Next year is set to be one that will sit prominently in the annals of history, but even among the political upheaval and major sporting events, a number of other factors will have a major influence on local retail. We spoke to a number of leading industry figures to find out their thoughts on what will shape the next year.
by Kevin Scott
SLR enters 2014 in a unique position. For the first time we can look forward to our first full year of trading as actual local retailers. We have entwined ourselves in this wonderful industry like never before; our fortunes and yours are shared. So putting together this annual feature has taken on a different mantle, one where we must also pay heed to the advice and thoughts of the industry experts who have kindly contributed. Over the next few pages you can read what trade associations, suppliers, wholesalers, manufacturers and retailers themselves have to say. And what a 12 months it is set to be – a more important milestone you will have to wade 300 years into the past to find. Be under no illusion, the independence referendum will have a huge effect on the local retailing community, as it will in every walk of life.
There is a power in the Yes movement, led by Alex Salmond’s SNP Government, that is more potent than ever before, and indeed, there will doubtless be many retailers ready to cross the box marked ‘yes’. Whether or not the SNP can upset the odds remains to be seen, and indications certainly suggest that Scotland will continue to be a devolved part of the United Kingdom. There is plenty of debate and proposals to come between now and 18th September though. Between now and then Scotland has much to look forward to. The economy is predicted to continue its recovery, and the Commonwealth Games in Glasgow in August will bring hundreds of thousands of visitors to the city and beyond – how to make the most of Games will be a major in SLR next year. As will the World Cup in Brazil. And the Year of Homecoming. And the Ryder Cup!
While the Scottish Parliament may focus on the referendum, there will be plenty more to contend with, much of which will affect local retailers. For starters, the Government will be forging ahead with its plans to introduce plain packaging on tobacco products – which it aims to introduce in either 2014 or 2015. Whether this is possible (for there will surely be a legal challenge) remains to be seen, but it is set to be a hugely contentious issue. As will be the pursuit of Minimum Pricing, and the ‘voluntary proposals to support healthier choice’, which will see retailers invited to remove confectionery from the till point.
Meanwhile the Licensing Bill will see loopholes closed on the proxy purchasing of alcohol and possible changes to the way Licensing Boards operate. There will be new Waste Regulations to contend with, while carrier bag charges will become mandatory. Yet the convenience sector in Scotland is booming – store numbers are up, competition among symbol groups is intensifying, and consumers are using their local shops more. And so they should – c-stores are moving with the times and more retailers than ever are beginning to harness the power of modern technology, from maximising the functionality of EPoS to digital communications, more efficient equipment and a whole load of snazzy technology, much of which can be previewed on SLR’s video only website www.shopflix.tv. But that’s enough from us. Read on for a snapshot of what the rest of the industry thinks, and here’s to a great year’s trading for everyone.
Mark Baird, Head of Industry Affairs & Alcohol Policy, Diageo
This year, the theme of Edinburgh’s Hogmanay celebrations is “Scotland’s Big Year Starts Here”… and they’re not wrong. At Diageo, we’re really excited to be hosting The 2014 Ryder Cup at our magnificent Gleneagles resort. We are also really proud to be an Official Partner of The 2014 Ryder Cup through Johnnie Walker Scotch Whisky. And of course there are many other momentous events on our doorstep, including the Commonwealth Games and Homecoming Scotland, not to mention the referendum!
Early in the New Year, we expect to find out what the Scottish Government will include in the Licensing Bill, be it a ban on internet deals, criminalising the supply (not sale) of alcohol to under 18s, insisting that licensing exams are taken in English only or far reaching powers to shut licensed premises around football matches. We’ve been a bit short on alcohol regulation over the past few years so it’s good to have some more to keep us all on our toes! And oh…I almost forgot minimum pricing. If the debate goes all the way to Europe, as I suspect it will, don’t expect to see a final decision until at least 2015!
Jeremy Blackburn, Head of Communications, JTI
The food, drink and tobacco sectors in the UK are under constant media scrutiny, with campaigners frequently calling for ever increasing regulation. Price control laws for alcohol are already in place, and chocolate bars and soft drinks could be next. Another step could be for tobacco and whisky to be labelled generically. JTI’s position on plain packaging remains: it will not have any public health benefits; we feel it will instead rob Scotland’s law-abiding independent retailers of much-needed turnover, and increase illicit trade. JTI will continue to engage with the same vigour as before and we encourage all retailers to by voice their opinions with their local MSPs. We are delighted that the Scottish Government banned the proxy purchasing of tobacco by adults on behalf of children – a law we called for – but further work needs to be done to deal with the illegal trade. 2014 will also see smaller store retailers face their final full year of an open tobacco gantry and preparing for the display ban should be high on every retailer’s agenda. My message to those reading this article is simple: don’t wait for the display ban to happen; be prepared.
