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Visit any British high street, and there’s a fair chance you’ll be looking at the same selection of retailers as at any other. Chains and franchises have grown in size and number over the past three decades, whereas many single-store operations have shut up shop. On the surface, it may seem the chains have homogenised high streets and forced independent retailers out of business. But can this be embraced as a simple cause-and-effect, or are shoppers more loyal to the bigger brands? And is there any point to small, independent retailers beyond satisfying our collective nostalgia?
The Labour MP for Corby and shadow communities minister, Andy Sawford, recently accused Waitrose of stealing trade from small, high-street shops by offering free coffee and newspapers to members of its loyalty scheme. Mr Sawford contacted every MP with a Waitrose in their constituency, asking them to write to Waitrose’s managing director to tell him “his company is acting in a way that will further destroy the British high street”. Mr Sawford is a career politician, so can perhaps be forgiven for a lack of understanding of the finer points of encouraging customer loyalty in the retail sector, but he might be expected to be more discerning in his choice of opponents.
Waitrose is the food retail division of the John Lewis Partnership, Britain’s largest employee-owned retailer, and competes in a fiercely competitive subsector. The “big four” supermarkets (Tesco, Asda, Sainsbury’s and Morrisons) have a combined market share around 75%, and up-and-coming “discount” chains (including Lidl and Aldi) are growing in popularity. Waitrose, meanwhile, stoically nurtures a market share below 5% and, although often teased for being “upmarket”, it is generally thought upon fondly. Even up against this considerable competition, Waitrose still behaves like a big grocer, rather than a small supermarket. Like its sister chain of John Lewis department stores, many of its branches are still in town centres, rather than sprawling out-of-town hypermarkets with huge car parks.
If you’re a politician, there’s lots to like about the John Lewis Partnership. It’s a successful, stable, British-based company that employs 91,000 people, all of whom have part-ownership of the business. The 40 John Lewis department stores and 300 or so Waitrose stores are generally considered positively by the shopping public, who spend over £10bn a year there.
Mr Sawford’s claims were described as “completely misguided” by Mark Price, the managing director of Waitrose. His Labour party colleagues were also quick to dismiss his criticisms of the business, saying it should instead be applauded for its positive approach to employment and business issues. Chuka Umunna, the shadow Business Secretary, said Mr Sawford’s move was “a bit of froth… It doesn’t represent party policy, he is a constituency MP raising a local matter”. Ed Miliband, the leader of the opposition, positions himself as the champion of the little man against predatory giants. If it was this sentiment that prompted Mr Sawford’s actions, the execution exposes ignorance. True, Waitrose is a well-recognised retail chain, but it is ill-advised to treat it as a major supermarket. It might be better thought of as a big David rather than a small Goliath.
Perhaps most embarrassingly for Mr Sawford, the episode brought into the public consciousness that he is bankrolled by the Co-operative Group; another employee-owned business with a food division of comparable market share to Waitrose, and at which his misguided criticism might also be directed. Mr Sawford also did a splendid job of highlighting some of the benefits of the myWaitrose loyalty programme to the wider population. So what would prompt a politician to take such an ill-advised line? Can it really be said that Waitrose’s loyalty scheme is further destroying the British high street?
Party politics aside, Mr Sawford may have been acting with good intentions. Waitrose recently opened a new store in the Northamptonshire market town of Oundle, and the owner of its only newsagent observed that his newspaper sales had declined by 30%. The newsagent’s owner contacted the Waitrose store manager as well as two MPs, one of whom was Mr Sawford, who undertook to write to Waitrose’s managing director. In all respects other than this, the arrival of Waitrose to Oundle might have been considered a good thing, not least because of the correlation between the opening of Waitrose stores and an increase in house prices, nicknamed the Waitrose Effect.
The blunder, then, was for Mr Sawford to try and elevate the concerns of one of his constituents into some kind of national campaign. In reality, that newsagent is in trouble, Waitrose or otherwise. It’s under attack from every angle: anti-smoking campaigns and increasing consciousness about healthy eating is eroding its trade in tobacco and confectionary. Newspaper circulation is also in decline, particularly in print formats. An all-round economic slump doesn’t help either. Whatever else that particular newsagent sells, it had better be a goldmine.
