Could the internet save the high street, particularly the smaller independent retailers we all profess to love but all too often fail to support with our custom? Brandon Lewis, the government minister with responsibility for the internet, thinks so – and he might be right.
The conventional wisdom is that as more people do all their shopping online, buying their goods from a handful of dominant internet retailers, the independents will lose even more business. Mr Lewis, however, argues that “click and collect”, where customers order online but then pick up from the store, will drive shoppers back on to the high street, increasing footfall for all retailers in the locations where people are collecting their orders.
It’s certainly true that click and collect is a phenomenon. Many consumers prefer it to the inconvenience of waiting in for deliveries – and retailers like it too, since it saves them money on distribution. It’s a fast-growing channel: a report published earlier this year by the consultant OC&C predicted that click and collect purchases will grow more quickly this year than those fulfilled by delivery – with the former set to post annual growth of 60 per cent between 2012 and 2017, compared with only 5 per cent for the latter.
For now, customers are mostly collecting their purchases from stores. But a growing number of retailers and independent providers are installing lockers in locations all around the country, where customers’ goods are dropped off ready for pick-up at their convenience. Mr Lewis’s theory is that as people make those collections, whether in-store or from a locker, they’ll also pop into the local coffee bar, or take a few minutes to browse independent shops.
It’s not an unreasonable supposition and there is already some evidence that parts of the high street are recovering from the economic downturn. There has been a 75 per cent increase in the number of cafés opening on high streets over the past year, for example, while restaurant openings are up 20 per cent.
Still, while the image of a lifestyle-oriented high street in which shoppers sip on a latte before collecting their online orders might be aesthetically pleasing, we need a recovery that is a little more broad-based. Will other independents – clothes stores, bookshops and the local butcher, say – benefit from this increasing footfall too? Or will shoppers not bother with them having already made their purchases online?
There are no guarantees and the independents would be wrong to count on click and collect. This is not to say, however, that it is the only opportunity. For one thing, there is no longer any reason why even the smallest independent retailer can’t establish an effective sales presence online for itself, with growing numbers of marketplaces – from Etsy to eBay – that offer a straightforward way-in.
For another, click and connect may create a very specific opportunity. Many large retailers are now finding that the huge stores they have built in retail parks and elsewhere are far too big given that customers are now browsing and ordering online. They no longer need the space previously required to show off broad ranges of every imaginable product. Instead, some are seeking alliances with smaller retail or leisure partners, which they hope will use their unwanted space in ways that will give customers greater reason to visit them.
This is part of the reasoning behind Tesco’s purchase of the Giraffe restaurant chain, for example, and the supermarket giant has also partnered with a gym chain in one of its stores. There is no reason why small, specialist, independent retailers should not pursue such opportunities too.
More broadly, the trend towards click and connect is one that small businesses on the high street should welcome. Some will have to work harder than others to snag a share of the higher footfall, but a larger potential customer base is good for all.
Tax breaks raise investment
The overhaul of the Enterprise Investment Scheme (EIS) two years ago, which saw the Government open up the tax-efficient fund-raising vehicle to a wider range of companies, appears to be paying dividends. There was a 16 per cent increase in the number of smaller businesses raising money through the EIS in the 2013-14 financial year, after a 9 per cent increase in 2012-13.
In all, 2,718 companies last year sought to raise money through the scheme, which offers investors who put cash into smaller businesses generous tax breaks.
The data, from HM Revenue & Customs, also shows that the number of EIS fund-raisings has risen each year since the 2008 financial crisis, underlining the difficulty some small businesses have had obtaining finance from conventional routes such as bank credit.
Help for firms in finding funds
Though it has no new money of its own, great things are expected of the British Business Bank, the new government-backed institution that is soon due – at last – to win European Commission clearance to begin operating autonomously.
Ahead of that clearance, the bank has published the Business Finance Guide, an independent resource on the very wide range of funding options now open to small and medium-sized businesses – and details of how and where to find them. Published in conjunction with the corporate finance faculty at the Institute of Chartered Accountants in England and Wales, the guide is designed to “plot the path from start-up to mid-sized company”. It features contributions from almost 20 groups comprising different types of finance provider, reflecting the bank’s view that small firms struggling to find funding often don’t know what is available. Details: icaew.com.
Small Business Person of the Week: Dean Hunter, Founder, Hunter Adams
“I founded Hunter Adams as an HR consultancy in 2011 – I had spent the previous 10 years running HR for a global oil company where the management achieved very rapid growth, but when the company was bought, I didn’t feel I had the passion to work for an employer and decided to do something for myself.
“Initially, the idea was to do some consultancy and get a bit of work-life balance, but it rapidly became very clear that there was huge demand for the services we offer and I took the decision to go for it and launch the business. We now work with everyone from tiny SMEs to FTSE 100 companies: our premise is that we help them to become better employers.
“Much of the work we do is around staff engagement: there are still employers who see this sort of work as a bit ‘touch-feely’ but we can show them how much money they’re wasting – poor employee retention rates can have a huge impact on the bottom line.
“The key to good HR is to really help employers to achieve what they want to achieve with their business, rather than HR acting as a barrier to their ambitions. If you can do that, you can be very successful: our revenues were around £180,000 in 2011 but we are on target to hit £7m this year.
“I try very hard to practice what I preach and our own staff turnover rate, at about 2 per cent, is very low.”