Stephen Carr, Nisa Retailer, Falkirk
The continued drive by multiple retailers into the convenience sector looks likely to intensify. Morrisons and Asda are set to increase their investment in c-store format outlets and the rapid growth of Aldi and other discounters, whose value driven offer is proving attractive to consumers, is proving a real threat to larger c-stores. Whatever your views on the Living Wage campaign, it will prove costly for every small business if it’s successful. Staffing is our main controllable cost so sales will have to rise to match the increased overhead. Staff numbers may have to reduce for business owners to maintain profitability. In energy, LED costs have reduced and I expect more retailers will invest in this technology to cut energy bills. The independence referendum will boost sales whichever way we vote. And it’ll be party time with the World Cup, Ryder Cup, The Commonwealth Games and (hopefully) another hot summer, so we are confident of continued sales growth, but one thing we do know is that the sector will get more competitive for independent retailers.
Pete Cheema, retailer
I think that next year will be a very challenging time for retailers, perhaps even more than the last two years. There are so many new pieces of legislation to deal with, it beggars belief how we will all cope. These include: New planning regulations, Obesity Route Map, Plain tobacco packaging, New waste regulations that come in to force in January, Legislation on carrier bag charging and the administration required along with that, and the first year of Personal Licence Holder Refresher courses.
As retailers, we have to spend more and more of our time keeping up with new legislation. This inevitably increases the burden on our business of both our time and costs. Perhaps the world cup and the Commonwealth Games can provide us some much need cheer in our sector!
Paul Condron, Marketing Director, Tennent Caledonian Breweries
The convenience channel looks set to continue its growth in 2014. Challenging economic times shape the channel, with cash conscious shoppers favouring a little and often approach to help them stick to budgets. Looking to 2014, it’s going to be a busy year for Scotland with opportunities for retailers coming as shoppers buy for impromptu gatherings in front of the TV to watch some of the fantastic sport lined up. A few key areas to bear in mind: Optimise merchandising space – It is critical that retailers give the correct amount of space to the top brands to ensure shoppers are given the choice they are looking for The Chiller Opportunity – Shoppers in convenience are more likely to be buying for immediate consumption, so ensure the best selling brands are always in stock, and that the most popular pack formats are given sufficient space in the fridge Right Packs – We recommend focussing on smaller packs to support additional purchases, and focussing on Scotland’s favourite brands.
Barry Cuthbertson, Sale & Marketing Development Manager, Müller-Wiseman Dairies
‘Produce with Provenance’ will remain a key focus for us going forward into 2014 and we have a number of exciting developments planned involving a continued focus on regionality within our Black and White brand. Consumers increasingly demand traceability within fresh produce and by offering milk with regional labels showing a clear link to the area where it is produced, without adding cost to the retailer, we can add value to our milk which can be passed on to consumers. We also see health and wellbeing as a continuing trend into 2014, and one which we are well established at targeting with our products. As the UK’s first semi-skimmed milk, freshnlo has always been associated with health and nutrition, and has been a family favourite in fridges since its launch in 1981. In addition, the recent success of our 1% fat brand The One is down to its increased distribution and availability throughout the UK, combined with the increase in consumer demand for healthier dairy options without compromising on taste.
John Drummond, Chief Executive, SGF
2014 is likely to have a bigger impact on convenience stores than any other year in this decade so far. We’ll see the new Waste Scotland regulations and the Carrier Bag charging scheme coming into force; there will be a new Licensing Bill and refresher training for the first batch of Personal Licence Holders will have to be completed. The Scottish Government will try to press ahead with its plans for plain packaging of tobacco products and we may finally see Minimum Unit Pricing land on us. There will be a strong focus on tackling obesity, with the ‘invitation’ to remove confectionery from till points being just the start. The Commonwealth Games will have a big impact on convenience stores in Glasgow – SGF is now the Industry Sector Lead for planning and communications for the games. Competition will remain fierce: the planning system is now designed to promote town centre development and this might play into the hands of the big mults as they increasingly move into the c-store sector. We might find ourselves in an independent Scotland… and England might win the World Cup!
Amanda Jones, Chief Operating Officer, Nisa
The convenience retail sector is very competitive with growing symbol groups and the multiples all wanting to increase their presence in this market. I do believe that the trading environment will improve slightly for independent retailers in 2014 as the green shoots of an economic recovery start to be evident but the increase in competition will still make it tough. The biggest challenges for independent retailers in 2014 are two-fold – combatting the strength of multiple retailers and discounters encroaching on the traditional independent retailers’ space and managing the cost base of running a small business.
