Decline in the British small shop independent retail sector: Exploring ...

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Journal of Retailing and Consumer Services 12 (2005) 357–371 www.elsevier.com/locate/jretconser

Decline in the British small shop independent retail sector: exploring European parallels$ A. Coca-Stefaniaka, A.G. Hallsworthb,, C. Parkera, S. Bainbridgea, R. Yustec a

Manchester Metropolitan University Business School, Manchester, UK b University of Surrey Management School, Guildford GU27XH, UK c D’Aleph, Barcelona, Spain

Abstract In this paper we start by outlining the continued decline of the small shop in Britain. The decline is seen as especially severe in the truly independent/non-affiliated sector and we look at trends in decline but also the methodologies used to analyse this. Since a key current theme in European integration policy is for exchange of experience and best practise we then report on how an EU-funded (ESF) project is seeking lessons and parallels in the small shop sector in Britain and Spain. By examining official government statistics we see how the sector is monitored in Britain and Spain and then identify one clear one common factor in the rise of organised town centre management. We suggest that future research may usefully begin to develop a more euro-centric approach ensuring that the small shop sector EU-wide learns from transnational experiences. Accordingly, we also present the preliminary findings from a transnational survey of small retailers. The paper ends with a summary of ways in which we have sought to bring together the experiences of small retailers in both countries. r 2004 Elsevier Ltd. All rights reserved. Keywords: Small shop decline; Britain; Spain; Management; Data sources

1. Introduction Decline in the small independent retail sector, especially foodstores, is one of the more intractable issues in retail research. In general terms, this type of outlet can be seen as the basic building block of retail activity. Once markets could sustain more than itinerant traders, so the small fixed shop unit became common. For many major contemporary retail organisations, growth came from owning first one small shop and then multiple small shops. This, however, is not a study of the history of small shops—a topic well covered elsewhere (Benson and Ugolini, 2003). Instead we consider the marked decline in the numbers of such shops in Britain $ The authors gratefully acknowledge the support of the European Social Fund who part-funded this research and to Dr. Gary Warnaby, the editor and the anonymous referees for their helpful and thoughtful contributions. Corresponding author.

0969-6989/$ - see front matter r 2004 Elsevier Ltd. All rights reserved. doi:10.1016/j.jretconser.2004.11.007

as a prelude to considering a framework for future research, recommendations and possible intervention. Whilst change is a retail fact of life, many voices point out that for deprived communities the small shop can be a vital resource (Bishop of Liverpool Rt Rev Dr. James Jones, 2003). In other contexts, powerful market competitors are seen as an irresistible force working against small shop survival. (Peterson and McGee, 2000). A particularly important point to note is that, in recognition of the pressures on small retailers, coalitions of interested parties have led to such initiatives as the Main Street program in the USA and the ESF-funded Retail Enterprise Network in Britain. First, however, we take the situation in Britain to show the pressures on small shops.

2. Pressures on small shops—the example of Britain As one of the countries where the small shop has not fared well, it should not surprise us that the retail

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market in Britain—especially in groceries—shows high levels of market concentration with the key agendas being set by a handful of powerful corporations (Wrigley and Lowe, 2002). This concentration may become even more severe as fourth-placed retailer UK Safeway is, at time of writing, being purchased by the smaller Morrisons group based in Yorkshire. As with many such deals in the past, the arrangements include a mixture of cash and shares—but in February 2004 over 90% of the shareholders in both companies voted for the deal. It can also be argued that a more restrictive retail planning system since 1996 (Clarke and Hallsworth, 2001) has cemented current structural rigidities and forcing the major players to look elsewhere for corporate growth. The market leader—Tesco—is increasing its profile internationally with such developments as Lotus in Thailand. Interestingly, however, as Hallsworth and Bell (2003) have noted, Tesco (and others including the Co-operative Movement) have also begun to buy into the British convenience store sector. This corporate activity stands in marked contrast to the fate of the independently owned or run (Mom and Pop) stores in Britain. Many of these independent convenience food operators are continuing to lose their ‘‘true’’ independence and are seeking to locate under the umbrella of symbol or buying groups such as Spar or Costcutter. Broadly this indicates that the collective purchasing power of the umbrella groups is important— further implying that the supply chain discriminates against the small or lone retailer. The lack of vitality and viability in the truly independent sector is exacerbated by succession problems in the recently vibrant ethnic-owned retail sector (Barrett et al., 1996). In this paper we first update the situation in the small shop sector—drawing heavily on earlier work that was outlined by Baron et al. (2001). We later explore parallels with our chosen comparator— Spain—where the pressures on the small shop sector are arguably more recent. For example, whilst Aldi is a ‘‘hard-discount’’ rival to local operators in both countries, Aldi has been in Britain since 1990 and has 259 stores but only entered Spain in 2002 and has just 18 stores (IGD, 2002, p. 107). 2.1. Trends in the independent retail sector in Britain In line with the above comments it will be interesting to see how the well-documented problems in the UK small shop sector are mirrored in Spain. As Baron et al. (2001) reported, studies of UK independent food and grocery retailers emphasise the decline in their numbers over the last decade (Peston and Ennew, 1998; DETR, 1999; Gordon and Walton, 2000). For example the number of ‘non-affiliated independents’ (the focus of our concern) declined from 24,000 in 1996 to 22,000 by

