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Not for quotation or ISSN 0265 9778citation without the expresspermission of the author.

Andrew Smith is a Research Assistant in the Department of Marketing andLeigh Sparks is Professor of Retail Studies, Dean of the Faculty of Management, University ofStirling, Stirling, FK9 4LA.

Research Paper 9702

INDEPENDENT RETAILERS AND SMALL SHOPS:

ISSUES,PROBLEMS ANDSUGGESTIONS - EVIDENCE

FROM SCOTLAND

Andrew Smith & Leigh Sparks

Disclaimer

The opinions expressed in this research paper are the responsibility of the author alone.

Institute for Retail Studies. All rights reserved.

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Independent Retailers and Small Shops : Issues, Problems and Suggestions -Evidence

from Scotland1.

Abstract

Small shops are seemingly everywhere. Most people have some view over what constitutes a

small shop and how valuable it is to their locations or shopping patterns. Small shops however

are a complex phenomenon. Many physically small shops are run by large corporate retailers.

Many large franchise organisations operate through small shops. Small shops may therefore

be part of large businesses. Yet, the small shop in most people’s minds is that of the

independent retailer or local shopkeeper operating on his or her own. Independent retailers

have been under severe competition from multiple retailers. Their number has been apparently

in decline. Their functions and roles have had to adapt to the changing circumstances of a

modernised and highly efficient retail sector changing as consumer expectations and demands

have changed. Whilst there are many good examples of small, independent retailers, there are

also many others which do not operate effectively or efficiently. In some locations,

particularly rural ones, the shop may be the social and community heart of the village and

function as an essential service. In others, the function of the small shop may be to provide

diversity and vitality. This paper explores these issues in the context of the Scottish retail

sector and reports on survey work undertaken with land-use planners, retailers and consumers.

Introduction

Small shops are ubiquitous. Everyone has a view of small shops and most people use them at

one time or another. The general view of the small shop is that it is in decline, unable to

compete with multiple retailers and to keep up with changing consumer demands (Dawson

1983, Davies and Harris 1990). But this perception equates small shop with independent

business. In reality the two are different forms of classification; size is simply a measure of a

physical attribute such as floorspace, sales or employment whereas independence is one

organisational form through which retailing may be organised. One of the largest retailers in

the world in terms of shop numbers (and a multiple chain company quoted on the Stock

Exchange) - Seven-Eleven Japan - operates what are undeniably physically small shops


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(convenience stores). So, when we consider the decline of the small shop, we actually really

mean the independent shopkeeper. Many town centres in Scotland for example, have lots of

small shops, what they do not have is lots of independent small shopkeepers.

The initial problem is therefore a definitional one. The statistical definition in the 1986

Companies Act takes measures of sales, asset value and employment as factors, any two of

which together may signify smallness. This owes something to previous reports on small

business and retailing which have recognised the problems of definition (Bolton Committee

1971, Dawson and Kirby 1979). In retailing for example an outlet may employ very few

people but because of the line-of-business (e.g. jeweller) have high total sales. Another store

in a prosperous village may have very high sales and employ a lot of people (e.g. convenience

store open 24 hours a day) but is clearly to all expectations a small shop by its function.

Likewise, the Thorntons chocolate shop in The Gyle Shopping Centre is physically small, but

as the average shop in the 200+ store chain has an annual turnover in excess of £232,000, it is

above most people’s views of a small shop. It also does not offer a local, convenience

function which for many people is the ‘real’ meaning of small shop. Or how about a

Community Business Enterprise shop of 800 sq.ft. sales area taking close to £500,000 per

annum, employing 8 local people, obviously convenient, but with poor margins due to the

emphasis on (cheap) cigarettes and alcohol which drives up the income but does little else?

However this convenience viewpoint is probably overly focused on food retailing. A small

‘specialist’ retailer e.g. clothes designer (retailer) will equally be a small shop to many, but

without the local, convenience attribute.

In short, defining a small shop is fraught with problems and exceptions. Notwithstanding

these caveats and qualifications, a reasonable working definition can be attained via previous

research (particularly Dawson and Kirby 1979) and updating for inflation and changed

operating and working practices :

“A retail establishment of any form of organisation (but most commonly independently

owned) with an annual sales figure of less than approximately £175,000, and having fewer

than 10 FTE employees”.

This is adopted as a working definition and a strict adherence to the figures would not be

helpful. In particular, the turnover figure is open to question as some very small shops take


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more than this (see the regular Scottish Grocer top retailer profiles for example). Exclusion

on a strict financial basis seems curious as it may be a measure of success to which all such

shops should aspire or could be due simply to the product mix, local area and possible lack of

competition. The term small shop is used in the paper, but it is really the independent small

shop that is the main focus.