It is a constant battle for retailers to meet the promotional low pricing activities of the multiples whilst delivering a profitable margin. Despite the competition, independent retailers can set themselves apart by delivering a personal and localised service and being at the heart of the communities in which they trade. At Nisa, each store is independently owned which allows the store to be tailored to meet the needs of the local community and the independent retailers and their staff can create a familiar and friendly in store experience which some competitors can’t. In 2014 Nisa is planning on simplifying its business to make it easy for retailers to grow and develop.
We are organisationally changing to become more consumer focused by establishing a new marketing function to increase brand awareness amongst consumers and new business units which will specifically focus on the different needs of our symbol and our independent and specialist members.
Ross Kerr, co-ordinator, Healthy Living Programme
2014 will continue to be a year of opportunities for the development of not only fruit and veg in convenience stores but for the whole of the ‘healthier for you’ group of products. Evidence suggests that convenience retailers who develop this category show increased sales, profits and footfall. Customers are not only looking for a strong fruit and veg range, but for that complete ‘healthier for you’ package. Unfortunately, those that don’t find this don’t necessarily comment on it – they just shop where it is available, and with your competition developing this offering more and more, so too must you. Impulse siting has become more important with fresh. Areas such as the till point, is an example of further development opportunities. Sales growth will also come from further development of chilled cabinets and there’s a need to be more adventurous to drive total awareness of healthier options.
Jill Livesey, Shopper Insight & Marketing Director, him!
The big focus areas we have seen this year and believe likely to continue are ‘fix the basics’ and ‘meal occasions’. The understanding of shopper missions (key drivers to store) is become increasingly sophisticated. Retailers recognise a one fits all version doesn’t work, which is how symbol and independent operators have the edge on the competition. Shopper expectations will naturally differ by store type and locations and flexing range to suit your local shopper need – appeals to shoppers in the edge of trust, personalisation and supporting local. This year we have seen a big drive behind getting the basics right, particularly in key footfall CTN categories and also a big focus on great availability, providing choice, and great displays that are easy to shop.
Another big improvement we expect to continue is the development in retailers’ meal occasion range and offers. C-stores are the champions of meal occasions and have been doing this for years. There has been huge investment by independent retailers in fresh, hot food to go and coffee, as the meal and snack solution is no longer limited to a ready meal or a packet of crisps, drink and sandwich. Shoppers want meal deals throughout the day.
This investment is a risk; fresh is a difficult category to get right but we are being told by retailers this it it paying off, with bigger baskets, and new shoppers. One last thought: keep an eye on your local discounter; this sector is focusing on the top up shop, and communicating outside of price, focussing on meal solutions, driving their fresh credentials and loyalty initiatives.
James Lowman, Chief Executive, ACS
The main policy challenges in 2014 will focus on the continuing cost increases that are facing the convenience sector. Energy costs, the national minimum wage and business rates cannot continue to rise without retailers feeling the squeeze and cutting jobs and investment.
We are pushing Government to give local shops a reprieve in the Budget. Another key area for retailers in the coming year will be working in partnership with local authorities, business groups and the police to reduce alcohol harm, promote long term local planning initiatives and tackle crime and anti-social behaviour in communities. In terms of the sector as a whole, our research suggests that there will be a gradual increase in the number of store owners embracing new technology, along with a renewed focus on providing extra services such as mail order collections and returns, home delivery and stocking locally sourced products. As ever though, the key to competing with the major multiples is still fantastic service.
Kate Salmon, Executive Director, Scottish Wholesale Association
With the eyes of the world on Scotland in 2014 – the Commonwealth Games, Ryder Cup, Year of Homecoming and, of course, the referendum on independence on 18th September – there will be some big opportunities for our members to win new business and develop existing business links. But despite all this, the business environment in which we operate will remain tough.
The SWA has evolved into a collaborative organisation so we intend to work closely with our members to provide the services and support they need. With our suppliers and partners we will continue to provide relevant training for our members. Our groundbreaking mentoring programme will also be ramped up. We also know that when it comes to lobbying, we have a louder voice if we collaborate with other trade associations.
The next 12 months promise to be challenging, at times difficult and frustrating. But let’s pool our resources, share our knowledge and make the most of 2014 in the knowledge that its success won’t be measured next year – it will measured in the years to come.
Roy Williams, Sales Controller, CJ Lang & Son
Going boldly into 2014 we should see shoppers increasingly using the convenience channel as a means of better managing their cash and also topping up between big shops. However, along with this we will see greater competition, and standards increasing, within the marketplace. The symbol store offering continues to adapt to the ever changing needs of our customers with an increasing list of services available to the shopper.
The likes of food to go will become ever more popular and concessions such as Costa Coffee and Subway will become more commonplace. Money will still be tight for the majority of shoppers and we need to get the basics right and offer value for money. We will continue to build on the success of our TV advertising and ensure that we continue to increase footfall and basket spend for our retailers.