1998 (Gordon and Wilson, 1999). Yet the combined total of other trading formats servicing the convenience food and grocery market rose by 1000—suggesting elements of market innovation even in the convenience sector. Unfortunately, attempts at rigorous analysis are hampered by poor statistical information—perhaps itself a sign that the sector is seen as insignificant. Indeed, the independently owned-or-run sector has never been regarded as important enough to command careful statistical treatment. In the convenience retailing sector, not just non-affiliated retailers but also symbol group members are classified as independent retailers, and traditional retailing sectors such as butchers and bakers are classified as independents. We must, therefore, treat all statistics with caution (Baron et al., 2001, for example concentrated solely on the convenience store format (Kirby, 1987) but noted the competition from major multiples and petrol forecourt retailers.) One of their key points was that the notion of long opening hours for customer ‘‘convenience’’ was being eroded. Indeed, in Britain, 24 h trading is becoming a feature of the operations of the major players—something to which the corner store owner/operator cannot respond. Arguably, as with many such trends, the USA had historically led the way—with Nystrom (1930) having identified high failure rates among US independents. Baron et al. (2001) noted that later work by Smith (1937) in Britain concentrated on strategic and financial aspects of the sector. This work suggested that the key factors resulting in the high failure rates amongst independent retailers were the ease of entry into the sector without either the necessary financial support or business acumen, and the rise of multiple retail rivals. In the 1960s and 1970s—in the face of ongoing decline—there arose studies focusing on the social role of the independent sector (Dixon and McLaughlin, 1968; Dawson and Kirby, 1979). At a time of a peak in writing about such stores, Dawson and Kirby (1979) offered an overview of the issues relating to the independent retail sector. They found problems in the independent retail sector related to the supply chain, to a lack of sufficient capital, to low margins and to a lack of business experience. Environmental factors included local and national taxes (the levels of rent and rates), and the complexities of red tape. At that stage, Dawson and Kirby (1979) saw that the traditional advantages of independent retailers lay in convenient location and opening hours, possible home delivery, friendly and personal service, and informal financial services such as extended credit and Christmas clubs. These advantages, however, were offset by higher prices. The conclusions made by Dawson and Kirby remain as relevant today. What did provide crucial competition was the arrival in Britain (in the late 1970s and early 1980s) of the USstyle 7–11 convenience store format. These stores— usually between 100 and 300 m2—were located close to

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housing and offered a wide range of goods including grocery and CTN products, chemist sundries, alcohol and possibly other lines including video hire, fast foods or petrol (gasoline). Their use of casual, short-contract, non-unionised labour to achieve opening long hours (including Sundays) offered competition not just to the independents but also to the unionised Co-ops (Hallsworth and Bell, 2003). Such grounded or situated research approaches recognise that market regulation frames competition and can enhance the market power of key players. As noted, recent decreased opportunities for large store developments in Britain have led the majors to become interested in this sector. Tesco’s Metro (some in conjunction with Esso), Sainsbury’s Local and even Marks and Spencer Simply Food are testimony to this. Petrol forecourt shops have been another convenience-based initiative for the market leaders—all increasing pressure on the independents. Baron et al. (2001), noted another 2001 report (Henley Centre, 2001) suggesting that over 70% of the UK’s £32 billion convenience food retail sector was already being serviced by the multiple retailers. Also, independent food retailers who had been able to claim that their advantage lay in their long opening hours soon found that eroded. In another key study, Smith and Sparks (2000) found that, whilst the multiples’ superstores opened up to 150 h, the longest opening hours for independent shops located in neighbourhood centres offered a mean of 81 h per week, and the longest individual small shop opening hours recorded totalled 109 h per week. Echoing our initial points, Pickering et al. (1998) emphasised that independent retailers contribute significantly to the preservation of local communities, while Peston and Ennew (1998, p. vi), pointed out that ‘consumers and retailers agreed on one thing y that there was a social need for their (‘corner shops’) existence. The problem, as with healthcare, transportation and social housing, is that services that are socially desirable are often not economically viable. Indeed, the social and economic construction of individual societies will determine what is forced to the margin—and whether or not it will then be collectively rescued. As Baron et al. (2001) argued, the social and community services provided by independent retailers can be viewed as a positive function. But can one (or should one) legislate to preserve the positive (but inherently interpersonal) social elements of shopping that are still valued by many consumers? The owner/manager of the independent store often knows their long-term customers, and can seek to meet their known needs. In earlier research, Baron et al. (1999) had argued that the independent retailer’s ability to provide these positive, interpersonal components of the retail experience could be viewed as a real strength to be exploited to the full. Yet the world is increasingly technologically sophisti-

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cated and Peston and Ennew (1998) suggested that independent retailers must also improve their technology and management systems in order to satisfy their customers.

3. Methodological approaches to understanding the small shop sector It is clear that there is, in fact, a substantial literature on small shops—little of it optimistic about their collective future. When we consider how information is derived we find a tendency to use sampling of opinions drawn from the small shopkeeper community. This is the general approach adopted by Baron et al. (2001)— the study on which we have drawn most heavily. Based, amongst other sources, on a five-point Likert scale and semi-structured interviews with small retailers, Baron et al. (2001) sampled a range of small shop opinions. Tellingly, in their first attempt, only seven retailers returned completed questionnaires! Eventually a link with the Association of Convenience Stores (ACS) proved to be helpful. This reinforces the importance of thinking collectively—though the study results still emphasise the problems of the individual store considered in isolation. The Baron et al. (2001) sample inevitably, then, reflects retailer self-images—these may be biased towards the more positive aspects. What also emerges is the theme we will pursue—the power of the collective. For example, members of symbol groups were more optimistic about the survival of their main store in 10 years time than the truly independent retailers. Given the power of the majors, it is not surprising that only a few of the truly independent retailers in the Baron et al. (2001), survey said that suppliers discussed packaging and display of products with them. Significantly, few worked together with other neighbouring traders to improve the health of their own high street (Parker and Byrom, 2001). Given the very strongly and widely held views of independent retailers that national and local government bodies are too bureaucratic and of little help. Baron et al. (2001) felt that organisations such as the ACS may play an increasingly important role. They summarised, then, a generally bleak picture for small independent food retailers in Britain. Such prospects are reinforced by a plethora of other studies: (Monbiot, 2000; Parker and Byrom, 2000; Simms et al., 2002). Included in this research is evidence that small shops depend heavily on popular goods for which there is an attractive black market. Accordingly, alcohol and tobacco smuggling are particularly damaging to small local shops which are also burdened by costs of security measures. Small, however, need not equate with insignificant. For example, SMEs represent 75% of all retailing companies in Europe and represent the second largest



