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UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 168-iv
House of COMMONS
TAKEN BEFORE the
Business, Innovation and Skills Committee
UK RETAIL SECTOR
Thursday 12 September 2013
MARY MONFRIES and MATTHEW TOD
MARK WALMSLEY, KEN PARSONS and MERYL HALLS
JanE REXWORTHY and MARTIN-CHRISTIAN KENT
MIKE DAVIDSON and PETER WHITE
Evidence heard in Public Questions 252 - 349
USE OF THE TRANSCRIPT
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Taken before the Business, Innovation and Skills Committee
on Thursday 12 September 2013
Mr Adrian Bailey (Chair)
Mr Robin Walker
Examination of Witnesses
Witnesses: Mary Monfries, Partner, PricewaterhouseCoopers, and Matthew Tod, Partner, PricewaterhouseCoopers, gave evidence.
Q252 Chair: Good morning, and thank you for agreeing to answer our questions. I will just give a few moments for any members of the public to settle down. Could you introduce yourself for voice transcription purposes?
Mary Monfries: I am Mary Monfries, partner at PwC.
Matthew Tod: I am Matthew Tod, partner at PwC.
Q253 Chair: Thanks very much. We will be asking you questions. Do not feel that you both have to answer every question if you have nothing to add to or subtract from what the other speaker has said, unless we invite both of you to answer. Can I open with a very general question? The retail sector covers an enormous variety of businesses, from small independent shops to multiple chains. What is your assessment of how they are coping with, on one hand, the economic pressures on retailing at the moment, but also the changes in technology in the digital age and so on-the so-called multichannel basis? Who would like to leap in?
Matthew Tod: I will take that one. It is an interesting time, because clearly we have the economic hardship, coupled with changing consumer behaviour, coupled with the digitisation of many different product categories. For books and games, they are moving from being physical to being intangible products that you download. At this point, we have three different things converging, and what we have seen is that retailers are adopting what they refer to as this multi-channel business model, where they are basically having different routes to the customer and they describe themselves as multi-channel retailers. What most of the large retailers have done in that case is create additional business units, so for each way they are going to reach the customer-whether that is mobile or tablets or websites-they have created a different business unit. Interestingly, this has not enabled them to grow, so what we see in the big retailers is a top line of sales that is almost always flat; increasing costs, as they bring in these new routes to market, and as a result, declining profit. In answering your question, they have adapted to the symptoms of "the consumer is changing", but the really hard yards of actually going, "You know what? We cannot afford to be multi-channel. We are going to have to be one organisation; we cannot have multiple warehouses and multiple teams," have yet to be worked through. There is more restructuring within the industry to come.
Chair: Right. Mary, do you want to add anything to that?
Mary Monfries: I am more than happy to. I think it follows on very well from your point, Chairman, about the multifaceted nature of the industry. It might help the Committee if I briefly give the background to the report that we did and why we did it. Eight years ago, in 2005, we first did a larger report looking at the total taxes paid by the Hundred Group companies; so, very broadly, the 100 largest UKheaded groups. That was looking at the total taxes paid by those businesses together. Very carefully, and importantly, we distinguished between taxes borne-like corporation tax, employers’ NIC, irrecoverable VAT-and taxes collected on behalf of the Government, because obviously they are very different. The reason we looked at that was that we felt it was very important for policymakers, when they are looking either at an industry or at the economy more generally, to look at all the taxes that can flow from business, not just one.
What was really interesting, having done this for eight years, was to start to see the trends. What was very clear in this year’s report was the trend of a move away from profits taxes-a more variable cost to businesses and a more volatile source of revenues for governments to fund public services-and towards other taxes. It was away from profits taxes like corporation tax to other taxes like employer taxes, business rates, etc., which are more of a fixed cost to businesses in nature and, of course, more of a stable source of revenue for governments. That trend was clearly continuing.
What then became interesting to us was to think about, "Well, how does the burden of that trend play out in different industries?" That is why we looked at this specific one as a start of painting the picture-and it is only a start of painting the picture, because of course, as you say, retail is multifaceted in itself-to look at "What does it look like for the retail sector?" As you have seen from the report, it is not surprising that, if you have a retail sector that is people- and property-intensive, the burden of that move towards people and property taxes will be felt in that sector. As I say, to conclude, I think it needs to be looked at in terms of "What are the multifacets of retail, what is it going to look like in three, five or 10 years’ time-not just now-and is the way we tax retail and different parts of retail going to be fit for purpose for that future vision?"
Q254 Chair: From your respective contributions, it would seem to me that there are two broad issues here. The first is how the industry is responding to the new technologies of consumerism, and secondly, how the Government taxes retailing in order to reinforce the sector and its survival. Can I just go back to your report on the total retail sector? I think you touched on this, Matthew, in your opening remarks. You said that the sector was responding in terms of a multi-channel basis, but that this was a faulty formula. Now, I think you touched on why it is a faulty formula, but we go on to total retailing, and I must admit I did look at your diagrams and could not make head nor tail of them. You were very lucid in your explanation of why it was faulty; can you just tell us why "total" is the answer in an equally lucid manner?
Matthew Tod: Yes, of course. Forgive me. I think the heart of great retailing is about the customer, and having products and things that the customer actually wants. If you set up an organisation that is actually looking at channels and routes to market, that is really very contrary to what the best practice is in all sorts of different, other industries. Basing your business on how you get the product to somebody and saying, "Actually, she is going to buy from me through different ways," rather than basing it on the customer, is more towards the future. What happens with retailers who set themselves up with channels is that you have one internal channel competing with another. You have the web team competing with the retail team. It is completely mad to compete internally as to who makes the sale, rather than going, "There is a customer; she wants to spend some money. We had better make sure she spends it with us regardless, not with a competitor." The whole thinking that we have is that you need one marketing team, one IT department and one warehouse, rather than the multi-channel route, where people tend at the moment to be setting up all these different teams within the organisation.
Q255 Chair: So what you are saying is that you should have fewer teams, and that they should be, if you like, multi-skilled.
Matthew Tod: Multi-skilled, yes.
Q256 Paul Blomfield: I want to drill down that idea a bit more, and ask whether you are setting up some sort of false dichotomy. There are some very headline-grabbing phrases in your report, but your point that a successful retailer is customer-focused is a bit of a nobrainer. Let us apply it to what looks like a relatively successful retailer in navigating the new terrain, John Lewis. They are very focused on having an omni-channel strategy, and yet I think they are fairly successfully navigating the terrain and absolutely customer-focused, and they are growing their business.
Matthew Tod: Yes, I would agree with you, and they have announced even better results this morning, but there are a couple of things. For example-they have talked about this-the way that they remunerate their store managers is not just on store sales but on the total revenue they generate from an area around the store. The store staff are incentivised to provide great service to everybody in their area, regardless of whether the sale is made through one channel or another channel. I think, also, with John Lewis you have got a very different shareholder mechanism. They are owned by the staff and clearly focused on the longer term and navigating a difficult transition for the sector. Other, shorter-term businesses will not have that luxury.
Q257 Mr Walker: I just want to follow up on Paul’s point about a false dichotomy. Obviously, you are looking at this from the perspective of the biggest retail businesses, and the ones in the top 100. For many of the smaller, independent retailers, there is not an option to have a separate division dealing with their online presence. They are looking at it from a customer perspective and working to keep up. Would you say there is any respect in which they have an advantage in being able to take a holistic view and a customerfocused view, and how, in this multi-channel world, do these small independents, which we all value very much, compete?
Matthew Tod: It is interesting; I do, in a way. When you own and run your own business, the notion of channel is completely irrelevant. It is just a sale. I met recently with a beauty business, where talking to the owner of this business-which is now significant-he had no idea about multi-channel. He could not understand it. He also thought total retail was complete rubbish, because that was exactly what he did. It was one business. He does not understand; it is one customer. The independent clearly has an advantage in that space. They also have the advantage in that there are many different routes to getting in front of a customer. Successful small retailers use eBay as a route to finding customers; they use the Amazon platform and the Tesco platform. There are many places where you can put your product out into the marketplace and still service that need through your business. You have got to adapt to that world. It is not just about building your website; it is actually about using your specialisation that you have, your service, your skills, your expertise, and then finding a way to extend your reach.
Q258 Paul Blomfield: This follows directly from that point, Matthew. What skills do you think are needed in the sector to support your total retail vision?
Matthew Tod: We need people who do not think of themselves as a channel specialists, first of all-people who think on a customer basis. For example, when you look at buyers within an organisation, historically they have grown up by buying just for the store, but I am afraid we now need them to look at Twitter and Facebook and Pinterest to really get a feel of what is going on out there, as well as looking at just what is going through the store. We need people who have got both the digital nous, coupled with those real product skills: they really understand menswear, but they also know how to use digital channels to make better decisions. I am looking for people who have got experience of both sides, and it is developing those skills.
Paul Blomfield: That is one very niche part of the retail workforce.
Matthew Tod: Yes.
Paul Blomfield: Can that be applied in terms of the wider range of people working in the sector?
Matthew Tod: I think it would always be similar, because I am always looking for people who will understand and know technology, whether they are in marketing or service. Whatever it is that they are doing, they need to have that understanding of the digital technology, and how you would use this. In truth, it is often what they do, and they need to say, "Well, how do I then turn that around and use that to support logistics or store operations?" and whatever else it might be. There quite often seems a disconnect between what I do personally and what it is the organisation is trained for, and you can say, "Well, hang on, you do not behave like that. Why do you expect your customers to behave like that?" So it is digital skills; knowledge of how the digital world works; how the technology works; how it can be used to differentiate your business; how it can be used to improve the experience; and how it can be used to improve service. I think that touches all elements of the business.
Q259 Paul Blomfield: Do you think the digital dimension changes the role of high street retail staff and their skills needs-the front-line customer service?
Matthew Tod: Very definitely. They have got people in the store who are using this technology right in front of them. They are using it to do research and to look. They need to be literate, absolutely, in their ability to use technology. We see many retailers starting to put these things in-store; you are going to need people who are comfortable with using technology in the front office, as well as presenting that experience and actually making it an interesting experience on the high street, as well as being customer service-centric and understanding what they do. It is a more broadly based role on the high street.
Q260 Paul Blomfield: Can I follow up on Robin’s point about large and small retailers? You talk, in a sense, about all retailers fitting into your vision because the division that large retailers have is meaningless. Does your solution necessarily work for smaller retailers in the way that it can for the larger players?
Matthew Tod: It is an interesting question. I think they are almost doing it by default, because they have greater direct contact. The owner of the business typically has far greater contact with the customer. They may not have the digital skills that a bigger business perhaps has, so, again, their digital skills may be weak, but they have got the opportunity. It is not expensive for many of these to go and list themselves on eBay and set up on eBay, or do their own website. It is not an expensive thing to do anymore. I think, in a way, they have the potential to become total retailers if they are not already, and the barrier is perhaps their knowledge, but actually it is not that difficult to use Facebook, Amazon or eBay as a platform to sell their own product.
Q261 Caroline Dinenage: What you are suggesting is that the platform of skills that retailers’ staff need has to be really quite extensive. Obviously, for your independent trader on the high street who might be taking on a school leaver, that really boosts the cost of their wage bill. Are you also suggesting that the educators need to be investing more into training people for a career in retail? At the moment, there is not a great deal of that sort of education available, is there?
Matthew Tod: I think there is not a great deal of education on digital retail. It gets picked up in different areas, but the idea of saying, "Are we going to do more with digital?" will be an interesting area.
Mary Monfries: Something just strikes me on that, Chair, if you do not mind. It is a very interesting area about the skills. I am quite optimistic about the opportunity that retail gives for people to develop those employability skills. What we are looking for is somebody who can be very aware of themselves as a customer, and translate that into wherever they are working in a business and ask, "What does that mean in terms of my interaction, direct or indirect, with the ultimate customers, and how to build value for them and therefore the business I am working for?" That mental agility, the ability to do that, I do not think necessarily is something to do with academic achievement, etc. It is a state of mind, and I do think that is quite an optimistic play for us.
Q262 Chair: Do you feel that there is an adequate training opportunity for owners of small businesses to upgrade their retailing, digital and IT skills to maximise the potential of their business? If I were a businessman, trying to run a business, and I realised that I just did not have the knowledge there, how could I access the training to get that knowledge?
Matthew Tod: Certainly, within the digital industry, there are a lot of extremely good trade shows with free training sessions that come with them. Because it is a booming area, there are a lot of places that will offer free training. I was at a trade show recently, talking to a gentleman who decided his skills were not good enough. He was 84 years old, and decided he needed to upgrade his digital skills to continue running his business. He had made a trip, actually, from not far from here-just in Wales-up to London to deliberately go and do that, and had taken a day out to do it. I think it is possible. Maybe it is hard to access and know where to go, and which are the places to go to. I have never thought about this as a particular issue, but I can see how that could be a problem.
Chair: I do find that, with all the research and surveys-the Grimsey, the Portas, and so on and so forth-this does not actually seem to have been addressed by any of them. Perhaps we have hit on something. Now, I was coming on to a question from Ann that was basically about the tax contribution. You have largely anticipated it, Mary, but I will hand over to Ann to see if you want to tease out any more.