We cannot know the effect had the new store in Oundle not been a Waitrose, nor if the myWaitrose benefits to its members didn’t include a free paper. The loyalty programme has been adopted by around half of Waitrose shoppers, and offers a range of benefits, so it’s unclear whether the dip in sales at the newsagent is as a result of those customers being eligible for a freebie, or simply that they now had another place to buy newspapers. But it seems a reasonable assumption that the effect of the new store merely tipped the newsagent’s fortunes from protracted decline to death spiral.
Mr Sawford seems not to have considered this, and his claim that the myWaitrose programme destroys the high street is a leap too far. Retailers of all sizes have found themselves under pressure since the beginning of the economic crisis in 2008, but there are many factors contributing to their destinies—some of which reach back much further.
When the first Waitrose store opened in 1904, as Waite, Rose & Taylor, it was a modest grocery shop west of London. Back then, there was one motorist for every 5,000 people. Now, it’s over three in five. Our adoption of motor vehicles has radically changed our behaviour—from where we live and work, to where and how we shop. In the same period, our gross domestic product per capita has increased fivefold. Our life expectancy has increased by 30 years, and our society has embraced equal opportunities across genders and classes. Disposable income and general quality of life have improved so dramatically that the day-to-day lives of Waite, Rose & Taylor’s customers are barely imaginable. We buy more stuff, we work fewer hours and we do more with (and spend more in) our increased spare time.
Brands have also played an increasingly significant role in our purchase decisions. Our brand awareness, both of individual products and also services such as retailers, has never been higher. We have come to trust, and demand, branded products and manufacturers. For independent retailers, it’s no longer enough to stock the right kind of product—shoppers are used to their specific brand of toothpaste, butter, television or whatever. Chain stores establish another arc of branding, and therefore another layer of trust, over the products they sell. This is reenforced by their marketing and advertising activities, which can usually be conducted at a larger scale than their independent brethren.
Economies of scale such as this are what turn independent retailers into chain stores. From supply chain and distribution, to purchasing power and strategic marketing, chains and franchises enjoy many advantages beyond the reach of a single shopkeeper. But there’s one thing all retailers (indeed, most businesses) need to achieve: customer loyalty. Making customers aware of a store and then consider purchasing there is expensive, compared with encouraging previous customers to return. For those retailers who sell items with a short consideration time (grocers and newsagents, rather than car dealers), loyalty has two broad goals: increasing frequency of visits, and increasing spend per visit. Loyalty programmes look to promote and reward one or both of these, and typically they have the defensive side-effect of dissuading customers from the temptation of going to a competitor.
But customer loyalty doesn’t necessarily demand a loyalty scheme. Many such schemes reward both frequency and basket size by awarding points to cardholders based on how much they spend. The myWaitrose scheme is unusual in that its members do not accrue points. Rather than “spend this, get that”, the rewards of membership are softer and more subtle, such as the complimentary coffee or newspaper. The scheme is also peppered with a discounting model on some lines, as well as competitions, but it has gained members, as well as the respect of Waitrose’s competitors, by being positioned as a statement of the retailer’s loyalty to their customers, rather than the other way round. Whatever the mechanism, loyalty schemes have the required effect and are widely adopted by consumers, but are not the sole reason why consumers are loyal. The number of reasons for loyalty is, in fact, equal to the number of customers: each shopper will have their own matrix of motivation for turning a decision to shop somewhere into a habit. All a loyalty scheme does is help to formalise and quantify that exchange, but it is a mistake to assume that the retailer is subsequently in charge of the relationship. Customers will do as they please, so the “trick” for retailers is to please them.
To best serve his constituents (and, perhaps, his own voters), Mr Sawford should research customer behaviour rather than pining for the good old days. He would do well to study well-established loyalty schemes, and perhaps the marketing agencies employed to conceive and run them. He could also consider why the consumers in his locality might have switched to using one big shop, as opposed to spreading their spending across the numerous little ones. He will no-doubt discover that many forces are at work: industrialised customer loyalty being just one.
He might also turn his attention to practical things he can directly influence that would benefit high-street retailers of all sizes: keeping the streets clean and safe, increasing parking and public transport options, and so on. Were he to do all this, Mr Sawford would not only be taking steps to reverse the fortunes of the British high street he wishes to preserve, but also be well-placed to advise the small retailers in his constituency on how to change their own habits to encourage shoppers to change theirs.