The official statistics reveal that the retail sector grew at a respectable 2.5 per cent in the 12 months to June. But examine the detail, and there are two pockets of poor performance.
The first is among businesses with up to nine staff, which saw a 0.9 per cent shrinkage in their sales. There will be a lot of newsagents and corner shops in this bracket, which have been losing out to the likes of Tesco Express and Sainsbury’s Local for some time now. Other victims will be expensive boutiques whose customers’ enthusiasm for spending has cooled during the recession.
But this faltering in performance is nothing compared to the devastation wrought on retailers with 70 to 99 staff. These have lost almost half of their sales, a fall of 45.7 per cent. Companies with 40 to 69 employees, on the other hand, have seen an equally noteworthy 51.3 per cent increase in turnover.
When trying to understand this striking mismatch in performance between the medium-sized and the slightly smaller, it’s worth considering the possibility that, in layman’s terms, the stats are a bit dodgy. But far be it from me to cast aspersions on the Office for National Statistics. Where the numbers are so far apart, it is hard to believe there isn’t some underlying trend, even if the statisticians have exaggerated it.
Clearly, the largest retailers (those with more than 100 staff) are weathering the economic storm, with growth of 3.3 per cent in this category. But this includes companies with thousands, or tens of thousands of staff, like the big supermarkets. They can afford to keep prices low, trimming margins and squeezing suppliers.
Those with less buying power and smaller room for manoeuvre are struggling. Businesses with 70 to 99 staff, perhaps gardening centres, shoe shops or furniture showrooms with a handful of outlets spread over a city or region, are really feeling the pinch. The only answer, when faced with such big falls in sales, is to close stores, lay people off and attempt to keep the nucleus of the business going until better times, no doubt steering round some alarming cash flow obstacles on the way.
But if you’re a smaller, growing operation with 10 to 69 staff, you’re likely to have seen double-digit growth over the past 12 months. You’re faced with a very different set of problems, although cash flow may be equally worrying as you face the need to stock up, take on new workers and manage seasonal peaks and troughs. As you expand, you’re vulnerable to changes in the economy, whose trajectory is still uncertain.
Any business owner would rather be in the latter category than the former, of course. But the latest ONS statistics are a reminder of the volatility of the retail sector. While it’s easily understood and seems straightforward, it’s fraught with dangers and notoriously difficult to get right. From the demise of Woolworths in 2008 to the lacklustre flotation of Ocado this week, the last two years have only underlined that point.