Q263 Ann McKechin: I wonder if I could tease out a couple of facts and figures in this very interesting report. You stated that the profit margins and volume of UK retail sales have stagnated, and you give a chart for the retail sales volume from 2003 up to 2013. You then state that the overall contribution in taxation has increased by 6% more to the UK exchequer for the year 2008-09 to 2011-12. I do not think it mentioned in the chart what the profit levels were over that period. Did profit levels increase between 2008 and 2012?
Mary Monfries: That is certainly what those figures would suggest. I do not actually have the graph for the profit levels with me, I am afraid. If that is helpful, we can send it back later.
Ann McKechin: I think that would be helpful, just to see that comparison.
Mary Monfries: That would be the natural assumption from there.
Q264 Ann McKechin: Your fundamental assumption within this is that the major problem for retail companies is the constant increase, year on year, in business rates and that, actually, the corporation tax is not the major burden now. Business rates are becoming a larger part of the tax burden. Would that be correct?
Mary Monfries: Yes. What this puts out is that, actually, you are right. It is the other taxes that are the larger part of the burden, if you want to put it that way, for retail, and what this shows is that a big part of that is business rates, as well as employers’ national insurance. Again, that is looking at that property- and people-intensive piece. Again, what this does not yet give us visibility on is: "Well, what about the different types of retailers within that?"
Q265 Ann McKechin: You had quite an interesting chart about property tax revenues in the UK. The figures that we have got on property tax revenue as a percentage of GDP shows that the UK is very much higher than countries throughout Europe, running around about over 4%, whereas most of the other countries are running at around 1% to 2%. Is this because property values in the UK are much higher than they are on the continent?
Mary Monfries: I think it is a combination of things. As you will be aware, business rates in this country are a function of the multipliers, the tax rates, and the rateable values. I think I am aware of the OECD research that you are talking about, which was done in 2011. That, as you rightly say, shows that property taxes in the UK expressed as a percentage of GDP are higher than in the other OECD countries. They also looked at it another way, of which you may be aware, which is property taxes as a percentage of total tax revenues in that country, and the UK is second only to the US there. So, it is an interesting analysis. I would express caution before policy decisions are made solely on that analysis, because of, number one, the interaction with other taxes. For example, in Europe, I think generally the opinion would be that the lower property taxes are offset by the higher employer social security costs. I think one has to look at-
Ann McKechin: Total tax.
Mary Monfries: Total tax, and also-and I am a big believer in this-what is actually going on in a particular country. What is the economy going to look like? What are the activities going to be? How could one tax them? What comes from where, and in what proportion, to fund public services, still recognising that that country is operating in a competitive environment? You can bring that closer to home with retail.
Q266 Ann McKechin: That is very helpful. A final point. In both your reports, there is no analysis of this issue about the actual land values, because people have argued in the UK that land values are artificially high. They are very high in comparison with its comparator countries, and in somewhere like America, for example, there has been a huge and sudden decrease in land values. They say that that has actually helped the economy to bounce up much higher. I am sure you might have looked at the Grimsey review, but it has got a fascinating figure. The number of zombie retailers in this country has increased by a huge percentage since 2008, and the banks do not have the money to do the administration. Do you have any thoughts about the actual land value being one of the major problems that we have?
Mary Monfries: I think it is a factor, but of course, there are other market forces working there than what we are just looking at here. The question is not focusing on a particular tax per se, but asking "Is the whole way that we tax retailers dependent on the way business was done some years ago?" In fact, if you look now and forward, rather than looking at business rates and property taxes alone, what are the different ways that you tax those businesses? Do you need to look at who is bearing the burden now and whether that works both for the Government who need the revenues and the different parts of the retail industry going forward and at what the playing field is going to look like?
Q267 Mr Walker: I just wanted to expand on your last point, which is keeping a taxation system that reflects the retail system of the day. The other section of your report makes it clear how the retail system has changed, and how everybody is going multi-channel and moving towards a total retail model. The shop space is probably less important in the overall picture of retail than it ever has been. In that context, is the fact that we have a business rates system that gives a very high premium to Category A retail shop floor space, as against storage and warehousing, not something that probably does need looking at and probably does need to be updated for the 21st century?
Mary Monfries: I do think the whole thing needs looking at. As you rightly say, that physical presence is not the whole thing anymore. When I say it is looking at the whole thing-and I am going to apologise, because I will be simplifying what it is a complex industry to try to make my point-we have, as we have talked about, got the whole piece around online digital business. We have what we call the "experiential" piece of retail: how they are responding to the experience people need, and maybe that is more physical location. We have new entrants from overseas looking to say, "Well, can we come here and occupy some of these empty properties?" and critically-and I think this is really important for us, going forward-we have that piece that is much written about, which is UK retail brands and how attractive they are becoming overseas. If one believes, of course, that the growth is going to be outside of the UK and Europe from a consumer perspective going forward, it is not surprising that one would want to encourage the export of those brands overseas. Now, if one believes that that is going to be a growing part of retail for the UK, then for example one would want to look at a tax system that values highly and taxes the profits that are derived from those retail brands. It is quite a complex picture, and it is about how you balance the system so it reflects what retail is going to look like.
Mr Walker: And also reflects the diversity of retailers, between those very large ones who may be able to export, and perhaps the smaller shops who are unlikely to play any role in the export markets unless they get their online business particularly well organised.
Q268 Caroline Dinenage: I think largely, Chair, my questions have been answered. It was particularly about what you think the Government should do from a taxation point of view to ensure that the small and independent businesses survive.
Mary Monfries: I would probably just repeat what I have just said. I think it needs to be looked at in the round. The survival of the small and independent businesses-forget tax for a minute-for some of the reasons Matthew has just said, is so dependent on response to what is happening on technology and to what the customer is looking for. I look for a very different experience when I go into an attractive shopping centre versus when I am online, so that is really critical. We then need to look at whether the tax system currently supports the direction of travel, or whether it needs to change and be modified.
Caroline Dinenage: And your thoughts would be that it does not?
Mary Monfries: If you look at the evidence here, you would say that there is a large proportion of taxes-that is what the empirical evidence is showing, as Robin was just saying-relating to physical location and properties. I personally believe that physical location and properties are going to continue to be important for some aspects of the retail sector, but it is not the whole picture, and therefore it needs to be looked at. Where are the gaps? Is it skewed too much towards a property way and an old way of doing business? The evidence would indicate that.
Q269 Chair: Can I put you on the spot? You are accountants. The Government needs money, and it cannot dramatically alter its taxation regime in a way that would prejudice the income flow. How would you restructure the approach? You have talked about the Government looking at it, which is a bit of a copout. Yes, they can look at it, but the problem is what do you do to actually deal with the problem, having looked at it? What approach would you recommend that would benefit retailers the most, or damage them the least, but would still sustain an appropriate level of income for the Government?
Mary Monfries: I could not agree with you more. I do not think this is necessarily about how you reduce the tax burden on retail. It is about what the distribution is. We are focusing on retail; I believe that needs to be done in terms of the broader economy. How do you get the same or greater taxes, looking at whether the distribution is right between different industries? That is the first point. Secondly, I do think it needs to be looked at in the context of what is changing, and it needs to be looked at with a real, thorough understanding of what that is going to look like. There are a number of things that could be done, and of course there are a number of things that are already happening on an international basis. I talked about the fact that is important to recognise that a country is in an international playing field itself, so the whole question of international taxation-both digital and non-digital-is a big subject of the OECD project planning review at the moment, as the Committee will be aware. That is critical, and it is critical that the UK stays committed to that in a leadership position, because one needs to look at the question of "Is the tax system fit for purpose?" more broadly, and also look at it in terms of retail. I think some things will come from that, from the broader review, into retail as well.
Clearly, digital business, for example, is a strand of that OECD review, and my own personal view is that the way of looking at that is "How does one look at an international and a domestic tax system that works for the current world, including digital and online business?" rather than saying, "Let’s pick up online/digital business and tax it differently." That is my personal view, and it is based on a belief that, if you look at one thing individually, what you risk is problems of definition: "What do we mean by digital business?" You risk the potential of unintended consequences, rather than looking at the whole. I am really not trying to avoid your question. I think there are many things that could be done, but it is looking at what the activities are, how the tax system taxes those, and what is going to make sense going forward.
Chair: I would like to pursue this further, but we are running out of time. That was very interesting. Thank you very much for your contribution, and please feel free to stay as a member of the audience, if you so wish.
Examination of Witnesses
Witnesses: Mark Walmsley, Chief Executive, ActSmart, Ken Parsons, Chief Executive, Rural Shops Alliance, and Meryl Halls, Head of Membership Services, Booksellers Association, gave evidence.
Q270 Chair: Good morning and welcome. Thank you for agreeing to give evidence. Starting with you, Mark, could you introduce yourselves?
Mark Walmsley: Mark Walmsley, from ActSmart. We provide support to cycle, outdoor pursuits, and leisure time independents and their supply partners.
Ken Parsons: Kenneth Parsons, chief executive of the Rural Shops Alliance: a trade association, as the name implies, for rural shops. Our interest tends to be in the smaller market towns-that sort of end of the inquiry.
Meryl Halls: I am Meryl Halls, from the Booksellers Association. We represent all the retail booksellers, from large to small, but we have a relatively strong independent sector, which is my responsibility.
Q271 Chair: You may, if you were here earlier, have heard my opening question to the previous panel, and this is virtually the same. I just want your different perspective. As you demonstrated, you represent a wide variety of retail businesses. Basically, how do you see your sectors responding to the omni-channel or mixed channel approach, and what is your view on the "total retail" perspective outlined by the previous panel? We will start with you, Ken.
Ken Parsons: First of all, it is very difficult for smaller, independent retailers to be effective in the omni-channel environment. Clearly, it is the future; it is happening, and it is happening now, but it is a totally new skill set for people who are very often working very long hours anyway just to keep their existing bricks-and-mortar business going.
Q272 Chair: Can I just interrupt you at this point, Ken? You would have heard my question to the previous panel about potential skills training for people in small businesses, for whom this is a real problem and barrier. What is your perspective on that?
Ken Parsons: I think it is essential, and it is not really available currently. I think it is a real role for BIS to provide structured training for independent retailers: perhaps not just in the new developments, but also in some of the fundamentals of retailing. Very often, they come in with a lot of enthusiasm, but not necessarily the skills and professionalism that these days the industry requires. I would be 100% behind providing that.
Chair: Good. That is very helpful. Do either of you wish to add anything?
Mark Walmsley: Within the cycle channel, which is the biggest part of our representation, over 70% of independent retailers have an online presence. It is the quality, the management, the development and the maximisation of that online presence that is questionable. The two largest online players in the cycle trade internationally are independents or ex-independent businesses. They took an early adaptation lead: Wiggle and Chain Reaction. They invested early in specialist resource. As early adapters, they have been very successful, to the degree that they are threatening some of the other independent sectors, too. There is an opportunity now, but a lot of that came with the level of investment and resource they made.
In terms of training, personally, I fundamentally think there is a core issue across the whole independent sector of accessing quality training in all areas of retail, and the developments in multi-channel just make that more of a challenge. As in everything-this is the reason we exist as trade bodies-trying to put any service commercially into the independent sector, including training, is very challenging. It is a very fragmented audience. It is very hard to hear and it is very hard to engage; it is very hard, therefore, to deliver it. It is especially difficult to deliver a sincere service like people development, both ways. I think you have got Jane Rexworthy on later, and I am interested in her views about dealing with independents works, compared with dealing with corporates. When you think of these very sophisticated challenges, like online-and it is not just online; it is about digital in-store, and card and mobile developments are moving very fast-it is a real challenge to build a really accessible training process. I think it is a lot more than seeing something at a trade show. It actually needs a continuous support programme and development to work.
Chair: Meryl, do you wish to add anything from a bookseller’s perspective?
Meryl Halls: Just to reiterate, it is incredibly challenging for independent retailers to participate in the omni-channel market. In the book trade, what has happened is that providers of white label or e-commerce services have come on to the scene. Some of them are very helpful to independent bookshops, but one of the challenges for bookshops is that a book is the same wherever you buy it, so it makes it very hard for bookshops to differentiate themselves against supermarkets or online. They have been caught in a pincer movement between the deep discounting that comes from supermarkets and online and also the digitisation of the product, second only to music. There is a skills challenge, but there is also the absolute rabbit-in-the-headlights indecision about what to do-whether to embrace that e-reading experience, or to leave it to other people who have mopped up.
Q273 Chair: I was going to ask a supplementary along the lines of how your members ensure that store shopping complements online shopping, and vice versa. I am not sure how you can respond to it, but I would be very interested to see what your perspective is on that.
Meryl Halls: I think often what bookshops do is extend the personality and the culture of the shop on their website. Our anecdotal evidence is very much that the bookshops are servicing their local customers with their website, so they have got no global reach. It is not that they are reaching new people, particularly; they will maybe do click and collect, and the best bookshop websites from independents are the ones that are quite quirky. They will sell only a limited number of titles. They are not trying to be category killers, so they are just extending the personality of the shop, which seems to work best for them.
