‘The future of retail isn’t only about price’

Retailing is changing and retailers will have to change with it, says Lucy Neville-Rolfe

Lady Neville-Rolfe: “Some villages will end up without retail.”

Lady Neville-Rolfe: “Some villages will end up without retail.”

 

Lucy Neville-Rolfe remembers when her then young children caused chaos running around 10 Downing Street during John Major’s years when she came in one Sunday to help deal with one of the many crises of that era.

“It was during a weekend when my husband was away. I had three children at that point, and no childcare at weekends. So I had to bring them in with me and allow them to cause chaos with paper planes,” says Neville Rolfe, sitting in a bay window in the Houses of Parliament, overlooking the Thames.

Back then, she led the Cabinet Office’s Better Regulation Unit. Over 20 years on and now a member of the House of Lords and a Dame of the British Empire, she remains convinced of the need of it, but, equally, she has come to the view that not all of it can be done by diktats from government.

Today, Neville-Rolfe, who speaks in Dublin on Tuesday to the Retail Ireland conference organised by Ibec, is president of EuroCommerce, a Brussels-based, but EU-wide association representing the retail trade.

“I worked for both sides – I was in the ministry of agriculture in my early years and I am a farmer’s daughter. So I had a passion for trying to improve relations between farmers and retail and to do it on a voluntary basis, rather than by detailed legislation.

“In my experience, legislation tends to be full of hope, but the results are never that good,” says Neville-Rolfe, who left government after the Conservatives departed office in 1997 to join Tesco, where she finished as executive director for corporate and legal affairs.

“The thing I loved when I went to Tesco from government – which I loved, too – was the speed with which you could get things done. In politics things take a long time to come through – perhaps rightly,” she tells The Irish Times.

EuroCommerce has now produced its own voluntary code to govern the relationship between suppliers and major retail chains, who often hold the whip-hand in the increasingly competitive market – one that has been further complicated by the impact of the recession on shoppers’ habits.

Though many will doubt her beliefs, Neville-Rolfe insists that voluntary arrangements can work; pointing to the decision of over 100 companies across the EU to sign up to pledges to create a proper complaints system for angry suppliers.

“If there is an issue there will be somebody in the company who will look at the complaint properly. You don’t just have to go to the buyer, who caused the problem in the first place. That is what you need, a simple system,” she goes on.

However, retail is, and will remain intensely competitive, so stories of difficulties will individual suppliers will always remain: “Sometimes you do have to change the contract, but the key thing is to give notice and to be clear in the process about what the new deal is. If there is a competitive issue then you have to look at that together. It may be that you have to move the price down and share the pain of doing that, but that should be done in an agreed way. It shouldn’t be done retrospectively.

“I always remember a broccoli supplier in the UK, whose complaint made a lot of noise. It echoed around the system, but, of course, the companies that are not buying broccoli from that supplier can’t really help. That is why having industry involvement on a voluntary basis is valuable,” she goes on.

Such conflicts often are the ones best heard by the public at large, big retailers bad, small suppliers good: it is, in her view, simplistic and one that where it exists does nothing for the long-term benefit of either party. Others, naturally, will disagree.

For instance, she argues that huge out-of-town hypermarkets – blamed in Britain for destroying high streets – have been a positive, not a negative, pointing to research by Southampton University for Sainsburys.

“It showed that new hypermarkets didn’t wreck communities. They gave jobs to the local unemployed and they improved diets because everybody introduced cheap fresh fruit and vegetables which improved local diets. Retail is incredibly important in terms of the numbers of people it employs, the value-added and so on, but perhaps it is not as political as financial services. Perhaps as a result it doesn’t always get the understanding that it should do.”

Last December, Retail Ireland produced its strategy for the next three years – one that argues that retail can help Ireland “return to growth”, but only if there is action from all quarters – government regulatory bodies and business organisations.

“The Irish retail sector employs 275,000 people. This is the same as the numbers employed in IT, agriculture, forestry and fishing and the financial and insurance sector combined,” it says, generating €8 billion in wages and €5 billion in taxes, including €1 billion of employer-paid employment taxes.

Retail has suffered badly in Ireland: one in seven of all jobs lost since the economic crisis have been those behind tills and counters, but Retail Ireland argues that 40,000 jobs could be created between now and 2020 if shop spending recovers, even if more slowly.

However, business as it was done will not be enough to secure the future of retailers into the future, argues Neville-Rolfe, even if she believes that the idea that everything moves online and that everything will be bought from Amazon is simplistic at best.

“The future of retail isn’t only about price. Customer service is also very important. We are in the internet world where the price is very transparent; and it is even more important to differentiate yourself. That can be about quality, service, range or new products.”

A study done for EuroCommerce by Oxford Consulting points out that growth for “pure” internet retail companies “flattens off a bit as e-commerce becomes a bigger portion of the market”, she says, pointing to companies such as Next that are successfully combining online and “bricks and mortar”.

“This is because you get more multi-channel, like Next with strong sales both in store and online. Tesco’s click and collect was the first example. Carrefour now has Drive in France. It is doubly beneficial to the retailer. They don’t have to pay for delivery, into rural Brittany for example, and sometimes when customers drive in to the store they spend a bit more money,” she goes on, emphasising, however, that traditional patterns will be challenged, perhaps beyond repair.

“You have to accept bring out diversity. Some villages will end up without retail. Our village in Wiltshire doesn’t have a shop any more, but it does have a pub. I think you might see some of these things coming together: the pub, the shop, the delivery of newspapers, bringing services together.

“Our nearby small town has 6,000 people, Boots, a supermarket, a butcher, a deli, two cafes, and a train station. You have to see what can be a success; the slightly bigger small towns, the big centres for leisure and shopping; mixing the shop with the café and potentially the pub,” she argues.