employer in the EU, after manufacturing, with a total workforce of 21 million people. In the UK alone, SME retailers still employ 64% of all employees in the retail sector. We now propose that a more fruitful approach than concentration on events in one country should be comparative research in two or more countries. Consider, though, the impediments we have already identified in this sector—including pitifully poor data. This leaves us with a second theme for this paper— transnational study requires a thorough grounding in the prevailing national market regulatory contexts. We see this as a firm base for the ongoing action research both by ourselves and other interested parties. As stated, our chosen comparator is Spain and we suggest that a useful background to retailing in the two countries can be found in Flavian et al. (2002). Their work took a much more general overview but stressed two points to which we will return: that market innovations generally arrived later in Spain and that the Spanish market is more locally (we would argue regionally) oriented. Their work assists our general understanding—though their focus was not on the small shop sector. 3.1. Sources of secondary data (Great Britain and Spain) As noted, Baron et al. (2001) and many other studies have tended to be based on empirical and/or survey research on this poorly defined sector. In respect of secondary sources this situation, too, is seen as one where data are open to question and interpretation. There are a number of official sources of secondary data related directly or indirectly to small retailers in Great Britain and Spain and the main ones have been summarised below (Tables 1 and 2). Taking these primary and secondary sources as a springboard, comparative research is now under way. Underpinning this is our belief that, whilst global market forces may work against small shops, the responses to threat are locally mediated. The structures that arise to resist the power of large retailers will therefore differ. Classically, however, one country rarely learns from another about what may or may not work. In part this is because substantial differences are to be found in retail structures in sub-regions of the same country.

4. Comparing Britain and Spain: academic approaches Looking at organisational issues, we find that small shop trends in Britain and Spain have, in fact, followed largely similar paths—but with a time-lag and then greater pace in Spain. This has attracted academic interest (as outlined above in the case of Britain) though their priority areas have differed sometimes. Topics such as retail strategy have attracted much more academic

interest in Britain than in Spain. Conversely, Spanish researchers have generally concentrated on environmental factors affecting retailers. To offer a brief summary of the market in Spain we can observe that modernisation of retailing in Spain was not established until the mid-1980s when an influx of French hypermarket chains—led by Carrefour—became evident (at the time there were no effective controls on such outlets). That said, hypermarkets may co-exist with small retail formats and many of the latter have survived to this day. However, concentration among the market leaders (whilst less evident than in Britain and The Netherlands) means that the ten leading retailers now control well over half of the market. Note too that among the traditionals there remains a low level of training in the sector—a key agenda of our ESF project. The year 1985 saw a significant regulatory change—again one that differs from Britain in that the Autonomous Regions (Carrasco, 1996) were given retail regulatory powers (a point to which we will return). Whilst large but distant hypermarkets may have left market space for the small shop, a further and potentially more damaging trend is the rise of discounters. Dı´ a and its franchises are the market leader—but German-style hard discounters in the shape of Aldi and Lidl are increasingly significant. Accordingly, even though a legislative vacuum persisted into the 1990s (Cruz and Rebollo, 1995) 1996 did see significant legislative activity—and at national level. That year the Leyes de Ordenacioń del Comercio Minorista (Allué, 1996) were enacted to regulate retail competition. This was intended to exert some controls on matters such as large store development and lossleading/promotions (for sectoral topics see Mozos Ramirez and De Manuel (1998) and Garcia (1998)). Underlying this is the hope of protecting traditional retailers from the market effects of larger rivals y a policy not universally welcomed (Casares and Rebollo, 1997). See also Dawson and Burt (1999) and Cruz (2000) on Spain including the small shop sector and note, too, that assistance programmes are financed jointly by National and regional governments—a further contrast with Britain. Further existing research topics are summarised in Table 3 which is based on content analysis undertaken by Frasquet et al. (2002). Obviously, it is difficult to establish clear comparisons in respect of research in sub-areas of retailing such as small retailers. Although there appears to be some evidence of relatively early (though very focused) academic research in this field the topic of small retailers and their competitive business needs (e.g. training) this appears to be a relatively recent area of academic research in Spain. In Britain, academic research on small retailers in general is more established both in historical terms and


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Table 1 Sources of secondary data on the small retail sector (Spain) Source

Currency of data

Socio-geographical resolution (max/min)

Contents

Ministerio de Economı´ a y Hacienda (Direccioń General de Comercio Interior)

Last published in 2000

Countrywide

The report ‘‘Estudio sobre la Estructura del Comercio Minorista’’ Represents the best single source of information in Spain on the SME retail sector on a nation-wide basis. The aim of this government report is to improve the national and international competitiveness of Spanish SME retailers. It includes data on: number of outlets per subsector; surface area per subsector; employment and turnover levels per subsector; age, gender and qualifications of retail outlet owners; age of retail outlet; type of sales; payment methods of suppliers; customer services offered; level of ICT use in business management; membership of trade associations; participation in vocational training courses; etc.

Anuario Econo´mico de la Caixa www.estudios.lacaixa.es/ anuarioeconomico

Yearly

Town/autonomous region (e.g. Andalucı´ a)

Demographics, market share, bank and building society branches, sector-specific data (e.g. number of and surface area of multiples, SME retailers, catering services outlets such as pubs and restaurants, and various other economic indices related to industrial output and tourism).

Instituto Nacional de Estadı´ stica www.ine.es

Yearly

Family/countrywide

Instituto de Estadistica de Andalucia (IEA) www.iea.junta-andalucia.es

Yearly

Family/autonomous region (e.g. Andalucı´ a)

As above but focused on the autonomous region of Andalucia. The IEA also manages a GIS database with local information (towns, etc) on demographics, employment, sectors and subsectors of the economy, retail outlets, etc.

