Tough time to be a small retailer, says entrepreneur
GARY Grant, founder and executive chairman of the successful Entertainer group of toy stores, has said he wouldn’t start in retail today as a small independent.
The retail exec launched with just one toy shop in 1981 and has built the group into the largest independent retailer in the UK. Despite having their most successful year to date in 2018, he said the retail landscape had changed and the next quarter was going to be extremely tough due to uncertainty over Brexit. ‘I think it could be as challenging as the last quarter of 2008, just after Lehman Brothers went down, when companies were going bust and people were fearful about their jobs.
‘I think the demise of Thomas Cook – a million people had their holiday plans disrupted – means that people are saying, “Whoa, hold on a minute, there’s something going on here”, and it’s just more uncertainty, more people are being cautious. My prediction is that we’re going to have a very, very tough October. September was tough; I think October is going to be tougher. And as it was in 2008, I think we’re going to have a very, very late Christmas.’
This week was quarter day, when retailers pay their rent, and Mr Grant is concerned we will not see the effects of the current climate until January. ‘Who knows how many retailers haven’t paid their rent on time? Retail businesses generally don’t close down in the last quarter because you’re about to go into your busiest period and therefore if you’re going to close, if banks are foreclosing on businesses they generally foreclose on Boxing Day. So it’s a worrying time. The Entertainer isn’t immune from that, but we’re certainly doing better than the high street as a whole.’
Mr Grant puts that success down to several things. They have diversified, now with 175 Entertainer stores across the UK, plus they bought the Early Learning Centre brand from Mothercare, and they have outlets selling ELC toys across the world. In addition, there are 30 franchisees in places as diverse as Malta, Azerbaijan, Pakistan and Malaysia. The Entertainer also has its own brand of toys, which means they can sell at very competitive prices while also focusing on customer service, and being independent they are able to be agile in the marketplace. However, Mr Grant said: ‘The Entertainer needs good retailers around it to bring people out to go shopping and at the moment in the UK footfall is down.’
Mr Grant was in Jersey to talk to local retailers at an event organised by Jersey Business. He wanted to challenge some of the retailers here. ‘I think the amount of product that is leaking into the Island through online retailers like Amazon will be a concern to them, but my experience of Jersey over 20 years is I don’t think retailers take into account the bigger market and the choices that Islanders have in where they buy their goods and services from. I think there’s a challenge with retailers that blame the transport on getting goods to the Island so they can charge UK prices.’
Mr Grant said that although carriage to Jersey was twice as much as the cost of carriage to their main warehouse in somewhere like Scotland, there was still room for prices here to be lower than those in the UK. The only exception to that is bulky, low-value items. ‘Whatever we charge in the UK, for every pound in the UK, we charge 90 pence in Jersey, so if we discount in the UK, the same discount applies to Jersey. Therefore there’s no reason for people to buy toys from Amazon.’
Mr Grant said that although being a group their buying power was stronger, they also had higher costs and called on retailers to recognise that people have a choice. He also challenged the government to deal with the de minimis import allowance, which means goods of £250 can come into the Island without GST, making local retailers less competitive.
He did have some sympathy for small retailers. Having started with just one shop in 1981, he said he wouldn’t do it again in today’s climate. ‘You can’t start small today – it would be so different. Today, a small independent starting up would struggle to get credit limits; they’d struggle to get credit insurance. They would struggle to get access to the stock when it’s short because it’s just easier to ship another container of stock than send out loose boxes. It will be a real challenge. So I don’t think I could start small again.’
Mr Grant said unrealistic rents were one of the issues. ‘Rents are just not sustainable. In the UK, retail rents in most cases have dropped in a lot of locations by a third to a half. And in some locations, rents are now zero. In most cases in the UK now landlords are taking a very realistic view because it is about sustainability.’
Mr Grant mentioned one shop in town which was empty and currently being advertised at £248,000 a year. ‘It’s an utter joke. In my view, it might be worth £100,000.’ He added that retailers needed to ensure rent, rates and service charges did not add up to more than 12% of turnover to be sustainable. ‘It’s impossible to take £3m in that size of shop, so if somebody was to sign that shop, within 24 months, they’ll probably be open and then closed again. So what’s the benefit?’
The Entertainer group is in a strong position, and Mr Grant remains optimistic. ‘We’re entrepreneurs. If we can do a good deal with a supplier, we can do a good deal for our customers. I’m still optimistic. It’s just going to be a choppy 12 months. Even if Brexit happens, it’s going to take a while to settle down.’