Ken Parsons: A high proportion of our members are in the food industry, where of course you are up against some of the most professional players. We as a trade association have actually looked into trying to provide a generic platform for individual shops to use, and, I must admit, we came to the conclusion that although it was possible to set it up, the real dilemma for independent retailers would be to then actually maintain the system. Keeping one of these platforms up to date in terms of pricing, ranges, and so on and so forth is one of the key barriers to doing it properly and going into it, which is obviously a very big limitation for smaller retailers who just have not got the staff or the capability of doing that.
Mark Walmsley: There is a big part for independents to play, because generally they are specialists, and therefore one of the things they are offering is specialist product that is not widely available. Therefore, the internet should be a major solution for them. That, in itself, creates quite a big product management job; therefore, what they really do need is the technical support brought to them. They actually need a formula or service division that sorts out the technical side so they can concentrate on product and use it as a retailing platform, rather than having to be technologically advanced themselves to maintain the whole of that.
Q274 Mr Walker: I was interested, Meryl, in your point about the pincer movement on the bookstores in particular. Do you have any figures for the number of independent bookshops that there are now, and how that compares with 10 years ago?
Meryl Halls: Yes, I have got numbers. We have got over 1,000 independents now, as of the end of 2012. In 1995, we had 1,894 independents; in 2003, we had 1,594, so there is a relatively slow but very steady decline in the sector. We have got a third less than we had 10 years ago.
Mr Walker: I am a big fan of independent bookshops, and I have taken part in a "Books Are My Bag" event this weekend.
Meryl Halls: Oh, good. Thank you.
Q275 Mr Walker: But I think anecdotally you often hear of people who go browsing, look at the books in the bookshop, and then buy it online; they take their mobile device with them, and order it elsewhere.
Meryl Halls: Yes. We call it show-rooming, and it is massive.
Mr Walker: How big a problem is that?
Meryl Halls: It is a huge and growing problem. Anecdotally, again, bookshops get quite offended. They are less offended now, because it is much more common, but people come in completely bare-faced about it-as in other retailers-so it is very hard. We did a consumer survey for Independent Booksellers Week, and we asked consumers whether they did show-rooming and whether they felt guilty about it. Young people felt very guilty about the fact that they show-roomed, but older people did not care. The age split was really interesting. But 64% of book buyers admit to show-rooming, so it is probably more like 84% who really do it.
Caroline Dinenage: Did you say it was called show-rooming?
Meryl Halls: Show-rooming, yes. That is one of the main challenges to retailers: they have got all of the overheads of their premises on the high street, but unless they are an omnichannel and can think of their shops as showrooms, they cannot possibly compete. The independents cannot treat their shops as showrooms because they have not got anything to fall back on. It is very hard.
Q276 Caroline Dinenage: Meryl, continuing on that theme and with that in mind, in the Which? consumer survey that asked consumers to name their preference for online and high street stores, three of the top 10 online shops rated by customers, excluding Amazon, just sold books-were bookshops. I wondered how on earth independent bookshops can survive against that backdrop, and also whether you had any evidence of independent bookshops that were thriving against this backdrop and whether they were doing anything innovative and unusual that led to that success.
Meryl Halls: There are many that are thriving, but I think it is getting harder to thrive. They are incredibly innovative. There have been quite a lot of new entrants: we lost 60 independents last year, but we gained 39, so there are still people coming into the industry, and those people are probably going to be stronger in the long term because they have come in in the middle of a recession. The good ones are innovating all the time. They are diversifying, and this is one of the things we really find. We do a benchmarking study, and we have discovered the increasing importance of what we call non-book product. Booksellers are having to stock and sell other items in order to sell books; their passion is books, but they will often have a café. That is a very common partnership now. A lot of them are selling art and art materials; they will sell children’s toys, they will sell homeware, and they are being very inventive with how they get to their customers and keep their customers happy. They will run endless events. The bar is so high now-the level is so high-that the customers are expecting a full events programme. They are expecting a loyalty scheme, and they are expecting personal shopping. One of the booksellers we know very well talks about extreme customer service. They just have to keep delivering extreme customer service by giving them all these bells and whistles.
Q277 Caroline Dinenage: That is very interesting. Can I ask all of you whether there are any specific actions that you think the Department for Business, Innovation and Skills could take that would ensure that smaller, independent retailers can benefit from the electronic forms of shopping? Do you feel the smaller retailers might miss out on the growth of online retailing because they are not necessarily equipped as well as some of the bigger players?
Ken Parsons: If I can pick up on this, I think there are a couple of pointers already in existence. The Technology Strategy Board, which is attached to BIS, as you possibly know, has in the past supported the open high street project in Herefordshire, which is now fairly moribund but did point a way forwards. It provides a platform for independents to have a common electronic platform, marketing directly to customers, with a common delivery system but enabling each of the independents to provide their own shop front, their own marketing, and offer local produce and their own personality. That model, I think-although that particular pilot was not really taken far enough forward-is the right one, and one that should be developed massively and very quickly by the Department to help the independents. I think it is a real game changer.
Q278 Chair: Why is it moribund now, if it had so much potential?
Ken Parsons: If I am being candid, I think it was badly managed. A lot of the budget went into branding and so on and so forth, without enough of it going into the nittygritty of the website-actually reaching out to customers, getting customers to come on board and to make use of the service. If the lessons were learned from that experiment, then there is real potential for that pilot to be rolled out nationally, with a lot of benefits to small retailers. For example, in that one, there was a butcher based in the centre of Hereford; there was a produce stall in the market that was actually tied in with it; there was a village shop that was doing all the packets, and so on and so forth. There was real synergy between the stores involved, but somehow the project never seemed to take off.
Q279 Chair: Has there been any formal assessment of it at all?
Ken Parsons: That, I do not know. You would have to ask BIS.
Chair: It might be worth investigating.
Q280 Caroline Dinenage: Would the other witnesses care to comment?
Meryl Halls: I would just echo the point about business rates. Obviously, that has already been talked about. I put charity shops on my list of concerns for bookshops, because Oxfam actually has more outlets selling books than Waterstones, and they are benefiting from a fantastic range of relief. It would be great to have the business rates system looked at, because often our members are teetering on the edge, and the rates can make all the difference between tipping them over and not.
Q281 Caroline Dinenage: And, on the skills piece-which you have already spoken about-do you think that there is more BIS could do?
Mark Walmsley: I think, in terms of technology skill, it is critical. You need commercial partners to provide these services, and if the sector looked more attractive, was more skilled and understood what it was doing, it would attract more partners to work with it. It is not a good or an ideal commercial proposition for a provider to come to, and it is a continuous, developing programme. It is not one set of skills; it is not a "job done". It needs to be a continuous programme to help independent retailers compete, and it can be made commercial, like the examples I have already quoted on the cycle side; all the leading businesses come from independents. It is a really sincere, continuous investment that is needed.
Q282 Caroline Dinenage: Do any of you have members who are purely online traders?
Mark Walmsley: About 4%.
Meryl Halls: I have got a tiny percentage–4% or 5%.
Q283 Caroline Dinenage: How do you represent their interests as well? Surely, their interests are quite different.
Mark Walmsley: There are two tiers of them. There are the leading ones that we talked about, and they are interested in going beyond needing me, and then obviously it increasingly will be an area for new entrants, because it is a local start-up. Putting away the barriers of everyone hating online-we are sort of getting over that now-actually, it is a way to introduce more people into the marketplace; hence, again, another need for skills or provision to bring people in. Ultimately, especially in service markets like mine, online sits with bricks and mortar. They run together. It is multi-channel retailing. Actually, it can be an attraction to bring more independents into the marketplace; therefore, we need to engage with having the services and skills again to help educate them back into retail.
Ken Parsons: Could I perhaps add something on the rates issue, very quickly? For a lot of people, you look at the accounts and the rates bill does not actually seem to be a very big figure, but the key thing is it is a fixed cost. It is there whatever your profit, whatever your business, is doing that year. If one were going to revise the system, then I would very much argue for something that was much more related to the performance of the business, rather than being a fixed cost year after year after year, irrespective of trading conditions.
Q284 Paul Blomfield: Is that not a problem with rent, too?
Ken Parsons: Yes, it is.
Q285 Paul Blomfield: I mean, this whole debate gets focused on rates, and yet a more significant factor is usually rent. Does that not go back to the point that Ann was raising about land values?
Ken Parsons: Yes. I personally would very much argue that, certainly historically, the rented property market in this country has been very much ratcheted. Rents always go up; they never go down. Often, that is built into upward-only rent reviews. Very often, in the past anyway, landlords would look for long leases, and one of the things we ought to be looking at is: "What is going to encourage a dynamic young person to go into retail?" At the moment, in those circumstances, you would tend to probably go online and have an online business. The sort of barriers that you would be facing would be this very high fixed component to your cost: rent and rates, very often. That immediately discourages you, because you do not know what your trade is going to be like in your first couple of years. I would certainly very much argue that upward-only rent reviews ought to be banned. Equally, landlords ought to be persuaded to be much more realistic about the rents that they sometimes charge. A lot of landlords still prefer to have properties empty rather than reduce the rent to economic levels.
Mark Walmsley: There are a couple of points there. It is very difficult in our situation, because we are the first touch-point for people who want to come into the industry. Unfortunately, my standpoint tends to be very much a cautious one; it is almost advising them against it, because the business fallout of locking yourself into a lease, the shop fit-in and shop fit-out you take on board, and the stock you need means that all your eggs are in one basket before you open the door. You see many businesses fail-often, again, because of skills-and not go fully through. I almost tend to always try to put them off, which is sad, but at least give them a real warning about what they are facing. The other issue in this is that when one does the review on rents and the rates side, one thing to realise is that a lot of these smaller independents have been around for many years. Many actually do own the property. They are the landlord. They are also getting older, and because the businesses are not so attractive to the next generation, they will be sold. I think there is something coming up the line about the current retail being sold off and there not being continuity in there. This is their pension fund, fundamentally, and there is quite a lot of that in the survey, quite surprisingly.
Q286 Ann McKechin: Can I ask the panel what progress has been made so far in relation to the recommendations of the Portas review?
Ken Parsons: Shall I kick off on that one? I am personally very disappointed, but not surprised. My starting point is that retail is a very fast-moving industry now, and I suppose any review is almost going to be out of date fairly quickly, but if you go down the 28 recommendations that Portas came up with, yes, there has been a lot of talk and some committees, and so on and so forth. However, I think certainly the results coming out of the Portas towns and so on are very much ideas, not actual customers on the high street, things happening, buzz, and things turning around.
Q287 Ann McKechin: So you do not think it is going to be used as an example by other towns and shopping areas around the country?
Ken Parsons: Part of the problem is actually having 28 recommendations. Some of them, I suspect, people dismiss pretty well straight away; others may be far more relevant. I think it would be far better to have honed down to a few key recommendations. Probably the most important one for me-which is actually quite general, but is in both of the reports-is the key need to have strong town centre management. Now, the problem-which neither report, I think, overcomes-is that there are so many different interests involved, not necessarily all pointing in the same direction, and some of them institutionally are not necessarily able to move as fast as others. I really do think it should be very much a case of, if necessary, pushing very hard indeed for strong town centre management that can take decisions, cajole, bully, and beat people into going in one direction.
If you look at where retail is working well-if you turn it around the other way, and be positive-30 miles or so down the road you have got Bristol, the Cabot centre, which is a fairly modern retail development. Most of the things that both reports would ask for are actually in place there, and it is working. You have got the nice atmosphere; you have got the good car parking; you have got the good access; you have got the good range of different types of business. You have got a good mix of cafes and restaurants and cinemas, and so on and so forth. It is almost a model for what these people are suggesting, and it works, so what more evidence do you need?
Q288 Ann McKechin: Thank you very much. You have got a very comprehensive plan. Meryl, did you have any thoughts about the Portas recommendations from your members?
Meryl Halls: I am not a technician in the way that Ken is but, ironically, I think one of the longer term benefits of Portas will be the fact that town teams came together in the first place. Many of my members have not been affected at all, but if they have been affected in a BID or been involved in a BID, the fact that the town team came together means that the carburetion has started in that community, and that can so often make the difference in a town if the retailers work together to create a message to consumers.
Q289 Ann McKechin: Mark, did you have anything to add?
Mark Walmsley: Only briefly. It is a good thing to raise in the agenda; I think some good things have come from it, but it really needs more action. I strongly support what Ken says about managing and personalising your town, and setting it up to meet your consumer needs. They are varied.
Q290 Ann McKechin: The Grimsey review, in contrast, was a very centralised approach. Every town centre would be forced to produce a plan and a strategy, with certain dates, but it also mentioned taking a one-off levy from the larger retailers to produce a fund. Do you have any thoughts about that particular recommendation or any others in Grimsey that you think are different from Portas and worth evaluating?
