Examination of Witnesses (Questions 114
TUESDAY 31 OCTOBER 2000
114. Good morning. Ms Rosewell, perhaps you
can introduce yourself and your colleague and we will begin?
(Ms Rosewell) I am Bridget Rosewell.
I am Chief Economic Advisor to the British Retail Consortium.
My colleague, Mark Bradshaw, is going to kick us off this morning.
115. Thank you. I think what we would like to
do is, rather than have an introductory statement, get right into
the questions and take it from there. I think you have been able
to assess the tenor of what we are trying to do here. Obviously,
of necessity, we have to look at the events of September, but
equally importantly we want to try and gauge the impact across
the broad sweep of industry and those particular areas of the
British economy which are, you might say, most distribution transport
dependent. We have identified your's as one of the most significantly
dependent. However, having said that, one then has to ask the
question: You are dependent on transport, is there any evidence
that the retail industry is suffering as a consequence of the
current levels of motor fuel taxation?
(Mr Bradshaw) I think that we are suffering from a
range of operating costs which we have seen increase over the
last five or six years now. As you say, we are dependent almost
entirely on road transport. There are various projects going around,
largely experimental, looking at the use of rail freight and so
on, but most of our goods from our members' centres to their stores
are borne by road. However, it has been difficult for usand
we have tried to rise to the challenge that you have set usto
strip out those elements which relate to road transport and those
costs that we incur, and particularly the impact that that has
on our competitiveness as an industry. That has been difficult
for us to do because we are subject to a whole raft of costs.
We are a property intensive industry, we are a major employer,
we face a whole raft of costs. It is very difficult to strip out
the transport element alone.
116. I appreciate that you have made a stab
at it, shall we say, quoting the data from the ONS where you quote
that in 1998 it was about £2 billion? (Mr Bradshaw)
That is right.
117. Then you get a wee bit more specificand
we are not asking you to name names or anything like thatbut
you did say that one of the retailers says that there was an increase
of £1 million due to increasing fuel duty. How significant
is that in percentage terms? A figure of £1 million we can
just about handle, but how do you place that in the general costings
of that company?
(Mr Bradshaw) I do not know the costings of that company
in depth. What I do know is that it hit them as a significant
one-off cost that they faced immediately. There was no planning
for it. There was no phasing in of that cost. That was a cost
that had to be met from day one. Therefore, it has a direct impact
on that company. On the scale of things, in most of our member
companies, certainly the multiple retailers that we have as members
transport and distribution costs are normally in the top five,
and for some it is in the top two.
(Ms Rosewell) I think the real issue here is the significance
of these costs and also, secondly, the ability to mitigate them
in any way. In other words, transport and distribution costs are
obviously significant to retailers, so if there are additional
charges, is there fat to absorb them, if you like? Also, can you
adjust to them by changing the way that you do things regularly,
easily? The difficulty for retailers at the moment is that neither
of these things is easy. It is a competitive industry. You only
have to open the Financial Times and look at the way that
retailing is treated as a sector to see that it is under considerable
pressure as far as margins are concerned and as far as share-holding
is concerned. So, that is difficult. We see that prices are falling
in shops. Both our own surveys of prices and the ONS figures for
shop prices, as distinct from the Retail Price Index, all show
that prices are falling. That means that you cannot simply take
an additional cost that hits you and pass it on. Can you, therefore,
replace those costs in some way by reducing costs elsewhere in
the system? That too is extremely difficult. It is difficult in
a number of ways. It is difficult because the logistics of delivering
to shops is very complex and, therefore, replacing a freight with
rail or something like that is almost certainly impossible in
the short-term and very difficult in the longer term because of
the mixes of deliveries that you need to make. Equally, many retailers
are extremely constrained as to times of delivery and, indeed,
becoming increasingly constrained by times of delivery with the
introduction of more restrictions on parking and delivery times
and when you are allowed to stop a van or a lorry or whatever.
Many stores often do not have off-street delivery facilities,
particularly in high streets or town centres, so there are great
limitations. So by the time you have taken all the constraints
into account; when you can deliver, what you need to deliver,
the perishability of what you need to deliver, your ability to
mix and match a particular delivery system is extremely limited,
so the cost just has to be taken on the nose, if you like. That
makes it not just important in financial terms of, "How big
is this sum of money?, but also extremely important in terms of
margin and in terms of your ability to handle and respond to any
particular change in prices. I think it is that that is as important
as how many zeros there are after the one.
118. You are saying that you cannot be expected
to charge similar prices to other countries when your costs are
so much higher, and you are telling us here that the costs are
higher to a significant extent because of the increased transport
and delivery costs. Can you give us some indication of how much
higher your costs have been made by the increases in fuel?
(Ms Rosewell) We do have figures, and we have provided
figures in the submission, for the difference that duty makes
in comparison between this country and other countries. We can
mitigate that to some extent by doing fewer miles, for example,
or trying to be more efficient in our use of fuel. However, we
would dispute in any case that prices are necessarily higher in
this country than in other countries. Obviously, the pressures
on pricing are greater because of these differences in cost, but
that does not necessarily mean that we are charging more, because
it is such a competitive industry.
119. It is difficult for you to assess because
the needs of your members are so very different. Some people are
delivering with small vans, relatively infrequently to fashion
stores or something like that, and others of your members are
delivering every day perishable products by huge refrigerated
vehicles. There must be some indication you can give me overall
as to how much you think prices in various sectors have gone up
because of the changes over the last few years?
(Mr Bradshaw) What we have seen in the industry is
a general move towards even greater efficiency and an attempt
to absorb as many costs as can be done. We are a pretty lean,
fit and efficient industry.