil enforcement through seizure of goods. Genuine mistakes or oversights are not valid reasons for underpayment.
remember you will need to employ a licensed contractor if the materials are high risk (e.g. pipe insulation and asbestos insulating panels). If the materials are lower risk (e.g. asbestos cement) then an unlicensed but competent contractor may carry out this work. The use of asbestos was banned in 1999. For more details, see:
Again, the vast majority of rural retailers are punctilious at paying the national minimum wage and this tougher regime should hold no fears for the vast majority of them.
■ http://www.hse.gov.uk/pubns/indg223.pdf ■ http://www.hse.gov.uk/asbestos/campaign/ duty.htm#what
DUTIES REGARDING ASBESTOS We have recently heard of work to install a new Post Office facility being delayed because the contractors needed to be re-assured that the walls of the building did not contain asbestos before they drilled into them. Although we have covered this issue before, a reminder seemed useful.
PLANNING LAW – CHANGE OF USE The Town and Country Planning (General Permitted Development) (Amendment and Consequential Provisions) (England) Order 2014 The Government has been keen to address the problems of empty shop units in town centres and also the lack of housing in relation to
The duty to manage asbestos is contained in regulation 4 of the Control of Asbestos Regulations 2012. For non-domestic premises, there are three essential steps: ■ Find out whether the premises contain asbestos, and, if so, where it is and what condition it is in. If in doubt, materials must be presumed to contain asbestos; ■ Assess the risk; ■ Make a plan to manage that risk and act on it. Remember that the duty to manage is all about putting in place the practical steps necessary to protect maintenance workers and others from the risk of exposure to asbestos fibres. It is not about removing all asbestos. If any materials do need to be sealed, encapsulated or removed,
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Legal Bits & Bobs...continued demand . One of its measures has been to make it easier to convert small shops to residential use, thus working to reduce both issues. Rather than having to apply for change of use, this Order provides permitted development for change from class use A1 (shops) to C3 (housing) for buildings under 150m2. The developer still has to apply to the planning authority for a determination as to whether approval is required. A key reason why this might be the case is whether there is adequate provision in the area of the sort currently provided in the building. Although there have not as yet been any test cases that we are aware of, we would expect this to mean that normally a rural shop that is the only one in the village providing its services could not be converted into a house under these regulations but would require proper planning consent. This is obviously very different from the urban context for which the regulations have primarily been drawn up. ■ For more information, see: http://www.legislation.gov.uk/uksi/2014/ 564/article/5/made
SIMPLIFIED ACCOUNTING FOR MICRO-ENTITIES The vast majority of rural retailers qualify; a micro-entity is defined as meeting at least two of the three following criteria: ■ Balance sheet total must not be more than £316,000 ■ Net turnover must not be more than £632,000 ■ Average number of employees must not average more than 10. Such companies can now submit micro-entity annual accounts, allowing them to prepare and publish simplified financial statements. Only the balance sheet with minimal disclosures needs to be filed at Companies House. It is not necessary to file the profit and loss account or the director’s report. These new regulations are optional for eligible companies. Directors can continue to prepare and submit accounts as before.
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By Michael Taylor of EM&F
The Great Escape It’s hard not to notice the current hype around the London property market with reports of panic buying leading to substantial price increases. So the demand is there but does that mean everyone wants to live there? In simple terms – No! Business transfer agents are currently receiving strong enquiry levels from those living in London and the Home Counties planning their escape for a better quality of life, in particular those with young families, often armed with a healthy deposit as a result of increasing house prices in their area. Why would you not look to re-locate and buy a business when you can go from a modest London terraced property to a 30+ acre Caravan Park complete with owner’s accommodation and generating a substantial income for not a great deal more money?
in demand, the advantage with Leasehold being new owners can often purchase outright, rather than having to borrow money. However, funding can be secured for the purchase of Leasehold businesses subject to satisfactory accounting information being to hand. This really does highlight the need for those selling businesses to ensure that accounting information is up to date prior to going to market. ■ Should you be thinking of selling your business and require a ‘free’ market appraisal then don’t hesitate to contact E M & F, details of your local office can be found at www.emfgroup.com or alternatively their Head Office can be contacted on 01404 813952.
The above example may be the extreme but it is reality. Further examples can be found with village stores, with a significant number of recent sales agreed and completions taken place over recent months. This has led to a shortage of quality stores on the market with each new instruction now generating substantial interest. Whilst pursuing a lifestyle change purchasers are looking for a quality life. This usually means the provision of accommodation with the business. If this is self-contained and with a garden then this proves very attractive. Another plus point is a modern well fitted retail area, allowing new owners to move in and concentrate their efforts on running and developing the business rather Colyford Stores & Post Office has recently sold after having been than having to worry about a re-fit. run for 60 years by one family. The Post Office is a community Both Freehold and Leasehold opportunities are office and so sold on retaining this contract.
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