Ken Parsons: Both of them, obviously, want towns to be managed as a piece, which is what I would thoroughly endorse. Probably the slightly more autocratic approach from Grimsey would be much more effective but much harder to get buy-in to. I would certainly disagree with the thought of trying to have a 20-year vision; retail and the high street are moving so fast that that really is trying to look far too far into the future. In terms of the 0.25% levy, my personal feeling is that it would be so hard to get the multiples to not resist it. I actually think it is never going to happen. I just cannot see it happening, to be blunt.
Ann McKechin: Thank you. That is very helpful. Anything else, Mark?
Mark Walmsley: I am just concerned that not enough of the Portas review was bought into, and I think some of the hard decisions somewhere down the line were fluffed at the end. The Grimsey is even harder, and I just do not believe it is going to be deliverable. I would rather get on and deliver what is already on the table.
Meryl Halls: What is really good is that we are all talking about this. The fact that we are talking about it is very good.
Q291 Ann McKechin: Finally, one of the recommendations was that there was too much retail space in the UK, and that bricks and mortar retailing could no longer be the anchor to create thriving high streets, so it is a mixture of having community facilities and housing. Do you think it is important to retain bricks and mortar shops, and do you think this type of new formulation for the high street is a sensible way to look at it?
Ken Parsons: My personal view on that would be that the high street has always been changing. What we think of the high street now developed, very often, in the 1920s particularly, sometimes before that. I mean, if you look at where we are today in Gloucester, it is essentially a Roman street pattern, for heaven’s sake. Things are always changing. There is no fixed demand for retail square footage, because it does depend to a degree on how much it costs. America is the classic example, where there is a lot more square footage-for obvious reasons-and pound sales per square foot are that much lower. If high street rents were lower, if the rates were lower, there would be more demand for retail space. Having said that, Portas gives the proportion of retail sales going through town and city centres as 40% of the total, and that figure is bound to decline. In that context, yes, I think we do have more square footage now than we did perhaps 10 years ago. In some towns, it is going to be necessary to manage a decline in the square footage in an orderly manner, and broadly I would go along with Grimsey in terms of the right approach.
Mark Walmsley: We would support the retail to residential proposals, done in consultation, because it has got some important caveats in there to protect it. However, I think greater flexibility is needed. I have a slight concern if that ends up meaning a greater centralisation, and what impact that might have on retail levels of the retailers that are left, in terms of forcing independents out again. That is a little extra caveat on there, but I would support those proposals.
Q292 Mr Walker: I just want to follow up that point around changing use and encouraging more mixed use, and that side of things. Around the edge of high streets and town centres in particular, I can see how there is some scope for that, but particularly for the businesses that you represent, Ken, in rural areas and smaller villages, there is a real challenge there, is there not? You have got a very limited retail offering already; if you are saying, "Manage that down," you are effectively at risk of managing it to zero. How do we make sure that we are maintaining what people really want, which is the local shop and that local presence, and have a system that encourages that as well?
Ken Parsons: That is a very good point. The current proposals out for consultation do have safeguards built in, we believe, in terms of probably preventing most rural shops being converted to residential. It is an issue that needs to be very carefully thought about and the appropriate safeguards built in, and that does imply that retail assets with strong community use do need to be protected as far as possible. There is always a balance between interfering with property rights-the general right to sell to whom you want to-as against the needs of the community, and I think that does need to be very much built into any new legislation that comes forward.
Q293 Paul Blomfield: You talked about the problem with Portas being that there were 28 recommendations. Have we got a bit of a problem? Meryl says one of the great things about all of this is that we are all talking about retail, but is there a danger of initiative-itis blurring the scene? We have got the Portas pilots, town centre partners, business improvement districts, and so on and so on. Are we losing focus?
Ken Parsons: I agree with that proposition wholeheartedly. We have not even mentioned the LEPs, for example, coming into the equation. Clearly, county councils will not want to let go of their responsibilities, either, and I think that is a lot of the problem. Nobody is actually solely charged with developing these locations and taking them forwards. Again, as I said earlier, where you have got one developer, as in the Cabot centre, who has almost total control, then it may be slightly autocratic but you can then develop what the customer wants without lots of vested interests-with valid points of view-nevertheless not necessarily wanting to go with what is right for the particular town or city. Knocking heads together and getting a lot of these people to work as one is perhaps the hardest issue we are facing today. It is not rates or anything else: it is actually, "What is right for this town." Everybody must point in the same direction and meet the customer needs, so I would agree with you totally.
Q294 Paul Blomfield: That is hard to achieve. I mean, how do you get that transformation? I represent Sheffield, which has got retail challenges in the city centre with Meadowhall on the outside, and I talk to key players in the sector there. Their frustration is as much with their colleagues, other retailers, as it is with anybody else influencing the environment. How do you drive that working together?
Ken Parsons: I suppose it is very much trying to take the model from somewhere like Meadowhall, where you have got perhaps a more-dare I say it-autocratic style of centre management, because of the power structures there. It does require a new structure to come in, perhaps with legislation behind it, with the powers to bring the changes necessary to fruition. That is going to be against some people’s interests. It is not necessarily something that everybody will buy into, but ultimately, if you are going to have city centres competing with out-of-town effectively, it has got to be done.
Paul Blomfield: Mark? Meryl? What are your views?
Mark Walmsley: I can only really reiterate what Ken said. It is back to actually having a powerful, controlled planning process.
Paul Blomfield: Your suggestion, in that case, is that will not happen of its own volition?
Mark Walmsley: No. There are too many interested parties.
Paul Blomfield: It needs Government to act?
Meryl Halls: Yes. We would concur.
Paul Blomfield: Okay. Thanks very much.
Q295 Chair: Just concluding on business rates, I think it is Grimsey that makes the suggestions that the business rate discount for charity shops should be reduced and the savings made by that recycled for other community ventures there. Now, I would welcome your opinion on this, but do you think there is a case for the business rate being used to shape what you might consider more worthy retail offers than others-if you like, a higher business rate levied on betting shops and payday lenders in the high street, and lower on retailers offering more conventional retail items? What is your view on that?
Meryl Halls: I think you have to be careful of social engineering there, don’t you? Often, our booksellers hold France up as an example, because their local governance allows for them to control the types of retailer, so only certain types of retailers can be in certain shops and, I think, even specific properties. However, they are making sure that there is a balance in each arrondissement in Paris or whatever, and bookshops get tax breaks for being cultural spaces. To some extent, it is an attractive and proper thing to do, but as a Government you would have to take great care not to be seen to be socially engineering the situation.
Q296 Chair: You say socially engineering; there is a case, if you like, for localising the business rate in order to realise the objectives of a town centre management scheme.
Meryl Halls: Absolutely. 57% of consumers, who do not spend a lot of time thinking about this stuff, said in our survey-which was a small survey-that they would like more retail diversity in their high street. They want their local government to pay more attention to their high street. Retail diversity in the current situation is not going to come on its own, because the passionate people who care about the product-booksellers, wine merchants, cycle enthusiasts-cannot get into the high street. They cannot break into the bricks and mortar business, because there are too many barriers to it. You have to.
Ken Parsons: I can go to a strange high street, a place I have never been before, and just by the mix of businesses there, you can make a very good stab as to how healthy that high street is. Sometimes it is obvious: there are lots of pawnbrokers, charity shops, or whatever else. It is not that hard, but I think it does highlight that getting this mix right is absolutely crucial. Ten or 20 years ago, too many building societies was indicative; that period has now perhaps moved on. In principle, I would be in favour of actively trying to get the mix right. Bookshops, cycle shops, and whatever else add to the variety and the ambience of a high street. The problem, I think, is trying to define too closely who are the goodies and who are the baddies. Once you start with betting shops, do you then go on to pawnbrokers? Charity shops, obviously, are a very hot political potato, but a surfeit of charity shops really is not a good sign for a high street. It is a sign of a high street in decline.
Meryl Halls: Not least for rental values.
Ken Parsons: Not least for rental values.
Chair: What I should have said to the previous panel but will say to you, is that on looking at your evidence, we might think of further questions we would like to ask you, and we may write to you. We would welcome a response. Similarly, of course, if you feel that on reflection there is something you should have told us but did not, feel free to write to us with that evidence. Thank you very much.
Examination of Witnesses
Witnesses: Jane Rexworthy, Director of Skills Solutions and Head of National Skills Academy for Retail, National Skills Academy, and Martin-Christian Kent, Research and Policy Director, People 1st, National Skills Academy, gave evidence.
Q297 Chair: Good morning, and thank you for agreeing to answer our questions. Could I just ask you, for voice transcription purposes, to introduce yourselves, starting with you, Jane?
Jane Rexworthy: Jane Rexworthy, head of the National Skills Academy for Retail, and exec director of People 1st.
Martin-Christian Kent: Good morning. I am Martin-Christian Kent, and I am research and policy director at People 1st.
Q298 Chair: I will say what I have said to the other panels: do not feel that you both have to answer every question, unless you have something to add to or subtract from what the other speaker has said. Yesterday, we heard from David Owen, chief executive of GFirst LEP, about the training and mentoring work you have been involved with in Gloucester. Could you just give us a brief outline of this work?
Jane Rexworthy: Yes, of course. I run the National Skills Academy for Retail. It has a network of 53 skill shops across the UK that are one-stop shops that provide skills solutions to businesses of all sizes. We work very, very closely with agencies like the Association of Town Centre Management and the partners that work in those local towns. We work very closely, also, with our skill shops with organisations like GFirst, the local enterprise partnership that is based here, and the providers, Jobcentre Plus.
We have been working very closely in the Gloucestershire region for some time. We have provision that is available to support small businesses, and in talking to the town centre partnership in Cheltenham, working with Cheltenham Borough Council, we brought together a package of support for small businesses across Cheltenham town centre, specifically looking at the different streets and the high streets that we had and looking at the types of intervention that would really make a difference to those businesses. We pulled together a package of support, and what is very interesting for us is that the initial support was mentoring. That was bringing in some excellence from the retail sector, led by Rowland Gee of Moss Bros, Roland Gee’s family business. When he retired, he pulled together a group of like-minded industry specialists to come together and provide a service specifically for small businesses that we worked very closely with.
We provided a service to small business owner-managers in mentoring, and in getting to understand some of the barriers they had to growing their business in this difficult time. That project has been running for about 18 months now. We have also added into that some skill support for the people that they employ, so we run an industry-recognised programme that we have called WorldHost. It is a customer service programme; it was used for the volunteers at the Olympics. It is about really raising the game and getting the people who are working in the business to really be able to sell the products and understand the customer’s needs and requirements-so, again, a very successful programme. We also have introduced our guide to successful retailing, which looks at very specific areas of business, like business marketing. We have heard about the digitalisation and looking at how businesses can perhaps support themselves in this very new world of omni-channel, and that programme, as I say, has been running for 18 months. We have extended it, and we are now looking to take this programme into other town centres within the Gloucestershire region; so Tewkesbury and Winchcombe are some of those, and we are also working with some of the other town centres at the moment.
Q299 Paul Blomfield: Can I ask very specifically about your views on the role of apprenticeships in the sector and what involvement you have with apprenticeship schemes?
Martin-Christian Kent: Yes. If I could provide a bit of background in terms of my role, People 1st took over the standard-setting body role from Skillsmart, who were the former Sector Skills Council for retail, in October last year, so we are now responsible for overseeing the frameworks. The apprenticeship has a strong role to play, but I think it is a transitional role, in terms of where they are going obviously with the broader changes. What we have seen historically is that apprenticeships have been used, particularly since the demise of Train to Gain, in a broader variety of capacities. That has taken away very much from their core purpose, which is very much to develop the skills of individuals who want to develop careers. I think we have an opportunity to work with employers to set professional standards, which raises further aspirational levels and really reinforces the career opportunities, and therefore set apprenticeships around those professional standards. I think it is a sea change from where we are currently, but obviously that will be part of the broader changes that are being introduced.
Q300 Paul Blomfield: You are certainly right to allude to some retail apprenticeships having discredited the brand, almost. It is positive to see that changing. Do you think we are sufficiently ambitious for apprenticeships in this country? My perception is they tend to be very much focused on light-touch, generic customer service and at Level Two, whereas if you look at Germany, you are talking about Level Three being the norm and much higher expectations.
Martin-Christian Kent: It is about looking at the labour market. What we are increasingly seeing is, on one side, very transient, lower-skilled roles that are filled a lot by students, which is great for investment in terms of giving them the employability skills from which other sectors will benefit-but, obviously, it has high labour turnover. Also, you have got much more permanent and stable staff looking more into careers, and that raises questions around some of the skill shortages. Now, if we are looking at the apprenticeship to deal with the latter and actually have a very clear role within that, then I think that provides huge opportunities. What we are trying to do in terms of working with the employers currently is reposition the professional standards as a different way of looking at this. Rather than saying, "Okay, there is in-house training, qualifications, and apprenticeships," it is saying, "Well, okay, what are the aspirations around some of the occupations?" and actually stretching professional standards for those roles, and then effectively hanging off them the inhouse training, qualifications and apprenticeships. They have all got the same parity-we are not trying to create loads of qualifications when there is not any need to-but it really reinforces the particular role for apprenticeships. Ultimately, if somebody is starting in the sector, then they have got a longer journey to reach that professional standard, and that is what the apprenticeship is for. In other instances, inhouse training and qualifications have a different role. They have got the same parity, but the critical thing is raising the aspirations and looking at these professional standards.