Impuesto de Actividades Econo´micas

Unknown

Street/countrywide

Somewhat similar to UK’s Customs and Excise VAT Registration Department, though in Spain the tax referred to here is different from VAT itself (which is also payable in Spain). This government database represents the most reliable source to identify the number of business outlets present on any street. However, due to the fact that this is a business-related tax, it is necessary to find out which businesses have physical outlets. This can be carried out within the database and will produce information on the subsector, geographical location (street and number) and surface area of each outlet. Nevertheless, recent (2003) changes in taxation in Spain have meant that this tax no longer applies to small businesses up to a set level of turnover.

in its content. However, in contrast to the situation in Spain, there is greater indecision over the importance of the sector among policy-making bodies and government in spite of the fact that there is evidence of a growing concern about the (potential) demise of the sector (Baron et al., 2001). We have outlined above a number of contributory factors that have been advanced to explain the decline of independent retailers in the UK over the last 30 years. These can broadly be subdivided into two sub-areas: the changing environment which independent retailers face, and the resource position of independent retailers. Given the generic nature and

breadth of these areas, it is expected that they would be equally applicable to the situation of small retailers in Spain. Some of the implications of this are outlined below in view of exploring nuances in the areas of research on issues affecting the competitiveness of small retailers in Great Britain and Spain. 4.1. Categorising approaches to the small shop problem Whilst the work of Baron et al. (2001) dominantly explored the problems of the small shop in Britain, it is increasingly obvious that many of the key factors apply



Table 2 Sources of secondary data on the small retail sector (UK) Source

Currency of data

Socio-geographical resolution (max/min)

Contents

GOAD Maps www.micromarketingonline.com/play.htm

Regularly updated

Town/street

Include detailed data on the retail trade composition of over 1100 individual town and district centres. Provides information on anchor stores, proximity to neighbouring centres and the size of a centre in terms of outlets and floorspace.

Retail Directory www.h-info.co.uk/rd/ default.asp?cat=RD

Yearly

Countrywide/town

Includes listings of retailers, giving their name and type of business, street by street in about 400 towns in the UK.

Department of Trade and Industry (DTI) Registrations and De-registrations www.dti.gov.uk

Regularly updated

Countrywide/local authority

Details the number of VAT and PAYE registered businesses by sector and by local authority area. Businesses that are not registered will, however, not be recorded

Commercial market reports

Periodically updated

Countrywide

Various market reports by commercial agencies (e.g. MINTEL, Keynote etc.) give details of retail activity relating to specific product categories (e.g. industry structure, key retailers, current issues, consumer behaviour). SME retailers are frequently mentioned in such reports. Occasionally reports focus on retail sectors where SME retailers have an important role. Recent examples are market reports on ‘Convenience Retailing’ by Keynote (2001) and MINTEL Retail Intelligence (March 2002).

Government Statistics

Regularly updated

Countrywide/regional

Various sources produced by government departments/agencies provide general information on consumer expenditure and consumption (e.g. Family Expenditure Survey, General Household Survey) . However, data from these sources is not specific to SME retailers also it may be of use in providing contextual information.

www.statistics.gov.uk/default.asp www.statistics.gov.uk/statbase/ Product.asp?vlnk=361&More=N www.statistics.gov.uk/STATBASE/ Product.asp?vlnk=5756 www.sbs.gov.uk Source: Hogg et al. (2002) A review of town centre statistics in the UK REN working paper MMU.

in Spain also. We might imagine, however, that (if markets are differentially structured) then this might influence the subtle differences in research emphases that we have begun to identify. We have allocated existing published work to broad groups of approaches as follows: 4.1.1. Environmental factors There are a number of environmental factors affecting the competitiveness of small urban retailers. For the purpose of this discussion, they can be split into two areas—macro-environmental factors and micro-environmental factors. Their sources and influence on small retailers has been summarised below (Table 4).

4.1.2. Resource factors The effects of many of the environmental factors outlined above have often been exacerbated by inherent weaknesses in the resource base of independent retailers, including factors already identified above. 1. Problems with logistics and supply (Byrom et al., 2001a) particularly where distances from suppliers increase.( Kirby, 1981). 2. Minimum order sizes stipulated by distributors that are far greater than the stock requirements of individual independent retailers, which leads to equal or higher operating costs than those of larger formats of retailers (Smith and Sparks, 2000).


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Table 3 Transnational retailing research ranking by topic (adapted from Frasquet et al., 2002) Ranking Research topic

Spain

Europe

Environmental factors (including competitive, legal, political, technological, ethical, social, demographic and economic factors)

1

5

Business management (including location and general business management)

2

2

Consumer behaviour (including choice of retail outlet, consumption and shopping habits, buying Decision process, and typologies of consumers)

3

3

Retail structures (including theories of structural change, history and evolution, and new forms of selling such as ecommerce and franchising)

4

4

Distribution channels (including dimensions, value chain, vertical/horizontal integration, channel planning and international channels)

5

7

Retail strategy (including growth, segmentation, image, positioning, loyalty, marketing planning, competitive advantage, market orientation and relationship marketing strategies)

6

1

Performance (including productivity, profitability, sales, market share, satisfaction/service quality, loyalty)

7

6

Logistics (including stock management, warehousing, haulage, new instrumentation, and outsourcing)

8

9

Other (including research methodologies applied to retailing, training and courses)

9

8

Table 4 Environmental factors affecting small urban retailers (based on Howe, 1992) Environmental factor Macro level 1. Social

Description

Increasing mobility of consumers (high car ownership) and higher incomes have led wealthier customers to shop further away from their place of residence, favouring the large superstores due to their convenient opening times (24 h) and variety of produce. The poorer remain dependent on the small shop. Rising aspirations among new generations are creating a succession problem for many family run small outlets.

