Viewpoint: Michael Weedon, FSB

07 May 2020, 11:13 AM
  • Coronavirus brings unprecedented challenges, but may have some silver linings for indie retail says the Federation of Small Businesses’s chair of retail and high street policy
Viewpoint: Michael Weedon, FSB

All physical retail at the moment is facing a challenge of footfall. One thing I observe dealing with local food and drink merchants recently is that people seem to be gravitating towards supermarkets and small suppliers. Most seem pretty well stocked. They’re offering things people wouldn’t think of first of all, but they’re very significant providers of food and some are picking up footfall. If people aren’t out and about that’s a challenge, but they’re reaching out to customers (because they need customers) via all the things you’d hope they’d use like social media and websites.

So although many don’t have full blown e-commerce sites from the evidence we can see, they’re using the more straightforward, more lightweight methods of posting things on Facebook or Twitter. That’s something that frankly I’ve been advocating to outlets of all kinds for some time. There’s evidence that the engagement of high street businesses of all types with social media is not as strong as it could be. Very often retailers are put off by concerns about going full-on with heavy duty e-commerce. My argument is that actually they don’t need to. Making a step is the most important thing. Right now that’s proving important. Locally, at Taste Harborough, they’re offering to take card details over the phone and deliver. For those that are self-isolating or unable to deliver this is proving to be extremely useful. There will be impacts for years to come, but for food and drink retailers those impacts will be different to those affecting others.

Results for the big grocers pretty much match what’s coming through anecdotally from small businesses: many are busy. One local high-end wine merchant I spoke to last week described trade in-shop as “like Christmas Eve”. A local farmer and retailer reported that not only were sales strong, but that they were reaching customers they had never reached before, both locally and further afield. People may decide not to buy clothes right now, but they will continue to eat and drink.

When you get massive dislocations in daily life, that’s when things change. There are two parts to this: the behaviour of businesses (because they need the turnover) but also the behaviour of customers. It’s been noticeable when you look at online sales that although one in five pounds is spent online in this country, actually the break down of that is that less than 10% is food, whereas food makes up around 50% of total retail. So while there’s been higher penetration into other markets, food has remained stubbornly behind. What’s fascinating to see is whether consumers taking that first step to online shopping, as many have been doing now, will cause lasting change. My guess is we’ll see a sea change in the use of non-physical selling. It’s important to remember we will get through this. It will pass, at some point, even if we don’t know when that will be.

It’ll be fascinating to see if this experience fundamentally changes the ways we work, if it changes our relationships with the customers who buy from us. My feeling is that yes, some things will stick. We’ll have to look at that in a year or two’s time. Right now my guess would be some will return to earlier ways but the big change will have taken place. Yes, the current situation will come to an end… the questions are ‘when’ and ‘how’.

We still don’t know about the when and that poses one of the bigger challenges to the entire economy: the longer we all remain in lockdown the more businesses will meet their ends and the more jobs will be lost. That aggregate loss of demand, warned of in the OBR’s prediction of a hit in the immediate term amounting to a third of the entire economy, will affect all producers and all retailers because it will affect very large numbers of consumers.

At the same time economists are predicting (in varying degrees) some rebound in demand as society creaks back into life, and those producers and retailers can expect to see some benefit from that. The other question is about how it ends and it’s clear that if furloughing, for example, comes to an overall end, all businesses will immediately have to resume the pay burden – at a time when income may be just starting to recover.

We listened to the Chancellor’s ‘whatever it takes’ statement with interest. Could or should the Treasury do more to help mitigate this situation for independent retailers? The actions taken by Government so far actually prioritised independent retailers – it’s only retail and leisure businesses that are in line for the flat rate £25,000 business rates grants – and FSB sources tell us that some have already received these. However, as the Chancellor has said, not all businesses are protected and not all will be. Business representative organisations are working hard to demonstrate to Government where the many gaps are and where they think the promise of “whatever it takes” will need to be fulfilled.

The big disappointment, to which the Government has begun to react, is the very low rate of loan approvals under the Corona Business Interruption Loan scheme (CBILs).

Businesses need cash now. Later may be too late. For example, there are 5.9 million businesses in the UK, 4.8 million of which are self-employed single persons – they look to be particularly challenged by this. We need to make that when this passes, they are still there, continuing to provide employment and products. The Chancellor has done some good things, particularly for retail, but there’s more to do to keep cash moving.

Another problem is that furloughing staff has a countdown built into it: initially for a three-month period, furloughing is designed to protect against redundancies. Employment law tells us that businesses that may need to consider redundancies if furloughing is not renewed have a lead time for consultations on potential terminations. For small businesses the period is undefined, for those with more than 20 employees involved there is a consultation period “lead time” of 30 days and for businesses considering over 100 positions that lead time extends to 45 days. Right now bigger businesses are right on the edge of that time limit, so further clarification from the Chancellor is needed, quickly.

Can the high street survive? When you look at convenience stores – numbers of which are approaching 40,000 – they have their own supply chains and money and credit is flowing. I’ve heard people say these small local offers are very helpful. Personally, I’d run out of lapsang souchong tea bags, there were none in the supermarkets, but I found them at Emerson & West, my local fine food retailer.

These businesses are getting creative and taking steps which in many cases they hadn’t before. Bizarrely, that’s one of the good things coming out of a very bad situation.

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