Q301 Mr Walker: How are the movements in technology, which we have all heard a lot about today, affecting the attitude of the sector to skills and its approach to skilling people up? Also, you mentioned that a significant body of students are people who might be working in the sector part-time, as their first job. Traditionally, retail has been a huge employer of people going into the workspace. Do you think, with all the changes that are taking place and the changes in focus of what people actually need to be doing in retail, that is sustainable, and how can we make sure we are providing the skill support to allow it to play that role?
Jane Rexworthy: I think there is a real role for us to play in that, and part of our work as People 1st is to ensure that we have the right provision at an early stage to prepare people for the place of work, which is quite different from what it was 10 or 20 years ago. With omni-channel, the skills that are needed now are about understanding the different channels that their particular business that they are coming into trades by. There may be eight or nine different ways to go to market, and individuals-whether they are the sales floor or back of house-need to understand the different transactions that must take place. To prepare people for that, colleges, schools, education colleges and universities have a role to provide some of that skill base to support us in getting people ready for the workplace. We also have to acknowledge that many of our managers within the industry have come into the industry before the onset of multi-channel and omni-channel, and so therefore leadership and management is a key area of skills need for our sector at this moment. Many of our national businesses are really recognising that as they move into this new world of global retailing and not just local retailing.
Martin-Christian Kent: On a practical level, at the moment, we are working with the employers to embed multichannel retailing skills within the current apprenticeships. It is part and parcel of what their staff are required to do, but also those units will be available standalone-so either built into inhouse provision or qualifications.
Q302 Mr Walker: Your point about training managers for the multichannel world, I think, is very important. We heard some evidence earlier, obviously, that managers are busy running their businesses and it is very, very difficult for them to take out the time to access that sort of training. What do you think can be done to make it more accessible and to get that message across, particularly to people who are running the smaller, independent retailers?
Jane Rexworthy: For us, it has been a really interesting campaign, and certainly the work that we have done in local towns across the country has highlighted this real need to be able to market themselves and to become online businesses in some way. We are working very closely with the Association of Town Centre Management at the moment to develop a digitalisation training programme toolkit to support businesses, and it will be an industry standard programme that we will be taking out through that partnership across the country in the coming six months. We have been able to develop that programme through Employer Ownership, round one, and we believe that is enabling us to start targeting those businesses that want to know how to go about it. It is a very complex world for them. They do not necessarily know where to go, where to get the best information, and so by providing this toolkit, we hope to negate some of those mistakes that some businesses have made in investing, perhaps, in the wrong system or website, etc., for themselves.
Q303 Ann McKechin: When you were talking about different levels of training, Martin, are there any real differences between larger town stores when you train the staff and those smaller ones on the high street? Are there more people in the out-of-town centres actually training their staff together?
Martin-Christian Kent: On the top level, the significant difference, obviously, is size of business. Obviously, the larger you are, the more likely you are to invest in training, and I think that is probably standard across many sectors. I think it is also about the nature of the training that is required, and as Jane alluded to, the breadth of skill requirements for an owneroperator is much greater than if you can depend on support as part of a chain. That is a really critical area, but the mix within a town centre is probably very different than it was previously, and very different from out-of-town. Again, the product knowledge and the skill requirements are very different. Jane could probably answer more on the specifics, in terms of what has been done about that.
Jane Rexworthy: Through our network of skill shops, we have an ability to go into out-of-town, into shopping centres and into high streets to offer delivery according to the needs and requirements, and I think it is very important for partnerships to recognise that retail is pretty much 24/7 for many of the nationals and that small businesses are being pushed to open more and more hours. Therefore, providing training and delivery at the right time for them to accept that, and in a way that they can access easily in those short, bite-sized programmes, is really important. We have certainly discovered that in the project that we have been working on in Cheltenham, and we see it across the country. You do need to respond to the business’s pressure points, which is very much around trading hours.
Q304 Ann McKechin: Do you think that the partners you work with in colleges are responding to that difference in the way in which they present courses and offers?
Jane Rexworthy: Yes. We work with over 80 providers within our network of skill shops, and they are retail specialists, so they acknowledge the needs and requirements of the industry. I cannot answer for all provision, but what I can say is that for the provision that we work with, we look to accredit them with the knowledge that they are satisfying the employers and engaging with the employers in the most appropriate way for them. For retail businesses, much of it is around work-based learning, and much of it is providing short, bite-sized training and development at places that suit them at the right time. That is our response.
Martin-Christian Kent: The one thing I would add in terms of the skill set is that we talk about the skill set of the industry itself, but-given the two reviews and the emphasis on local authorities and town centre regeneration-it is also a matter of the skills within local offices, and the extent to which they are aware of some of these things and have got the skills to be able to help manage and lead the industry and the local community. We see the same in tourist destination officials, as well. It is a very similar issue, particularly given all the changes within local government.
Q305 Caroline Dinenage: How sector-specific does your training have to be, or is it largely generic?
Jane Rexworthy: That is a really good point. The first thing to say is that, from a sector-body point of view, when we assessed the qualifications and programmes some 10 years ago and started looking at what was being offered to the sector, primarily generic customer service was the one offer, whether it was apprenticeships or qualifications. Only 3% of our workforce do pure, generic customer service, and so it is very important that our qualifications really reflect the job role that an individual does. Therefore, generic qualifications and programmes can play a part, but they are only a part of what the offer needs to be. We have spent some time, certainly in our review of the apprenticeship framework now, looking at the different job roles, the different pathways, and making sure that they are very relevant to the industry. We do have generic programmes, and an example of that would be our WorldHost programme that we run across the service industries, but we have retailspecific units within that to make sure that any individual that is going through that programme is really able to respond to their customer appropriately back in store.
Martin-Christian Kent: It is also just differentiating between the qualification and the training. The qualification can be fairly generic, but as long as the training is contextualised for the individuals doing the training, that is the most important thing. We have seen that a lot within preemployment training, where a lot of the provision is fairly generic, but what we have found is that the more specific the provision-and we have developed a sector-specific pre-employment programme through Retail Works-the more the employers can guarantee that those skills they are particularly looking for are embedded in the programme. Sometimes, it is fine to have the generic qualification as it is delivered. In other instances, it is really important that there is a sectorspecific provision available.
Jane Rexworthy: Can I add to that? Just to give an example of that, when Westfield Stratford shopping centre opened, we ran our Retail Works preemployment programme to support the recruitment of local people into those stores. The success rate was that over 50% achieved a job at the end of it, and John Lewis Partnership, as one of those businesses, three months later had a 100% retention rate from their recruitment. It is evidence that the right programmes make a difference in terms of sustainability and individuals’ attrition rates, and ensuring that we do keep people in our industry who have been successful through the programmes.
Q306 Caroline Dinenage: So what are the specific skills that you found the retail sector was most lacking, and that have made the most positive improvement in your programmes?
Jane Rexworthy: For us, if we take the Retail Works programme, then that looks at customer service being very important: the whole nature of being on a shop floor and working in a team; product knowledge; understanding that environment of serving a customer and the breadth of customer base that that individual will have, and the response that they have to have with them. That particular programme would also include presentation skills, the ability to turn up and work on time, so that is where the generic part comes in: those employability, workreadiness skills that sit alongside the more sector-specific areas.
Martin-Christian Kent: If we are looking at the current top skill requirements within the existing workforce, 55% of employers are reporting that their staff need customer service and 55% job-specific skills. It really is that amalgamation of product knowledge and the customer service.
Q307 Caroline Dinenage: You already mentioned that in your most recent recruitment, John Lewis said that, three months later, most of the staff were all still there.
Jane Rexworthy: 100%.
Caroline Dinenage: Is that the sort of feedback that you are getting-that after the training, their retention levels and the quality of their staff is significantly better?
Jane Rexworthy: Yes. This programme has been running for five years, so it is tested and it has been adapted. In fact, we are adapting it now to support any new traineeships that take part this autumn.
Martin-Christian Kent: Looking at a bigger picture, while that has been really successful, the attrition rates in the sector are pretty eye-watering, and certainly labour turnover rates are high. Therefore, the biggest reason we have a skills gap is because staff are not in post long enough and not as proficient. Clearly, one of our aspirations looking at careers at the moment is really taking the journey to look at a better way of doing it, where you can have flexibility but with a more stable workforce, rather than being dependent on the transient workforce that we have historically had.
Q308 Caroline Dinenage: Whose role is it to provide the training? Is it the Government, the employers, the unions? Who takes responsibility for it?
Martin-Christian Kent: It is a combination of everybody. Everybody has a role in this. The employer is obviously critical, because they need to ensure that they are getting the skills they require. As I alluded to earlier, at the moment this sector is facilitating a broader role. It is attracting a lot of transient workers who might not necessarily want to pursue a career in the sector; some will, but actually it is therefore providing a lot of employability skills that are benefiting society generally. I think it is about that combination of what the industry could do and also how it can work with government to achieve that broader picture as well.
Q309 Caroline Dinenage: How far are all of the parties concerned rising to the challenge? How successful are each of them at stepping up to the plate?
Jane Rexworthy: It has been a complex time. One of the things that I need to point out is that the change from Train to Gain a few years ago, then moving to apprenticeships, is very confusing for employers. Whilst certainly the national employers do a huge amount of training and development behind the scenes for their employees, to align that and ensure that they are actually enabling people to pick up the right, appropriate qualifications is very confusing. We are no longer hiding the wiring; we are making it very difficult for our employers to really engage as fluidly as they might with the different funding streams and mechanisms, and as to the recent Employer Ownership pilot, we have not at this point got an industry partnership for retail. So, therefore, looking to the future, ensuring that our 10% of the workforce is enabled to access funding appropriately will be one of our challenges, and one of the challenges for industry and also government. We will have to look at how we respond to that.
Martin-Christian Kent: That clearly poses a challenge, because obviously there is the demise of Skillsmart as the Sector Skills Council, and the changes generally with sector skills councils. Really, we are in a no-man’s land since last April when the core funding went from sector skills councils to the vision for industrial partnerships and the roll-out of industry partnerships. We really are in a sort of no-man’s land as to what happens. We rallied the industry; a tourism and visitor economy industrial partnership bid was put into the recent EOP funding pilots, led by Merlin Entertainments. That was unsuccessful, but it would have really enabled the sector to put into some of these things that we have been talking about. The professional standards are really helping that transition, because there are clearly going to be a lot of changes over the next 12 or 18 months with changes to apprenticeships, for instance, funding, and everything else. It is really a critical time for the industry, as for others, but given the size of it and its dependence on things like apprenticeships, I really do think it is going to be quite critical. Having not been successful with that bid and not having an industrial partnership, it is going to be a challenging time.
Q310 Caroline Dinenage: So if you had one message for the Government on what more it could be doing to assist you, what would it be?
Martin-Christian Kent: The EOP was largely positioned around the industrial strategy, which was understandable. A lot of industry is slightly dumbfounded by the fact that, given the size of the tourism and visitor economy-with hospitality, retail, and passenger transport-it is not part of that industrial strategy, given it employs one in five people. I think they feel, at one extreme, disappointed, dumbfounded and highly frustrated. I think it is time to say, "Well, what is the consequence of not being part of that industrial strategy, and what extra support from the skills angle do we need?" Having an industrial partnership in place would have been a healthy thing to have at the moment, and clearly we are all disappointed that that is not the case. There is a funding round coming up with the employer innovation fund. That is going to be critical in terms of our ability to be able to support employers through that transition, particularly looking at things like apprenticeships.
Jane Rexworthy: I echo what Martin said there, but would add that what is really important for government to hear now is that many employers have been disenfranchised with the changes that have happened within the skills funding system, through Train to Gain, apprenticeships, and now through the new funding routes. These are competitive funding routes, and they are competing against sectors that are seen to be top of government’s agenda. Whilst we are not there, as Martin has alluded to, we actually employ across the service industries 21% of the workforce. It is a really important workforce; it provides some of those early starting roles for people to get into work. It also provides a fabulous career trajectory, and so therefore it is really important for government to think about how we make sure that those disenfranchised businesses that have not been successful in some of these funding rounds are supported and are seen to be recognised as important to the overall GVA of this country.
Q311 Chair: You said that the current funding regime is working against the development of the appropriate skills needed to boost the retail industry, and you also mentioned tourism and other industries.
Jane Rexworthy: It is not supporting it. Certainly, with not getting an industry partnership for our sectors, it is not supporting over the next year or two years in its development of the new skills that are needed and the ability to put those skills in place to provide the facilitative body-the sector skills body-to enable that to continue and happen. That is not in place, and therefore we are working with our employers to bring them together and work with them on what we can do, but actually it is perhaps taking us back, or not giving us the same advantages as some of the other industry partnerships that have been approved recently.