The Small Shop in Scotland

These definitional problems and issues are compounded by the total lack of quality and detail

in Government statistics in the area of retailing (and thus small shops). The abolition of the

Census of Distribution post-1971 and its replacement by the Retail Inquiry, which is not as

detailed nor spatially disaggregated, has destroyed the statistical base (Sparks 1996a).

Ironically those small shopkeepers who were vocal in condemning the bureaucratic demands

of the Census of Distribution are probably those who would have been better protected from

off-centre retailing, if we had national data that could have informed the debate and planning

inquiries.

The retail inquiry does not allow disaggregation at a Scottish level, except in alternate years

and at a high level of aggregation. It does not disaggregate directly into independent retailers

and certainly not into small shops! The best approximation for the purposes of this project is

to consider the change in single outlet retailers between 1976 and 1994 (Table I).

Table I : Single Outlet Retailers 1976-1994 (UK)

Percentage in Category

1976 1994

No. of Businesses 88.2 88.1

No. of Outlets 59.1 59.7

Turnover 34.0 22.6

Gross Margin 31.0 22.0

Capital Expenditure 18.9 5.8


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The table demonstrates that single outlet retailers are the dominant organisational and

operational format in retailing and that this is unchanged over the last twenty years. The

position of these shops has however worsened with their share of turnover, gross margin and

capital expenditure all declining considerably. Investment comparatively is a problem which in

turn is compounded by relative inefficiency allied to a reduction in market share. Whilst such

macro-figures hide some excellent performers, the overall view of independent retailing is one

that would be recognised generally. The Retail Inquiry, as noted above does have some

disaggregation to the Scottish level. Table II provides some of the details, extended back to

the previous Census of Distribution. As such, the period 1961-1976 is indicative only.


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Table II : Retail Outlets in Scotland 1961-1994

Total Food Drink/ Percentage

Confectionery Food/Drink/Tobacco

1961 50,800 24,000 8,500 64%

1971 42,400 18,400 5,500 56%

1976 31,217 10,536 5,044 50%

1980 28,437 10,927 4,554 54%

1986 29,539 8,730 5,484 48%

1990 31,182 9,784 6,069 51%

1992 30,128 8,368 5,309 45%

1994 21,664 8,174 38%

From 1961 to 1992 the table demonstrates what would be expected. A sharp fall in the

number of units has taken place and within this, the food market has become proportionately

less important in number of outlets terms. However, the lack of a fall overall between 1976

and 1992 is somewhat curious given trends to concentration and large-scale retailing. The real

curiosity is the latest retail inquiry (1994) which suggests that in two years Scotland has lost

28.1% of its retail outlets. This is simply not believable. It is possible that the figures in the

1980s and to 1992 were an over-estimate or that the 1994 figures are an underestimate, or a

combination of both occurred. Whilst some fall between 1992 and 1994 seems to have

occurred, the magnitude suggested by official data appears overstated, particularly as there

seems to have been little effect on the national proportion of outlets taken by single outlet

retailers (Table I). In short, there is a possible error margin of 50% on the number of retail

outlets in Scotland. Given that probably 60% of the outlets are independent retailers, the

upshot is that we have no real idea of how many or what type of small shops actually exist in

Scotland.


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Roles Of The Small Shop

It is possible to identify a considerable number of roles for the small shop (Dawson and Kirby

1979, Davies and Harris 1990, Howe 1992). It is not suggested that all such shops perform

all such roles all of the time; nor that they all perform these roles well. It is however

important to see the context for the small shop in functional terms.

The consumer supply of products and services has many facets. Consumers use small shops

in a variety of ways depending on their situation and need and the services offered by the

shops. For some (e.g. village shop) it may be the only shop that is available, is used for all

purchases and may be the social centre or focus. For others (e.g. convenience store) it may

be used as an ‘emergency’ source of supply.

The specialist nature of many small shops is what is held to bring diversity, ‘colour’ and choice

to retail locations. With a common complaint of similarity across high streets and shopping

centres, as multiple chains with standard formats predominate, the presence of various

‘different’ retailers offering non-standard merchandise brings relief to the otherwise

monotonous retail landscape.

This diversity is also linked to the belief that the independent sector is dynamic and brings

dynamism and local adaptation to the retail situation. It is probable that many of the ‘new’

ideas in retailing have to start in a small shop format due to constraints on finance etc. and

such formats form a test-bed for new retail and product ideas.

Clearly, retailers of all organisational forms have economic linkages with other businesses.