2. Technology

Self-service and EPOS technology has favoured large retailers due to economies of scale. The technology gap between large and small retailers is becoming increasingly larger.

3. Policy

The UK government has not used competition policy to defend the small shop, unlike other European countries. Acceptance of Sunday trading (1980s) and 24-h trading practices has had a big impact on small urban retailers, particularly corner and convenience shops. Red tape and government-led bureaucracy is also stifling business.

Micro level 1. Location of competitors

2. Small retail outlet location

Large food retailers (e.g. Tesco) have started targeting higher-earning customers in urban areas not far from small shops. This occurred first in out-of-town areas but now also in town/city centres, where additional services such as pharmacy and dry cleaning are being offered by large retailers in detriment to smaller ones. Small shops are increasingly finding themselves in areas with poorer, less mobile customers. High outlet rents in city/town centres are often a contributing factor to the exodus of small retailers from city/town centres to poorer (and cheaper) areas in the outskirts.

3. Minimisation of investment or capital expenditure on the upkeep of the shop in order to decrease overheads and maximise profit margins (Byrom et al., 2001b). 4. Inadequacies in management partly as a result of low entry barriers to retailing and the absence of any formal training requirements (Kirby, 1984, 1985). This can often be exacerbated by the fact that the shop is not the main part of its owner’s business and

the use of (sometimes inexperienced) family or relatives as members of staff.

These problems and difficulties have been summarised by Smith and Sparks (2000) as: inadequacies in the trading environment, inadequacies in the retail form, and inadequacies in management.



4.1.3. Temporal evolution After outlining the macro- and micro-environmental issues affecting small retailers and their strategic response, we may now add in the fact that business decisions made by managers, owners and entrepreneurs are often influenced by the stage of the business lifecycle (Table 5) in which the sector or the enterprise finds itself. While there would be evidence to suggest that the traditional small retail sector (e.g. corner shops) is well within the maturity phase of this lifecycle (Fig. 1) both in Spain and the UK, this need not apply to all sub-sectors of small retailing. Furthermore, outlet owners or managers will find themselves at different stages within the lifecycle depending on the longevity of their business, its size, financial situation, sub-sector, product, customer base and strategy, etc. Inevitably, an entrepreneur in the birth/growth phase will face different strategic issues from those of a well-established owner-run family retail outlet where succession within the family may be the most pressing factor for the survival of the business. Moreover, there is research evidence that gender, age and ethnic background can have a considerable impact on the type of business options open to small retailers and entrepreneurs. These issues are explored in more detail in Table 6, where each phase is analysed separately in terms of published research in the field. Inevitably this tends to take us back over material covered by Baron et al. (2001)—but in a more structured fashion.

5. Possible ways forward for small retailers In both countries it will be important to show both retailers and policymakers how a resurgent small shop sector can have the wider benefits suggested by many observers. These can also be categorised:

5.2. Business strategy In order for small retailers to prosper by taking advantage of some or all of the issues outlined above, it is important that they think and act strategically. In spite of this, Megicks (2001, p. 316), in what remains one of the most comprehensive UK study of independent retailer strategies to date with a sample of 400 independent retailers, points out that: ‘‘Extant literature in the UK has failed to address the variations in strategy and performance in this context substantively and little empirical evidence of the differences in independent retailer strategies exists’’. While most strategy-related literature in retailing has concentrated on the modern industrial organisation economics frameworks (Helms et al., 1992; McGee, 1987; Warnaby and Woodruffe, 1995; Wortzel, 1987), (closely linked to the work of Porter, 1980) and the product/market scope-growth vector (Knee and Walters, 1985; Kristenson, 1983; Omura, 1986), (based on Ansoff, 1957), any emphasis on small retailers has been lacking. The vast majority of research in this area has been US-based (Conant et al., 1993; Covin and Covin, 1987; Fiorito and LaForge, 1986; McGee and Rubach, 1996; Watkins, 1986), albeit with some limited contributions at UK/European level. This may in itself explain the tendency to adopt US-style approaches that often concentrate on two key areas: 1. development and future directions of the business (mainly in rural areas) (Byrom et al., 2001; Jussila et al., 1992) and 2. strategy types employed by retailers (Megicks, 2001) Their different contributions to small retail strategy are summarised below in Table 7 and it should be noted that most focus on the store itself—except the suggestion by Jussila to attact ‘‘visitors/tourists’’ (below). Our prime interest in this work is to examine prospects for small shop survival that focus on collective activity.

5.1. Socio-economic and sector-specific factors Smith and Sparks (2000) identify a number of areas where small independent retailers can play an important role in the future. We have already referred to a ‘‘greater indecision over the importance of the sector among policy-making bodies’’—this may stem in part from their holding an overly economistic view of the retail trade. There can be a reluctance to see value in enterprises that may be satisficers rather than maximisers. However, in poorly served communities it may only be the satisficers who are prepared to continue to trade. These more socialised, less economic factors have been summarised below (Table 6).

6. Next steps: transnational comparative perspectives In approaching retailing from a transnational perspective that is practical rather than theoretical certain next steps seemed to us to be logical. 6.1. A Spanish-British retail glossary A simple but obvious activity was to commence a glossary (Table 8) since the retail sector as a whole is poorly served by acceptable lists of definitional terms even at the national scale. This was approached by using teams of bilingual retail researchers from both countries.


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Table 5 Summary of factors affecting the business cycle of small retailers. Life cycle stage

Key Issues

Barriers to entry

Only 33% of British would-be entrepreneurs think they will end up running their own business (Walker et al., 2002). The top three reasons for this are ‘‘fear of debt’’ (51%), ‘‘difficulty in finding finance’’ (50%) and ‘‘fear of failure’’ (47%).