Martin-Christian Kent: The current emphasis on employers doing it on their own is a challenge for our sector. Given the number of businesses in the sector, and the high percentage of small businesses, it is much harder to rally around that, and it is really dependent on a support body doing the things that they need to happen. I think it is, then, about a sea change in why they are less dependent on some funding. No doubt, within these changes, we will see a huge drop in the number of apprenticeships, for instance. If it repositions apprenticeships’ ability to address the skills shortages, which are getting more acute around more skilled areas and management and leadership, but also then acknowledges the investment employers are already making in terms of their in-house training, then I think it would be less of an automatic focus on public funding in that sense. It would be more about making sure that we have got the infrastructure as a sector that reflects the needs of the sector, rather than having to compete with other sectors to make sure we have got X or Y, which I think has been the general culture over the last 10 years.
Q312 Ann McKechin: Can I just ask a quick question? You mentioned the fact that you represent one in five of the workforce. Of those that have industry partnerships, what sort of share, are you aware, do they represent of the workforce?
Martin-Christian Kent: I am not sure. To my knowledge, there are eight that have been approved as pilots, but I am not sure what they would cover. Clearly, I do not think they would be the size of-
Q313 Ann McKechin: Of yours. And am I right in considering that in your particular share of the workforce, there is a very heavy female bias?
Jane Rexworthy: 58%, actually.
Martin-Christian Kent: That is interesting, because that is one of the areas that we have focused on, particularly in hospitality. That is where we have been for so long, but obviously we are trying to introduce it to hospitality, which is the disparity in saying, "Operationally, a majority of our workforce are female, but actually from a managerial perspective, they are not." If we are able to help support and develop more female talent into management positions, I think it addresses the reliance on transient labour and provides that stable workforce, but also it is a much more balanced business model.
Q314 Ann McKechin: Do you know roughly what the split is in gender for the management cadre?
Martin-Christian Kent: I do not, but we can provide you with that.
Q315 Chair: That would be helpful. I have just a couple of general questions to conclude with. You may have been listening earlier when I asked the representatives of independent retailers about the barriers to developing the skills needed in order to improve their offer. You have outlined all sorts of highly entrepreneurial activities that you are assisting, but there does seem to be a lack of awareness of the potential that engaging with you could actually realise. I suppose, in essence, if you are doing so much, why is it that the sector itself does not seem to understand?
Martin-Christian Kent: There are a number of answers to that. First, things keep changing every two minutes. Like any brand, you need to be clear about what you are offering and what you are there to do. From a retail perspective, Skillsmart have gone; the offer from the Sector Skills Council has changed remarkably over the last nine years. We are now going to employers with a very different proposition, in terms of an industrial partnership, so that is introducing a new concept and the new opportunities that are there. At the same time, we are making headway, particularly on the levels of things they understand-so it would be apprenticeships, in terms of the work there.
Q316 Chair: I am talking about the small, independent retailer who is finding a lack of IT or digital awareness a barrier to developing his or her business. What can you offer them, and how can you engage with them?
Jane Rexworthy: It is a really valid point. The way that we work is that we work with trade associations-so, obviously, you have heard the trade associations speak before, and we work closely through that route. One of the key areas for us is working with local towns and high streets through the Association of Town Centre Management, and also working with shopping centres. Some shopping centres will have that mix of independent as well, and so for us, it is about working with business through the right method. For us, the town centre partnerships are absolutely crucial to how you work and enable small businesses to inform the types of skills needs they are requiring at that point, but also then be able to deliver it.
Local intervention has to happen. We have seen a lot of changes in that landscape for our small businesses, with the demise of the regional development agencies and the growth of the local enterprise partnerships. What we know is that, out of the 39 local enterprise partnerships, only 11 have retail or the tourism and visitor economy as a priority. Therefore, there is a huge amount of work for us to do to make sure that local and regional stakeholders are brought into supporting small businesses, along with the national organisations, obviously. We have a method of doing that through our network of skill shops. The skill shops are made up of local partners. The business will not know that; they will not know that Jobcentre Plus is involved in a Skill Shop, and they will not know particularly which college is delivering the training provision. They will not necessarily know that the local authority is part of that partnership. What they will know is that, when they walk through those doors and they ask for a particular training programme, skills or intervention, they are told exactly how that might happen for them and where it could be delivered, and whether there is a cost element to it. We are working on a local level, but I think there is a higher agenda to say that for retail-which is such a big part of our country-there is a need to have it recognised at that local level.
Q317 Chair: Correct me if I am wrong: what you are saying is-and to a certain degree, I think I agree with you-there has to be a local organisation that will make that assessment, provide the engagement, and you can work through them. However, the fact that there seems to be such a lack of awareness would seem to indicate that the quality of that intermediate engagement is not there, either through town centre management teams or LEPs or whatever. Is that a fair comment?
Jane Rexworthy: I would be interested in where you are getting that information from. I suppose the question is where you are-
Chair: I am making the observation that, if so few small businessmen know of what you are offering and you are saying that it is a duty of town centre managers and LEPs to raise their awareness of the potential of retail and bring these people in so that you can engage with them, there must be deficiencies.
Martin-Christian Kent: There are much more opportunities.
Jane Rexworthy: Yes, there are, and I think some of that has come about from a change of sector skills body; with the demise of Skillsmart Retail last year, we work and continue to work closely with the trade associations, but there have been different brands that those businesses have had to try to understand in that mix of change.
Martin-Christian Kent: Currently, we are working with the LEPs to establish, one, if it is on their agenda, how we can work together, and two, if it is not on their agenda, how we can get it on their agenda so they realise the importance of the sector. So, again, it is working with all of those changes as well. I think there are opportunities, clearly.
Q318 Mr Walker: On the LEP front, you mentioned that there were 11 that have either retail or the broader service and tourist economy as part of their aim. I represent Worcester. Worcestershire does have the tourist element on but, so far as I understand it, has not to date had much involvement from the retail side.
Jane Rexworthy: That is right.
Mr Walker: That is something I am encouraging them to step up. Given the huge amount of employment that the retail sector represents, it seems a surprising lacuna in many of the LEPs. Obviously, you have done quite a lot of work with Gloucestershire’s LEP. Are there any others that stand out as being particularly focused on the retail sector, and doing as much as you would like to see?
Jane Rexworthy: Yes, there certainly are. I heard Sheffield being mentioned earlier and, in fact, in Sheffield, we have one of our largest skill shops based just outside of Meadowhall. They provide a service through the whole of South Yorkshire, but are very, very much invested in Sheffield; in fact, they have retail as a priority and it is vice-chaired by our skill shop director. Therefore, we have made sure that, regarding the information, research, skills, needs and requirements, we are able to inform the LEP on those requirements. That has been a really useful way of working and making sure that retail is seen to be really important in the economy within that LEP region.
Q319 Chair: Can I just go on to some recommendations from Portas and Grimsey in the context of your particular offer? First of all, amazingly, Portas did not mention training at all. What is your view of that?
Jane Rexworthy: Well, I suppose surprised, because when I sit on the High Street Forum, and certainly in the task and finish group I sit on, skills makes up a third of what we have been reviewing and looking at in terms of the Portas review and what is happening in the Portas towns-so, surprised. Sometimes skills gets missed but the terms are used around making sure businesses are "equipped" to grow their business, and therefore it might not be that they use the term "skilled". However, it is an interesting point and disappointing that it is not mentioned, certainly when a lot of work that Mary Portas does is around upskilling the people who work in the businesses that you have seen on her TV programmes, etc. So, for us, skills has to play a very big part in how we improve our businesses in our local areas.
Q320 Chair: Moving on to Grimsey, there is not a lot, but it is implicit in at least some of the recommendations. Amongst them is: "Establish a Town Centre Commission for each town with a defined skill base and structure to build a 20-year vision for each town supported by a broad business plan in five-year chunks." It goes on to say: "Prepare for a ‘wired town’ vision or ‘networked high streets’ that puts libraries and other public spaces at the centre of each community based on the technology that exists today and will develop in the future," and then, "Establish a ‘Digital Maturity Demographic Profile’ for each town to prepare for ‘networked high streets’ and tailor connection and communication strategies accordingly."
Now, for somebody of my generation and limited comprehension of this area, that all strikes me as being a load of guff, but it does seem to be that, in amongst the guff, there is an implicit recognition that raising the skills level, particularly modern communication and technologies and so on, is essential for the survival of the high street. I would welcome your comments on where you think you can engage with that, if indeed you feel it is a valid set of recommendations. Do not feel put off by my scathing observations.
Martin-Christian Kent: If that means-presumably it does-that we need to, as I say, equip our current and future staff with the technology skills to compete, I think that is admirable and it is exactly where we need to be. I think the fact we are attracting so many young people means a lot of those people are coming with the ability to understand new technology. The critical thing is around the managers being able to harness that knowledge, but also the broader co-ordination that both reviews talk about in terms of how a co-ordinated effort can do that. Because what it also reinforces is the huge investment that needs to be taken with technology as a whole, and that is clearly beyond the scope of one individual business. So, it raises quite a lot of issues: firstly, businesses clearly need to be more technologically aware and embrace the internet, and how they can embed that, and clearly the focus on multi-channel retail is important in that. Then there is a broader thing around investment in new technology and how a local community and individual businesses can benefit and harness that as well.
Q321 Chair: I can certainly see your point. It says, "Establish a Town Centre Commission"-the town centre management partnership or whatever we want to call it. There is a case for assessing, if you like, the existing skills base and what is needed to develop that. Do you think that is a way forward that you could adequately engage with?
Jane Rexworthy: I think we have to, and certainly speaking to a lot of our national businesses, no longer is it just the town space. It is not just the local market; it is about global opportunities as well. Whilst it is about providing a place for the community to come together and have their whole experience-including the whole of the visitor economy, so retail, the café, the leisure-our customers are much more discerning about why they would want to walk into our high streets and towns. It is recognising that we can all go and buy online and, in fact, in this country, the customer base skill in purchasing online is top of the western world, and yet our businesses, at the moment, are not top of the western world. Therefore, that is our real opportunity, and to do that, then there is a skill base. As Martin talks about, it is about our leaders and managers who have not necessarily grown up with that embracing what is happening within education and young people coming in with some of that skill set. However, we need to make sure that we do invest properly in that technology, because it gives us a huge advantage for our high streets for the future, but also globally as UK plc.
Martin-Christian Kent: What we do have in place currently is a model called the "location model", which we use in local areas to look at: what are the consumers looking for; what are the current skill requirements; what is the current skills base of the existing staff; and what do we need to do in terms of the intervention to get them up to a point where it can meet customer needs? There is a base model that can be adapted and embraced to deal with that.
Q322 Chair: I have a sort of vision of a town centre high street with a network of cafés, where people can sit and access Wi-Fi to browse online or compare prices with the offer of the shops in the immediate neighbourhood. Is that a realistic vision?
Jane Rexworthy: There is an element of that, but I think it goes further than that. One of our national businesses gave me a really interesting story. They have recently opened a department store in a town. They were expecting to see a drop in online sales when that store opened, and they were interested in what that reaction would be. Actually, they saw an increase in sales. The reason, they felt, is that there is brand awareness. There is a real importance for our stores in our town centres to demonstrate the brand and to provide technology to enable the customer to have the right experience. One of their descriptions was around the click and collect, and the skill set of the people who are in that department providing and passing over a parcel. How do they get the adjacency-the add-on sales? How do they encourage the customer to come back into that store environment? It is more about how stores reinvent themselves to enable the customer to have the absolute best experience and go out spending a little bit more as well. I think it is a mixture. We will see the cafés with that, but it is broader than that.
Chair: Thank you. As I say, we may well think of questions that we should have asked but did not. We would still like you to respond and we will write to you to do so. Similarly, if you feel that, on reflection, you would either like to add to or modify any of the responses you gave today, feel free to write to us. Thank you very much. That was very helpful indeed.
Examination of Witnesses
Witnesses: Mike Davidson, Head of Retail Operations, Land Securities, and Peter White, Executive Director, Marketing and Customer Services, Gloucestershire College, gave evidence.
Q323 Chair: Good morning and thank you for agreeing to answer our questions today. We are slightly early, but we might as well kick off. Can you just introduce yourself for voice transcription purposes? We will start with you, Mike.
Mike Davidson: I am Mike Davidson. I am head of retail operations at Land Securities.
Peter White: I am Peter White. I am Vice-Principal at a local FE College-Gloucestershire College.
Chair: I understand you have had an association with Cheltenham Town Football Club.
Peter White: We have had the association for quite some time. We are actually the back-of-shirt sponsor.
Q324 Chair: Yes, I am aware of that. As a season ticket holder with the same club, can I thank and welcome you? My opening question is very similar to what I have asked the previous panels: given the wide variety of businesses now involved in retailing-from the small independent retailer to major chains, retail parks, shopping centres-all in competition with each other, how do you see the challenges facing them? They are fighting each other and they are fighting, shall we say, the economic situation and the changes in shopping habits in the digital age. How do you see this?
Mike Davidson: I do not know if I would necessarily go as far as to say they are fighting each other. There is a structural change taking place in the retail environment, and it is consumer led. Retailers will respond to what consumers want to do, and where consumers want to go. That is what will influence the restructure of whether development is in town, out of town, edge of town, the size of units that retailers will require, and the type of retailing that they can do from them.