Typically this is thought of as the source of supply for the stock that a retailer sells. However

retailers also consume a range of other products and services. For example there are services

such as shop-fitting and security alarms that most retailers require. The equipment and

signage used in stores also has to be purchased or obtained. Additionally both public and

private services are used by retailers.

Finally, small shops have an important role in employment generation and maintenance.

Numerically dominant in the retail sector, the independent shop clearly has an important

function in employment, self-employment and as a focus for entrepreneurs.


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Problems Of The Small Shop

Whilst we can identify a large number of potential roles for the small shop, the effectiveness of

such outlets in undertaking these roles is problematic (Bates 1976, Jones and Oliphant 1976).

Many small shops suffer from a variety of problems and difficulties (Dawson and Kirby 1979,

Dawson 1983). These can be described as :

• inadequacies in the trading environment (e.g. economic and social change, competition

from multiple retailers, locational difficulties);

• inadequacies in the retail form (e.g. operating costs, investment capital availability,

supply problems);

• inadequacies in management (e.g. management expertise and techniques,

entrepreneur’s age).

The trading environment in Scotland, as elsewhere, has changed dramatically in recent years

(Dawson 1994, Fernie 1995, Sparks 1996b, c). Whether in towns and cities or more rural

areas, there has been significant economic and social change which has altered the ability,

perception and behaviour of consumers with regard to shopping and retailing. The needs and

desires of the consumers have changed in all sorts of ways. Whilst there are constant needs in

the general sense, for example, access to food and clothing, the make-up of this demand has

varied considerably (e.g. red vs white meat consumption). The willingness and capability to

travel to obtain these needs has also changed. It is probably true that most small shops are

less able to satisfy these new demands than are larger outlets and businesses.

The retail form itself also has difficulties which compound the changes in the trading

environment. The operating cost base of the small retailer has been shown to be less efficient

and effective than larger formats. Much of this is linked to the location and the fabric of the

outlets, but small shops are often faced with higher costs than larger formats and retailers.

The ability of large businesses to obtain volume discounts for services places them at an


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advantage. Small shops may therefore face general business and running costs that are higher

than their competitors. These include elements such as utilities, staffing, business services,

and stationery.

Finally, in addition to problems arising from the changes to the trading environment and the

operation of the retail form, there may also be inadequacies in management of independent and

small businesses. Retailing is no longer (if it ever was) a nice, cosy business environment.

Scottish retailers are faced with outlets from some of the best managed businesses in the

world. Against these, small retailers have to be as effective and efficient as possible,

exploiting whatever advantages they can obtain. However, many people have a romantic and

nostalgic view of retailing which they use as an impetus for entry into shop-keeping ; a process

made easier by the lack of real entry barriers to the trade. Their expertise, training and

capability for opening and then operating a shop have never been tested in many cases and

must be open to question, since many Independent retailers have often not been adequately

prepared for the trade (see Kirby 1984,1985). Retailing can be a complicated business, made

even more pressured by financial problems and multiple competition. To cope successfully

with this requires a certain level of personal and family commitment and skill as well as an

aptitude for such a trade. This aptitude could arguably be enhanced by appropriate training

and advice.

Reactions And Solutions To Date

The reasons why intervention in the ‘market’ might be appropriate should be relatively clear

from the previous discussion of the roles and the problems of small shops. There are a number

of ways in which this support (or intervention) has been given (Davies 1976, Kirby 1981,

Logan 1994).

In certain circumstances it has been decided that small shops require some subsidies and grants

to enable them to survive or to perform more adequately. These subsidies and grants can take

a variety of forms but generally are given for capital expenditure both in terms of fitting out

the shop with modern equipment and/or improving the shop frontage or street-front. A

number of such schemes exist in parts of Scotland, with a mixed record of achievement.


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A second area of intervention is that of regulation amendment. This has a variety of aspects

ranging from broad policy to specific initiatives. The main planning regulations are the

national planning guidelines and the local development plans. This planning framework can be

more or less strict depending on the situation in the locality or plan area. The defence of the

planning situation can also be strong or weak. So, a local authority can set up a policy that

hinders off-centre development and encourages local shop development. It can pursue that

policy vigorously or it can be relaxed about challenges or deviations to it. This framework can

obviously work to the benefit of existing local retailers by reducing the level of national chain

competition and maintaining the status quo. It is probably accurate to report that if

independent retailers had their way then they would have imposed a total ban on off-centre

retailing some time ago.