Once people in the UK reach the age of 45 they are much less likely to consider starting a business (Walker et al., 2002). Eighty six percentage of British people admire entrepreneurs and 76% would encourage their friends or relatives to start their own enterprise (Walker et al., 2002).

Language barriers in the UK (e.g. evidence from Asian women) (Info.sm.umist.ac.uk, 2001) Lack of relevant business education, lack of planning and lack of affordable business premises for start-ups have been cited as the main barriers to entry for women entrepreneurs in the UK (Schmidt and Parker, 2003)

Business creation

Women account for 50% of all business start-ups in the UK (Scase, 1998) but the size of their start-up businesses tends to be smaller than that of men Fischer et al., 1993)

There is a higher proportion of would-be entrepreneurs amongst the Black and Asian communities (30% and 16% respectively) compared with 11% of the white population (Walker et al., 2002).

In the UK, 25% of all men are involved in business ownership but only 10% of women are (Walker et al., 2002), in spite of the fact that women make up 70% of the total retail workforce (Distributive National Training Organisation (DNTO), 2000)

People in the South West and London are most likely to be entrepreneurs. The Northeast has the smallest number of entrepreneurs (Walker et al., 2002).

South Asians have 23% of all local businesses in England, and tend to favour the following sub-sectors of retailing: food

Success

(25%), other (19%), clothing (17%) and catering (15%) (McEvoy, 2002). Yet, the first three categories are almost even in their distribution when considering South Asian resident areas only. Afro-Caribbean entrepreneurs also favour ‘‘food’’ (27%) as their preferred choice or retail outlet. Women entrepreneurs in the UK are affected by financial discrimination (Schwartz, 1976).difficulty in raising start-up capital, (Carter and Cannon, 1998), lack of financial training, (Hisrich and Brush, 1984) lack of management experience and business knowledge (Schwartz, 1976). Unemployment; redundancy; (Info.sm.umist.ac.uk, 2001) underemployment, lack of job satisfaction, desire for social status or independence, making better use of qualifications, family (flexibility) (Mattis, 2000); financial independence and need for a challenge (Carter and Cannon, 1998); and difficulty in finding work and insufficient family income (Orhan and Scott, 2001); need for greater flexibility for family commitments (all these mainly for women in the UK)

Racism, economic recession, and employment in marginal industries and disadvantaged regions and localities (Aldrich et al., 1981, 1983, 1985; Jones, 1981; Jones et al., 1989; Ram, 1994)

South Asian (Ram and Holliday, 1992) and Chinese (Parker, 1994) retailers find it easier to engage family members as Growth

temporary or part-time staff in the business than Afro-Caribbean (Ram and Deakins, 1995; Ward and Reeves, 1980) or white retailers. Informal sources of funding (family and networks) used by South Asian (Patel, 1988; Werbner, 1984) and Chinese (Liao, 1993) entrepreneurs. This, however, does not apply to Afro-Caribbean (Wilson and Stanworth, 1988) businesses. Main source of finance for all ethnic groups (including whites) (Jones et al., 1994) remains personal savings. Men in Spain tend to invest more in training than women (Fernandez Barcala et al., 1999). Yet, women in Britain tend to have the highest levels of education of all entrepreneurs (Carter and Cannon, 1988; Watkins and Watkins, 1984). Large and/or multiple retailers (Parker et al., 2003)

Business development generally financed through bank loans by Afro-Caribbean (40%), South Asian (55%) and white (62%) entrepreneurs (Jones et al., 1994).

Men in Britain tend to have greater business growth ambitions than women; (Rosa et al., 1996). they are also more likely to

own another business at the same time. However, women’s businesses experience the largest growth rates (Wojahn, 1986) in the UK. Female businesses in the UK are more likely to serve local market only and give more importance to social contribution of business (Orhan and Scott, 2001) they also have lower levels of core staff (Rosa et al., 1996) Female businesses in the UK find cash flow problems (Info.sm.umist.ac.uk, 2001;Fielden et al., 1998) lack of training (Schwartz, 1976), high cost of premises and link between sector choice and underperformance (Spanish entrepreneurs) (Fernandez Barcala et al., 1999) as major problems


366 Table 5 (continued )

Maturity

Key Issues

Business succession issues (new generations, particularly in South Asian communities, are increasingly well qualified. In the

Cessation or failure

Racism, economic recession, and employment in marginal industries and disadvantaged regions and localities (Aldrich et al.,

1981, 1983,1984; Jones, 1981; Jones et al., 1989, 1992; Ram, 1994) Crime Lack of funding for further investment Underperforming family members in the business (Ram, 1992, 1994) Factors that may cause decline include national (government/EU policy, lack of information to small retailers, and necessity to embrace change), regional (pro-active campaigns from other town/city centres), and local (participation in trade associations, involvement of trade associations in policy lobbying, reduction of footfalls due to closure of other service outlets, lack of staff resources to capture and process strategically relevant regional/local information, lack of skills, reluctance to change, reluctance to embrace new technologies) (REN,2003)

SUCCESS AND GROWTH

MATURITY

Small retail sector (modern formats)

Volume of sales

CREATION

case of Indians and African Asians the percentages with a degree exceeds the white figure, and Pakistanis approach (Modood et al., 1997) the highest levels of education, however, are found amongst the Chinese community (Owen et al., 1997) Some retail outlets beginning to cater for more than one market (i.e. local non-ethnic customers or non-local non-ethnic customers) (Barrett et al., 1996) Mature retailers can be unwilling to modernize (Parker et al., 2003) Mature retailers often slow to keep up with market trends of consumer behaviour (Parker et al., 2003) Often long-standing mistrust between council and SME retailers (Parker et al., 2003) Mature retailers may not engage with trade associations or discuss problems with other retailers (negative feeling of being ‘alone out there’) (Parker and Byrom, 2000).

DECLINE AND/OR CESSATION

Small retail sector (traditional format)

Life cycle stage

Time Fig. 1. Business lifecycle model and position of different small retail formats.