Chair: Regarding online trading, what are the implications? How do you think they can adapt and survive?
Mike Davidson: It has been with us for quite a while now, and it is just another aspect of the changing retail environment. Many retailers, as I know you have heard explained by previous witnesses who have come before you, are, by utilising the internet and omni- channel, improving their offer to their customers and the ways that they can engage with their customers. So, clearly, it is a change that has already happened, but it does have implications for the high street, as we know. Probably one of the biggest implications is that retailers are now looking at what physical presence they need, and clearly they do not need as much physical presence in a lot of towns as they may have had historically. They may rationalise their portfolios. That is probably the biggest implication that has come from the online retailing element, as I would see it.
Chair: Do you have anything you wish to add, Peter? You do not have to.
Peter White: I was just going to comment on the offline trading as opposed to the online trading. I am not qualified to comment on the retail market anymore-I might have been at one time-but it is mostly the skills for me, and the skills that are required offline and the vacancies that exist. One of the things I wanted to talk about today, or to bring to the Committee’s attention, was the lack of really good careers information, advice and guidance in the country, and in schools particularly. I think Ofsted just recently released a report.
Chair: I was about to say that that is reflected by the Ofsted report this week.
Peter White: That was some good evidence to say that, I think, one in five schools were found to be giving sufficient advice only amongst year 9s, 10s and 11s to assist sufficient career choice. We find that all the time: careers are choosing individuals, rather than individuals choosing careers. Retail comes off very badly in this because schools generally, and maybe careers professionals generally, are pushing young people towards careers that are more attractive in their view or would benefit the school maybe a little bit more, as opposed to looking at the local market and trading environments and saying, "What is there available?" and pointing out some pretty exciting opportunities in the retail arena. That is something that needs to be addressed.
Q325 Caroline Dinenage: Do you think then, Peter, that the retailers have more of a job to do engaging with educators? For example, one of my children thinks the coolest thing in the world at the moment would be to work in the Apple Store, because for him it is actually a very exciting retail environment. Equally, some people might think that about one of these very high-end high street fashion stores, where presumably one of the qualifying characteristics of working there seems to be looking very good in a bikini.
Peter White: That rules me out.
Caroline Dinenage: And me, I’m afraid-back to the two children. Do you think there is more that retailers can do to communicate with schools and talk about the options that are available?
Peter White: Yes, I certainly do. There is a distance between large retailers particularly, and colleges. I know they do work with other providers of training and education, and colleges need to try harder as well. Thankfully and luckily, we have got a LEP here that has got a retail sector. We work closely with them and the university, too. There seems to be this distance, and I do not know why, but most certainly it would be really good to have some input into careers advice and information. What we are trying to do in all of our programmes now is build real work experience. I think this was touched on earlier: it is not just about the specific skills to do a job, but also the ethos about work-being able to get there, knowing how to speak to people, English and maths-which is very much on our agenda now as well. It is about knowing how to do these things and how to turn up.
Just giving the opportunities for young people as a part of their learning programme to be studying in college but also working in a real live environment can open their eyes to opportunities and also give them very good transferable skills they can take on to wherever they go. But I think, largely, the people that are giving the work opportunities are going to be the net beneficiaries of those young people. For retailers, there is a good opportunity in lots of different departments in large retail to do this. They can look at opportunities in various things, like buying or logistics or marketing and so on. I think we have a big job to do. Providing work placements-real life work placements-with big retailers, if big retailers could be encouraged to do that and to talk to colleges, would be very good thing.
Mike Davidson: Our industry has a part to play in that as well. As a landlord in a number of city centre schemes, we work with organisations like the National Skills Academy to find space-an opportunity-to provide places where that sort of educational activity can take place. I think we also need to try to talk up retail as a profession, and one of the saddest things in all of this is that retail is still perceived by a significant number of people as a career of maybe not last resort, but certainly not first choice. That is sad, because I agree with you: I think there are some amazing skills you pick up in retail that can stand you in good stead in lots of other career choices later in life. If one of the things that comes out of this is that retail is put on the map as a career choice with future potential, that would be hugely advantageous in the process.
Q326 Caroline Dinenage: You will be delighted to know that one of my biggest local shopping centres is Gunwharf Quays in Portsmouth.
Mike Davidson: I thought it might be.
Q327 Caroline Dinenage: So I am very familiar with that particular retail environment, and have seen it evolve since the early days. One thing I do notice about Gunwharf-and it has very many great aspects to it-is that there are no small independent retailers there at all; they are all big, massive chains.
Mike Davidson: There is a small independent retailer there-the newsagent is, in fact, a local-but I take your point; that is true. I think the nature of the environment there-the retail format there-is factory outlet and is off-price. By definition, it is multiple retailers that are using the opportunity of an outlet centre to sell the stock that they possibly have not been able to sell on the high street or whatever, although some obviously do manufacture for outlet as well. It is a different type of retail environment that does not sit particularly well with people from the independent sector, if you like.
Q328 Caroline Dinenage: There are restaurants there, aren’t there?
Mike Davidson: There are restaurants there.
Caroline Dinenage: And they tend to be all the big chains as well.
Mike Davidson: That is true. In the past, we have had local restaurants. In fact, back in the early days, I think we had two. Unfortunately, they did not manage to survive.
Q329 Caroline Dinenage: Is it because the overheads are very expensive? The bigger companies have a way of absorbing that sort of thing, whereas the smaller ones find it harder.
Mike Davidson: I think it is a tremendously successful centre, and therefore the market dictates the rents that can be gained from there, and it is a factor of its success that maybe it is only the major multiples that are able to invest and sustain their business in that environment.
Q330 Caroline Dinenage: There is not really a great incentive for them as landlords to be propping up businesses for which the overheads might be too high.
Mike Davidson: The overheads are not all generated by the landlord, obviously. You have had numerous discussions about the business rates at previous meetings, and that is a significant factor as well. But, equally, you are quite right: we are a business too. We have a responsibility to our shareholders to maximise the return for their investment.
Q331 Caroline Dinenage: With that in mind, do you think it is inevitable that what we might call mega-malls-these big shopping centres-are going to squeeze small independents out of business?
Mike Davidson: No, I do not think they are squeezing out, because independents absolutely have their place. I will use Portsmouth as an example. Southsea has a significant number of small independents and, when clustered together, they create an offer that is quite compelling in its own right. There is most certainly a place for independents, but it has got to be a place where they can afford to trade profitably. In many cases, that is not always going to be in the mega malls, as you describe it.
Q332 Caroline Dinenage: Do you think that there is a role for the Government to play in balancing the sector and supporting small businesses?
Mike Davidson: Obviously I would like to see the Government support small businesses, and rates is possibly one of the best ways that they could do that. What else did you have in mind?
Q333 Caroline Dinenage: I am just wondering whether there are any incentives or pressures that the Government can put on big developers such as you to contribute more in a way that will benefit small businesses.
Mike Davidson: We do always try to have an element of independents in any development that we do. For example, have not quite finished but we are working on the last parts of the Trinity development in Leeds. There are a number of local, small independents in there. We like that; it does add a little bit of variety. But, inevitably, if there were some sort of regulation that said a certain percentage had to be, which I know has been suggested in some of the Portas and Grimsey-type reports, that would be counterproductive, because developing a major shopping centre is an exercise that takes place over a considerable period of time and has a huge amount of investment up front before you ever start seeing any rent coming in for a return on that. It is difficult to get the relevant return in the current environment anyway, so to limit the developers’ ability to get the rents that make the whole thing stack is actually pretty counterproductive, because that could result in developments that might have happened subsequently not taking place.
Q334 Mr Walker: Can I just follow up on that point? We saw yesterday a very impressive development right here in Gloucester Quays and some of the work they are doing there. They were talking about the fact that, through these difficult trading conditions, they have had to use reverse premiums in some cases to bring in people. Is that something that you see widely as Land Securities, with your portfolio as well?
Mike Davidson: Regarding reverse premiums, capital incentives are something that happens within the industry generally, and it is a way of getting the retailers or catering outlets into a centre to assist them to be able to afford to do it, because there is a significant investment up front. That could be some form of cash incentive or it could be a contribution towards their shop fitting costs. There is a variety of ways it can take place. However, as ever, it is a commercial negotiation between what the retailer can afford in that location and what still works for the landlord in terms of giving them the long-term income to make the investment stack. It is a commercial decision that would be taken on an individual basis. It is not something for which you could say, in every case, you would do or you would not do.
Q335 Mr Walker: Is part of the nature of those commercial decisions-the structure within which you work-driven by the business rates system?
Mike Davidson: It probably is because, at the end of the day, retailers look at total occupancy costs, and their costs in a shopping centre will be rent, service charge and business rates. In many cases, the business rates will be a very large percentage of that cost. They then look at the sales that they think they can generate from that unit, and they have their margins and their costs, and so what profit they can make. The rent they can pay is dependent on the profit they can make from retailing in that location. Clearly, if you have a very strong trading location, the ability to pay more rent is a possibility and, for a very weak trading location, the ability to get a better rent is harder.
Q336 Ann McKechin: Could we turn to the Portas and the Grimsey reviews, which we spoke about earlier this morning? Could I ask both of you what progress you think has been made in regard to the Portas review recommendations? We have heard a number of criticisms this morning. Would you agree with those or do you have a different opinion?
Mike Davidson: The Portas review has done a very good thing in so much as it is putting this issue on the agenda, which is tremendous. There are some very good suggestions in the review, but equally there are some things that we would not necessarily agree with or that potentially might be missing. The fact that it is raising it up the agenda and maybe actions will happen, or actions are happening as a result of that-anything that helps is an improvement-is good. I think it is much the same for the Grimsey review. There are aspects of that that we would agree with. Again, an example that we would not agree with is something like the quota system that we were just talking about, which could stifle development. It is probably better for a retailer to answer, but, on the levy that he was proposing, I would be surprised if many retailers would feel that that was particularly fair, particularly as it is based on sales rather than profit.
Q337 Ann McKechin: But his point is that the state of many high streets is becoming much more difficult and there is a lack of capital investment. If you want to start to change the mix-less retail space-you are actually going to require quite a lot of capital investment if you are going to keep these areas vibrant. I suppose the question back to you in the industry is: "Who is going to pay for it?"
Mike Davidson: You are absolutely right: he is correct in that premise, and "Who is going to pay for it?" is always going to be the big challenge with these things. We are very supportive of BIDs, and are working with them in a number of locations. We think that that is a very good way forward, albeit not on the same scale as is being proposed. Ultimately, a town centre will only survive if the people that are trading there are trading profitably. What would probably be required is a consolidation back to a core retail offer and then some diversity of offer: some services and things that maybe are not represented there now changed to other uses-residential. That is more beneficial than trying to create an environment where retailers are encouraged to try to come in but actually they cannot trade profitably from that location, whether they are a multiple retailer or an independent.
Q338 Ann McKechin: One of the clear recommendations of both these reports is the issue about management, and obviously your company runs a number of shopping centres and you have to control the whole domain. But if you take the average high street around here in Gloucester, there will be multiple landlords. I think it was presented in the other evidence too that actually if you have fewer landlords in total, it is much easier to try to negotiate new investment. Where you have a very fragmented ownership pattern, that becomes much more problematic. Would you concur with that?
Mike Davidson: Yes. It is an obvious fact that it is easier to deal with fewer entities. We have the advantage that when we have a major shopping centre, we are controlling what happens within it, to an extent. Equally, where we have a shopping centre, no matter how successful it is, it is going to be more successful if it is trading in a town that, overall, is vibrant.
Q339 Ann McKechin: Do you think that some landlords are not yet engaging and are allowing a shop to stay empty rather than lower their rents-just sort of sitting on it?
Mike Davidson: I am sure there are some, and obviously I cannot speak for those landlords. One of the points there is that having shop units vacant, and the suggestion that landlords as a general principle are happy to have them vacant, is a fallacy because a vacant unit is costing you money and loss of opportunity obviously, but equally it is costing you the business rates that otherwise a tenant would be paying. I would suggest that most landlords would desire to have their units let if they possibly could.
Peter White: Yes, I have a couple of perspectives. Grimsey talks about as well the importance of education as a part of redevelopment of city centres, town centres, and what are the component parts anyway of what a future high street should look like. In Gloucester, at the Quays-I think where you were yesterday; you might have seen the campus-we have got over 6,000 people at the campus in any given year who, generally speaking, walk through the town. That has been a major boost, and I would certainly support that. I think that has happened in Middlesbrough and maybe other places around the country when we have looked at regeneration.
When regeneration happens, then the partners that form the core are incredibly important and, yes, the various economies are as well-the evening economies, the restaurants and the cinemas. But certainly education has got a major part to play in all of that. So that is certainly one thing I would say.
I will take a slightly different angle, because I do not think I can add anything more to what has been said today about the Portas and Grimsey reviews: one thing Mary Portas has done, which television does for education generally speaking, is raise the awareness. I have got to say that that has been quite beneficial, because it starts to put it in the mainstream.
Ann McKechin: People talk about it endlessly.
