Co-op Wield The Axe

It's always sad to see fellow retailers facing redundancy, especially in times like these and my sincere best wishes go to those at the Co-op who received the wrong kinds of letters in Manchester today.

Mass redundancies can leave long lasting scars on businesses - I joined Asda less than 6 months after their 2005 "cull" and emotions were still raw. For some, they were still haunted by that dark day when I left 5 years later. You can't help feel that today's cuts were inevitable following the merger with Somerfield. My understanding is that there were still senior managers travelling between Bristol and Manchester which can hardly have helped the two groups of workers bond. But while a restructure was overdue, there are two key issues that I don't believe the Co-op has resolved yet - Range Complexity and Store Compliance.

There's no denying that Co-op has an incredibly diverse portfolio of stores. Their capping on square footage has put the brakes on format proliferation but they still have a phenomenal array of ranging routes for their stores. I've heard of a category with around 500 different planograms to cover the estate. I'm all for targeting ranges to local needs, but how do you ensure that every plan is accurate and consistent? And just how much does a small range in their core size c-stored need to vary? My experience is that only shopper mission makes a massive difference to the core range - shoppers of all pockets still buy Heinz Baked Beans and Walkers Ready Salted Crisps.

Another problem with this strategy is that unless you have a stable period with a base range in your estate, you have no robust sales data on which to make decisions about which products matter more to different shopper groups. Without good data, you're left with retailer hunch - a valuable input to any good range selection process, but dangerous as the primary or sole driver.

With so many senior changes at the Co-op coupled with disappointing sales, you'd expect strategy to be reviewed. Steve Murrells brings a huge pedigree with him when he joins from Tulip later in the year. He was highly regarded at Tesco and his CV would seem to make him perfect for the business. Hopefully, he will bring some of the old Tesco simplicity to their ranging processes and, perhaps make life a little easier for his merchandisers!

I'm certain that complexity at the centre doesn't help the stores, and it shows. Most Co-ops I visit are consistent only in being huge disappointments once I go through the door. Their branding is superb, externally they look amazing in the bright green livery, but once you go inside, it might as well be my old local Chelmsford Star from 30 years ago. There are some exceptions, notably Marple which I visited earlier in the week. When the store team genuinely care about their store and put the effort in, the branding comes alive and creates a wonderful store environment.

However, some of the stores I've visited are inhabited by staff who have no passion for their stores. I wonder sometimes if Co-op suffer from the same problem as Asda do with their stores and try too hard to be a "happy place" to work - if you don't stretch and challenge your store staff enough, some will take advantage. Sad, but true!

I appreciate that the systems aren't as slick as other retailers, but that's no real excuse. Good retailers deal with what they have to hand and cherish their stores. Untidy, poorly merchandised and basically scruffy shops that seem totally at odds with the slick branding and marketing. They don't appear to be good with anything, let alone good with food. This lack of consistent execution in the stores is inextricably linked to the first issue and reaffirms my belief that what Co-op need first and foremost is a much simplified ranging strategy to establish firm foundations for the next 5-10 years. If this was coupled with much improved store training that taught their stores had to be great traders, then credible local decisions could be made without the need for hundreds of centrally-driven variations to range.

Co-op does have a lot going for it - strong brand equity, great store locations, good store models. They now need to knuckle down to becoming operationally slicker. If they can achieve this, and do it during a downturn, they stand a big chance of becoming a true major player in the UK retail environment in the future. Good lucky to them, and even more luck to those who sadly won't be able to make the journey with them after today.

Too Many High Streets?

My home town is a small dormitory town in Essex. It has a thriving High Street and always has, yet there are still empty units and more than its fair share of charity shops. If I look at the units in use, there’s two supermarkets plus an Iceland, several bakers, estate agents, coffee shops, a record store, clothing shops, newsagents, a library – pretty much everything you need. It thrives despite very poor public transport and pretty poor parking facilities.

So, all types of shop are covered, there’s plenty of shoppers but there’s under-used or empty units about. Is this an indication of tough times in the economy? No, but to the casual observer empty units and charity shops hardly contribute to making us feel good about our local shopping areas. The same could be said of my local community shopping centre where I live now just outside of Leeds – a 1960’s mall full inside of great shops and lots of shoppers but lots of empty units on the outside. Drive past and you’d think the place was condemned and deserted – inside, you’ll be knocked over by the swarms of pensioners on their mobility scooters!

Britain over the last 20 years has gone retail space crazy. Every small scale development seems to create more and more units with no prospective tenants. These assume that new entrepreneurs will pop up from nowhere and existing ones will upsticks for the usually more expensive shiny new premises. Both assumptions have little basis in reality and actually can damage existing businesses by making their end of town look less attractive. In some extremes, the units lay dormant – near the very run-down district of Burmantofts in Leeds, an overly ambitious developer has built a block of apartments with 12 units on the ground floor - less than a two minute walk from a scruffy but well established shopping area called Lincoln Green. Only one unit is let, to an estate agent trying to sell the apartments. All other units now have overstickers on their To Let signs promising “ALL OFFERS CONSIDERED”.

This is being repeated across the country, I’m sure.

Meanwhile, we apparently have a housing shortage (Call for action on housing 'crisis' 30th August http://www.bbc.co.uk/news/business-14708841) as the big builders want to get back to ripping up greenbelt in the name of helping society. Surely the answer lies on our High Streets? The clear excess of retail stock would often make ideal space for regeneration and conversion to housing, often reverting back to older buildings’ original purpose. Not only would this provide an improvement in the aesthetics of an area, but also support the remaining retailers by providing them with a larger local population. True, some of the units may not be suitable for our househunters – parking , for example, could be an issue – but none of the problems would be any worse than those faced by new residents of the shiny new blocks springing up across our cities.

Perhaps what we need is a social housing style deal for developers. I'm not against regeneration as despite protestors against larger schemes, it's only carrying on something that has been going on for centuries - many High Streets were formed after markets were "developed" into permanent shops. However, councils need to be able to tie in developments better as part of a grander plan for their towns and cities. Limits should be placed on the net increase in retail units in towns where occupancy rates are below, say, 80% while a certain ercentage of any new development should be small units at rents no more than 10% above the town average for existing similar space. There was a trend for something like this at the end of the 1980's - even Basildon's Eastgate Centre, a testament to Thatcher era excess, had its "Galleries" floor which created space for small businesses. Locking it in by law would perhaps give us all a sense of pride in our towns and cities again and avoid the way we create retail wastelands outside the walls of our shiny new developments.

Mary Portas's review is due out soon and the lobby groups are either asking for more freedom in development or more support for businesses. As with many issues in the UK, we have a very polarised set of viewpoints and some frankly poor quality stats that create a scarry vision of the world. The Local Data Company's report on vacancy rates reports as a percentage, which continues to increase. However, when you consider the non-big 6 retailers who have their outlet data shown on Retail Week's Knowledge Bank, they've increased their units by over 57%, many of which will be new builds.

Do I have the solution? Of course not, I'm just a lowly retail professional. But I do realise that a different kind of solution is needed to first of all solve the existing problem and then ensure we break out of the cycle of building new space and discarding the old space without any thoughts for what will become of it.