6.2. A retailer exchange visit/survey Again emphasising the practical nature of the work, two steps were next taken. One was to undertake a transnational survey of small shopkeepers in Britain and Andalucia. An adjunct—which we first discuss—was to take a number of British small shop retailers—and also some town centre managers—to visit counterparts in Spain. A form of ‘‘twinning’’ system was initiated with Andalucia and it is at this point that what we have termed cultural friction becomes more evident. This,

essentially, stresses the complications in understanding of systems that flow from the observations by Flavian et al. (2002) that the scale of operations is national in Britain but local (again we suggest regional) in Spain. In Andalucia, as in other autonomous regions of Spain, all small retailers have to pay a membership fee to the Chamber of Commerce. This must be done by law and those that do not pay may be prosecuted (though this seldom happens). In return, the chamber offers free training, advice, courses, etc.—and these are accepted as a valuable resource. The British visitors were unprepared for the level of resources (buildings, training facilities, etc.) that they experienced when visiting the Chamber of Commerce in Malaga and Seville. That said, Chambers have little to do with the actual running of town centre management schemes. We stress again that this is a level of local collective effort generally not experienced in Britain. City Councils in Spain tend to use public funds to help with retail initiatives and, in some cases, help with existing town centre management schemes. Indications are that in policy terms Andalucia may follow a town management based regeneration policy. Whereas many British town centre management schemes have borrowed from experience in the USA and are retailer-led, the situation in Andalucia involved a wider range of parties. Several tiers of government were involved and also the Chamber of Commerce. The most surprising group to be fully involved, to British eyes however, was the Trade Union sector.


367

Table 6 Summary of aspects where small independent retailers play an important role (based on Smith and Sparks, 2000) Area Socio-economic elements 1. Consumer behaviour

2. Economic links with businesses 3. Resident community 4. Employment Sector issues 5. Diversity of choice

6. Dynamism

Description

Consumers may still use small independent shops in three instances: when it is the only outlet available (mainly rural areas) for ‘incidental’ or emergency purchases (i.e. convenience buying) to purchase products otherwise not available elsewhere (e.g. speciality shop) Links with other businesses in terms of services (e.g. legal advice, tax services, etc) and networks. This level of embeddedness has been cited as a reason for small retailers to participate in TCM schemes (Medway et al., 2000). Contributing to the fabric of communities with a sense of identity and place for their inhabitants by providing an economic ‘glue’ for local residents. Small shops can be a ‘seed-bed for entrepreneurship’ due to low entry barriers and the prevalence of self-employment in this sector. The diversity and ‘colour’ offered by (mainly specialist) small retailers may result in a competitive advantage (Davies and Harris, 1990) for an area in terms of its differentiation from the more standardised retail landscapes of most high streets, especially when the retail provision can be grouped into clusters or strips. (Brown, 1991) Small retailers can provide a test-bed for new retail and product ideas. Their better understanding of the local market and customer service needs can be a potential source of competitive advantage (Logan, 1994; Megicks, 2001).

Table 7 Summary of European research contributions to strategic aspects of small independent retailers (based on Jussila et al. (1992); Byrom et al. (2001b); Megicks, 2001) Author Jussila et al. (1992)

Description of contribution Identifies three strategic directions available to (rural) retailers in Finland:

adaptation (i.e. operating as effectively as possible) diversification (i.e. expanding product ranges and/or services) expansion (i.e. increasing customer numbers, possibly through visitors/tourists to the area) Byrom et al. (2001b)

Megicks (2001)

Develop a model based on retail variations. The model is split into: strategic stasis (i.e. maintaining customer base, turnover and profit in a declining market) strategic expansion (i.e. developing the business in both product- and market-led directions) Identifies five clusters of independent retailer types as defined by the following strategies adopted: buying group merchants that assemble and merchandise stock lines and deliver them with a level of service appropriate to their customer base—characterised by strong customer focus and growth by developing new lines, new customers and general diversification full-service strategists (strategically aware and active independent retailers) that are operationally more astute, improving efficiency and cutting costs in order to maintain their position—characterised by strong customer focus, growth by diversification into new markets and products as well as service improvements specialist vendors with a strong emphasis on merchandising their range and providing high levels of service and unique, quality products—they are not active marketers and their positioning is founded on a high level of focus and expansion through diversification indistinct traders that lack any active retail initiative and appear to be strategically deficient although they have a marginal level of focus—they are not active in pursuing growth opportunities through diversification and do not have a low cost or specialist positioning free-standing merchants—identical to buying group merchants, except that they are free-standing and therefore autonomous

A second key point of difference was that the situation in Andalucia was expected to make extensive use of benchmarks and Key Performance Indicators. This was not favoured by the visiting British town centre

managers who believed that use of benchmarks and Key Performance Indicators merely led to extra performance pressures being heaped upon them from above. As one put it ‘‘they end up being a stick to beat you with’’. It



Table 8 Abstract from retail glossary

Establecimientos comerciales Retail businesses. Categorı´ as: Categories: Cotidiano alimentario Grocers Cotidiano no alimentario Non-grocers Equipamiento del hogar Household goods and furnishings Equipamiento de la persona Personal care goods Automocioń y carburantes Garages and petrol stations Ocio y cultura Leisure and culture Comercio mixto (este engloba: grandes almacenes, hipermercados, almacenes populares, economatos y cooperativas de consumo). Mixed retailers (this includes: large multiples, supermarkets, hypermarkets, company stores and co-operatives) Superficie comercial (metros cuadrados de superficie dedicada al comercio). Retail surface area (square metres of surface area used for retailing). (the full twelve-page glossary is available on the web at: )