Peter White: People start to talk about it. Maybe it has been referred to as a bit of a beauty show and that it is, sort of, a makeover show. I do not mind that. That is fine for me. It is interesting as well, at a slight tangent, that "Mr Selfridge" created quite a lot of interest in window dressing and retail too. When you have things like this that are popular on the television, the knock-on effect is actually back through to education, or it can be if you want to capitalise on that. Those things never do any harm in my opinion, like "The Great British Bake Off"-one of my favourites.
Ann McKechin: There are a lot of cake tin shops doing very well.
Peter White: Absolutely. So, for me, Mary Portas, yes, tremendous, in that it has raised it. Once it goes back to-and I bring it back to this all the time-good careers guidance, I do not really mind where the inspiration comes from. If it gets people thinking and talking about it and exploring opportunities, then that is a very good thing.
Q340 Paul Blomfield: Just following on from that point and returning to what I raised earlier, although not with the previous panel, while the clamour of interest in retail is positive, are we suffering from initiative-itis? There are all the different things that are happening on the high street-Portas pilots, town team pilots and so on. Is there sufficient focus, or are we creating a confusing environment?
Peter White: On the high street, a confusing environment? I do not necessarily think so. On the focus on the high street, I would go back to what I said before: any discussions around the high street and what it should be are a good thing. I am on the board of Marketing Gloucester as well, and one of the things we discuss quite regularly is how you get people into the town centres. We have various initiatives. Parking is a big issue for traders in the city and how much people have to pay for parking, which affects footfall and whether the money that is taken for parking should be directly reinvested back into the city centre. Those sorts of things need to be carefully looked at. I know that if a friend and colleague of mine from the board were here today, he would simply bang on about that, because it is seen as, kind of, unfair. I do not think there is confusion. The high street has almost turned into a food service high street. Again, in terms of training, a lot of our students see opportunities-whether they do catering, whether they do business studies or something else-to join the retail sector but are not necessarily and directly doing a retail course. We do tend to use the high street as evidence that actually there is quite a wide variety of things that can be done. I do not see it as confusing, necessarily.
Mike Davidson: I suppose I do see it as slightly confusing, but maybe in a slightly different context. Our local centre managers and centre directors are absolutely wanting to engage with the local communities, the business community and the local authority and do as much as they can to be a force for good in the communities in which we are investing. However, quite often they have a limited amount of time and resource to be able to give to those things, because ultimately they are still running a business, and quite often, therefore, it is difficult to know where to invest that time. Is it the LEP? Is it the BID? Is it the local strategy partnership, of which many towns I have worked in have a plethora of groups that are meeting to talk about? Is it the retail community? Is it the leisure and tourism community? There are dozens of these, and cutting through all of that to get to the point where you can spend your time most productively doing things that are going to develop some sort of strategic change, rather than sitting in numerous talking shops, is what we would like to be able to do.
Sometimes it is very difficult to know which of those groups is going to be the most effective. If there was some way that a communication could be made that outlines exactly what each group does-what its responsibilities are, what it is focused on-then businesses in the community would be able to look at that and say, "Actually, that is the area where I want to be, because that can make the most difference and I can give the most help in that particular situation." I do think that is a challenge.
I am sure Caroline knows from Portsmouth that there have been numerous initiatives, and when I was based in Portsmouth, one of the things I was involved in was called City Growth, a Government initiative with 10 pilot cities. I and a number of individuals gave up significant time to try to look at a strategy for the city there and, indeed, the Government provided some money to do research. But the pilots happened, there were a few more and then the money dried up. The committee moved on and somebody else invented a new strategic partnership. It is a shame that so much time and effort can ultimately end in things that do not get progressed. That is a disincentive for people getting involved in the first place, if they think that potentially can happen.
Q341 Paul Blomfield: Certainly that strikes a chord with the conversations I have had with retailers in Sheffield. Where do you devote the time that you have away from the business most effectively? Coming back to, Peter, your answer: do you think a number of these different initiatives are pointing us in different directions? Isn’t that causing confusion?
Peter White: It probably is. I think Mike makes a very good point: it is whom you talk to. In Gloucestershire, the LEP having a retail sector group is helpful, because people do come together to talk. From my perspective, that group is a very good group, because you have got all these various interests brought together around one table.
Q342 Paul Blomfield: Can I just ask you a very specific question about the work that you have been doing on pop-up shops? Could you tell us a little bit more about that?
Peter White: It has been fascinating. We have been playing around with this idea for quite some time. Also, we regard our business as, first and foremost, education and making people successful in achieving whatever goals they have in educational terms. But also we realise that education-post-19 education-is becoming increasingly privatised, and it is very competitive, and the other bit of it is this whole careers information, advice and guidance, because it is lacking.
We were considering for quite some time whether we should move out of our campuses, where we have very low footfall coming in to ask questions. Most of our traffic is online, in terms of asking questions, or on the telephones. I know my world in the college, student services department, is fielding those questions. We thought we would just experiment with pop-up shops. We are part of the Gazelle Group of Colleges, which is very entrepreneurial. I do not know whether you know about this, but they are looking, and we are looking, to develop much more entrepreneurial models of teaching. This goes back, again, to this spending time in business in the workplace alongside a study programme.
Emma Jones, one of the founding members of StartUp Britain and of the Gazelle Group as well has got PopUp Britain. We were looking at that and we thought, "This is quite interesting." What pop-ups do, if they are done well, is give you the opportunity to try something out. Pop-ups by their very nature and implication are not as quick as here today, gone tomorrow; you can try things. We thought, "Well, we will try this."
As we came into the enrolment period this year-into the recruitment period at the beginning of the summer-we thought we would give it a try. We talked about it for quite some time; we thought we would give it a go. We came out to Gloucester and Cheltenham to ask whether we could look at having reduced rates in trying this out. Gloucester absolutely bit our hand off; they were fantastic. They took us into Bell Walk, which you probably know; you walked through it yesterday. The traffic flow and the demographics were incredibly interesting and absolutely what we were looking for. They gave us the right deal on a shop that was very low-rent for an eight-week period for us to try, and we moved into it.
Caroline mentioned the Apple Store. I have got a very young team who were working with me on this and they wanted to mimic that. They did not want something that would just look awful, because the danger is that is can look awful and that is not good. Of course, we have got a brand and a reputation to keep up in the local area as well. So, we moved in. I have got some photographs. I got some for you. I was told that it would be okay to pass them around, as you were not able to see it. Is that okay if I pass them around, just to show you some of the before and after and some of the things that happened?
The pop-up was very much linked to social media as well. We have got 3,000 Facebook and Twitter followers, and the local MP, Richard Graham, got involved and the local newspapers. They were tweeting about what we were doing each day. We opened up this shop. It was very clean lines; the colour schemes were bright and vibrant. The staffing costs were pretty much a sunk cost because my staff were doing that somewhere else anyway, so there was not much of a cost involved in doing it, and we moved in. We prepared the place within a week and we were moved in and operating within two. We had a bank of Apple Macs in there. It was a very attractive environment, and it attracted people in. We got some fantastic results. We also advertised demonstrations going on. So we had hairdressing teams, beauty therapy-all sorts of things that were going on outside. The local shopping centre management were fantastic. They really helped us enormously. I have got a few numbers, as you are looking at the slides. The footfall over the eight-week period was over 1,600 people. We actually took 169 applications for courses, so pretty much one in five people who came in applied for something; 83 of those applications were for full-time courses at the college, and on our conversion ratio-we convert at around 65%-you are talking about £189,000, so £23,000 a week.
Q343 Paul Blomfield: Is that net additional recruitment or is this displacement?
Peter White: Well, I was just about to say: it is very hard to say. All I can say is-I cannot answer that question absolutely-that when we asked everybody we could who came into the shop why they came in, they said that they came in just because they saw it and they dropped in. Those people then who applied could have applied somewhere else. That is all I can say. We have got a lot of competition for apprentice places around here and full-time courses and sixth-forms. All I can say is that, for one thing, we gave out a lot of careers information. Even if someone went somewhere else and benefited as a result of the guidance we gave them, that has to be a good thing. I am happy with that, first and foremost. If they came to us, that is even better. I would say that there has to be some degree of "People would have come anyway", and I cannot really say what that is. All I can say is that it was busy all the time, and it is something now we are looking at as being a continuing feature of our recruitment activity. We are going to do this more.
Chair: You are looking very agitated, Caroline.
Q344 Caroline Dinenage: I just wanted to ask a couple of questions before I forget them. Who staffed it? Did you have any staff that were people who would otherwise been doing the back-room role?
Peter White: Absolutely. I have got two schools liaison people who work for me who are IAG trained-so they are careers trained. At that time of year, it goes a bit quieter for them, and they both absolutely willingly really enjoyed being the shop managers. They shared the responsibility. It was a really good exercise for us. We had to set up start-up and close-down procedures and everything else. They were the people who were on the spot, pretty much all the time looking after things. Also our student services teams came across as well. In Gloucester, we were only a short walk away from the campus. Again, that just demonstrates that we probably have 10 people a week-probably not even that: three or four people a week-walking in off the street, and we are talking here about probably 250. It was pretty damn good and successful. It was a sunk cost, so there was no extra cost on staffing in that sense.
Q345 Caroline Dinenage: What was the cost of the shop fitting?
Peter White: The shop itself? The actual painting and decorating was done by our estates team, so there would have been a cost, but it would have been negligible. The equipment was-because we were pretty much going into a holiday period-seconded from the college, so the Apple Macs did not cost us anything and then they were recycled. The actual rent of the property was £1,500 for the 8-week period. That is probably half a page’s advertising for one night in the papers, to put it in some kind of context.
Q346 Paul Blomfield: It looks very impressive. So, you will be doing it not only again there but looking at doing it elsewhere?
Peter White: We are looking at doing it in Cheltenham and in the Forest of Dean.
Q347 Mr Walker: Sticking on the skills front, what you were saying about careers services chimes with me certainly. I think most people on the Committee recognise the challenges in that respect. As technology moves on and as the retail sector changes in its nature, how much is the skills base changing? Is it moving to be less of a generic customer service skills base and more specific? You mentioned, obviously, that people take a range of courses that might lead them into retail. Certainly, looking at my local college, they have catering, hair and beauty-they have lots of aspects. They do not have a retail course per se. Is that something you see potentially changing over the years to come?
Peter White: Yes. We have 1,000 apprentices at the college. We have only got 10 retail apprenticeships. That is more to do with careers advice and guidance than it is to do with anything else, quite honestly. We have tried to get retail courses going, but again I come back to the point that nobody seems to apply for retail courses. It has been very difficult. We have talked about, with David Owen, a retail academy to try to bring these skills together. The other thing we are doing it, interestingly, is we are looking at retail aspects of other courses. So, for example, with bakery or catering, we are looking at setting up shops and running shops and doing it that way, so you get a sense of that customer interaction.
We are starting a fashion academy in Cheltenham this year as well, which is going to be launched at the literature festival. Part of that will involve taking a shop. Building in retail into other vocational areas is probably one of the ways of doing it. As maybe Caroline said, working with big retailers, getting them involved and trying to work some sort of scheme, whether it is the John Lewis apprenticeship or the John Lewis retail academy to try to lever their brand awareness, is the way forward. However, colleges on their own find it very difficult to recruit.
Q348 Mr Walker: Obviously you have heard the evidence from the previous panel-the People 1st group. In terms of bringing in all the different organisations that are involved in training-the Government, the unions, organisations like theirs and colleges-would you see them as competition or are they someone who you can work collaboratively with? How does it all fit together?
Peter White: It is a bit messy. I would always say that, in true entrepreneurial terms, if you get your product right and you get the good advice, you will get the benefit of the income. Taking that kind of model, I would say that, first of all-this goes back to a point I made earlier on-if we give people really good advice about something and they decide to go somewhere else to do it, and they pursue a career in retail because we gave them the opportunity but they take an apprenticeship with another training provider, it is a result for us. It is a successful outcome. If they come to us, that is better, but that is not the end of it all.
We do tend to work quite collaboratively together. In the county, we have got a very good apprenticeship group that meets, and it comprises business, industry, the local media. We get together very regularly to run campaigns and the 100 in 100 Apprenticeships campaign started with us here and it has gone national. That was just a result of people coming around who are competitive in one sense, but who all had the same interest. Too many times, separate interest groups splinter because they are not co-ordinated in that way. We do not have any problems in talking to people who are competitors, because we all have a common aim.
Q349 Mr Walker: Just a broader question for both of you: we have heard a lot about regulations and costs affecting the retail sector, and both Portas and Grimsey have views on what can be done about that. Obviously, we have discussed business rates quite a lot, but in terms of the other costs affecting the sector, is there anything the Government could be doing?
Mike Davidson: In fairness, I think business rates is probably the biggest single one. If we could rebalance that rates burden, that would be a heck of an achievement.
Peter White: I would say exactly the same.
Chair: If there are no further questions, we will finish on that note. Can I thank you very much for agreeing to talk to us today? I repeat what I said to the other panels: if you feel that you would like to add to or modify anything you have told us today, please feel free to contact us. Equally, of course, we might look at your evidence and decide that there are further questions that we would like to ask you and we will write to you. We would be grateful for a reply. Thank you very much.