may be that, with the passage of time, the experience in Spain may tend the same way. The counter viewpoint is that the lack of anxiety in Spain about the use of benchmarks and Key Performance Indicators may reflect the more inclusive attitude (that includes Trade Unions) and that fears are unwarranted. Whatever the reality, we gained a sense that a stategy based on collective action—underpinned by policy—was emerging quickly and strongly in Andalusia—confirming our suggestion (above) on collective regeneration strategy. 6.2.1. The transnational survey Returning to our transnational survey, we undertook an exploratory study with key objectives to identify factors affecting the competitiveness of small retailers in Spain and Great Britain. This would focus on structural characteristics: testing if small shops in the two countries were similar in size, turnover, ownership etc. Longer term we intend to identify what small retailers in either country perceive to be ‘success factors’ in their business and how much progress they have made towards achieving them. In this process we explore barriers to small start-up businesses and causes of failure/cessation (including ethnicity, gender, disability and age) among existing small retail businesses. In terms of survival, we seek to ascertain the level of involvement that small retailers have with existing support organisations such as chambers of commerce/trade, town centre management schemes, local authorities, retail clubs, etc.

Eligible survey respondents were owners or ownermanagers of product-based retail outlets with fewer than 100 employees operating in urban and rural retail districts in Great Britain and the region of Andalucia (Spain). 6.2.2. Survey process and response rate The average overall response rate achieved was 37% with a total of 1324 questionnaires completed. This level of response rate among a sample dominated by small business owners (more than 80% of those interviewed had less than 10 employees) is largely due to the fact that in every retail district the survey and its associated benefits to the SME retail community were often advertised locally two or three days in advance of the field team’s arrival. Response rates ranged from 20% in some towns to 65% in others but the survey was always largely managed locally and, in this phase, the researchers only acted as facilitators for technical queries, field team co-ordination and so on. In Spain the field work was sub-contracted to Insomer (a medium-sized Andalusian social and market research company). Uniformity of approaches and methodology was assured through a series of pre-survey training workshops held by Manchester Metropolitan University personnel with field researchers both in Spain and the UK. These workshops advised field researchers on the modus operandi of the study and acted as exchange of experience based on smaller scale research surveys in both countries. Every retailer was interviewed face to face through a structured questionnaire, part of which they were requested to fill out individually due to the sensitive/ personal nature of the questions. On average, most interviews lasted about 30 min; tape recording was not needed as all the data was recorded in a questionnaire by both interviewer and interviewee. In order to attain an acceptable average response rate, each retailer willing to do the survey was given a maximum of three chances to complete the survey at a time and date of their choice. The research field work started in June 2003 and was finally completed in September 2004. 6.2.3. The transnational survey: preliminary results Survey findings reflect the realities expressed both in the literature and on the ground in Andalucia and Britain. Given the longer period of decline in Britain, we know that many very small British retailers have now closed—or moved under the protective umbrella of symbol groups such as Spar, Costcutter or Londis. Our sample in Spain contained many more truly small businesses (72% had one employee or none) whereas in Britain the figure was just 30%. In Spain, businesses with a turnover of less than 150,000 Euros comprised 96% of our sample—in Britain just 20%. Again, we


suspect that subsistence-level retailers have been driven from the British market. In Spain, 30% of businesses had been trading more than 20 years (just 12% in Britain) whilst the most commonly cited reason for going into business in Spain was ‘‘to continue the family business’’ (at 36%) whilst the most commonly cited reason for going into business in Britain (also 36%) was ‘‘to be my own boss’’. This may again reflect the view of British businesses as tradeable assets—and some reluctance (see McEvoy above) in Britain to carry on running family firms. So, in Spain, three times as many owners took over from a family member than in Britain. Equally, three times as many retailers in Britain than in Spain had a business plan (often needed if financial backing for takeover is sought). This same point is emphasised when we find that four times as many British than Spanish small retailers bought out a previous (presumably unrelated) owner. Overall, the picture emerges of a Spanish sample just moving down the slope of decline away from true independence—a route taken decades earlier in Britain.

7. Conclusions and future prospects That the small shop sector is in decline in Britain is without doubt and the fact that autonomous region of Andalucia is addressing concerns about health of the small shop sector in southern Spain suggests that problems are converging. However, as we have previously noted, (Hallsworth, 1995) economies and societies evolve differently and face different structural and socio-economic imperatives. Even focusing just on small shops has thrown up significant differences in the networks by which change is controlled or mediated: either nationally or regionally. From published and empirical work we have shown that decline in the small shop sector started later in Spain and has rapidly accelerated. That said, many of our Spanish respondents were still genuinely independent, family owned concerns of the sort now very much lost in Britain. Furthermore, the recent trends to give greater political power to Spain’s autonomous regions has led to a politically driven regional fightback in defence of the small shop sector. This process—identified both in Andalusia and in Catalonia—is largely absent in Britain. Indeed, the recent moves into smaller convenience formats by leading British chains such as Tesco merely increases the pressure on Britain’s independents. Technologydriven companies such as Tesco are increasingly dominating the supply chain—which must marginalise weaker competitors. Such insights were shared with transnational participants when delegates travelled from Spain to Britain—to experience how retail markets in Britain actually operate. This was further facilitated by

369

the development of the glossary and the recording of the Britain–Spain differences in approaching the defence of the small shop. These are essential first steps that suggest that transnational research on the small shop sector will not merely be of academic interest. The overall aim is to extend study beyond the two-country comparison and to establish best practise in the search for a truly viable small shop sector. What we have thus far learned is that the institutional mechanisms at regional and national level will also need to be carefully monitored. This reminds us that wider, generic trends—as in the global economy—are always mediated by events on the ground.

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Further reading DETR, 1998 The Impact of Large Foodstores on Market Towns and District Centres. The Stationery Office, London. DTI, 2000. Bridging the Gap. Building a Partnership Between Retail and Education, Retail and Consumer Services Foresight Panel. Available from Department of Trade and Industry, 1 Victoria Street, LondonSW1 H OET.