Thirdly, small shop retailers have benefited in some circumstances from training and support

provided in a variety of forms. These activities are best thought of as business start-up and

development programmes. The majority are offered by agencies such as the local enterprise

company but local authorities and other support groups also provide training. Some of this

training is linked in some cases to grants that the retailer may receive. Thus it may be a

condition of receiving the grant for business modernisations that the retailer undergoes

specified training to enhance the management skills at the same time. This training may be

supplied by the training agency or provided via various retail business consultancies.

Anecdotal evidence suggests that the quality and quantity of these training programmes

sometimes can leave a lot to be desired and there is a shortage of appropriate counsellors.

Table III summarises the discussion so far.

Table III : Roles, Problems and Tried Solutions

Roles Problems Tried Solutions

Consumer Supply Operating Costs Buying Groups

Supply Availability Village Support Schemes


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Economic/Social Changes

Competition

Diversity, Colour Locational DifficultiesSpecial ‘Areas’

and Choice Supply Availability Grants for Business

Dynamism andLocational DifficultiesTraining Schemes

Local Adaptation Management Skill Marketing

Entrepreneur’s Age

Economic Linkages Investment Finance Local Agency Support

with Benefits

Employment Generation Finance Grants etc.

and Maintenance

Survey Work and Findings

The study1 involved a three-stage process of literature review, planning authority survey work

and consumer and retailer survey work. A literature review of previous research on the issues

around small shops generally and the planning system interaction with small shops in particular

was undertaken. In addition, a contact network of academic researchers across Europe was

used to ascertain the situation in other countries and whether their policies could relate to

Scotland. Local authority planning departments were surveyed through a questionnaire on

retailing, planning and small shops. From the respondents a focus group of ten respondent

authorities was mounted to further investigate the issues. In addition, a survey of LEC

involvement in this area was undertaken. Retailer and consumer surveys were undertaken in

10 locations across Scotland representing 5 locational types where small shops have particular

representation and problems (secondary streets, suburban centres, neighbourhood centres,

rural villages, isolated shops). The surveys involved personal interview using a questionnaire

as the base and 65 retailer interviews and 395 consumer interviews were completed


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successfully. Given space constraints, it is not proposed here to provide anything further than

the summary findings (see Smith and Sparks (1997) for full results).

Survey work with the local authorities and LECs concluded that:

there was widespread awareness of the decline of the small shop sector and the problems this

posed;

the rural shop was clearly identified as an essential service;

small shops in urban and peripheral estate areas were seen to be multi-functional in

commercial and social roles, but were often suffering trading and other difficulties;

policies towards small shops, particularly in urban areas were viewed as currently limited and

ineffective;

there was little ‘planning’ distinction that could be drawn between independent and multiple

small shops;

the role of LECs with respect to retailing could be clearer.

The key findings from the retailer survey work were :

rural village shops and isolated stores have a more restricted catchment area but a wider,

social or community function than other locational types;

convenience style outlets tend to open 7 days a week, with long total hours;

village shops appeared to be doing better than the other types with neighbourhood centres in

particular having problems;


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the main constraints on the businesses were competition effects, reduced shopper traffic and

finance;

the retailer respondents felt that the local authority could do more for the sector, but that

retailers also could bear more responsibility;


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the local authorities could do more in terms of finance burden easing and environmental

improvements; central government could tighten planning legislation and reform the tax and

rate system for retailers and/or small retailers; the LECs should support existing businesses

more rather than increasing competition with new business start-ups.

The key findings of the consumer survey were :

the profiles of the samples drawn suggest a form of dependency on small shops which does

vary from locational type to type;

rural, neighbourhood and isolated stores have a very different catchment to the suburban and

secondary streets, being more local and pedestrian based and with shopping trips being more

frequent i.e. more of a convenience approach;

the main food shopping by the consumer groups was superstore based with the non-food

pattern being more dispersed and less focused;

rural village respondents used the small shops because they wanted to support them; this was

in direct contrast to neighbourhood centre respondents who criticised the high prices and used

them only in an emergency;

rural shops were also perceived as having a social or community function whereas secondary

streets were seen as a thoroughfare or a mixed use location;

satisfaction levels in rural village and isolated shops are high, being associated with high

service levels. Secondary streets were more poorly viewed and were seen as lacking in quality

and variety. Neighbourhood centres were mixed, with poor variety and quality as well as

prices reducing satisfaction ratings;

as with the retailers, the consumers identified local authorities as being mainly responsible for

the small shop sector. However consumers bore the most responsibility in rural villages and

isolated shops;


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destination retailing, such as the post office, was viewed as important in conditioning travel

behaviour.

Discussion and Conclusions

The paper has revealed and reinforced the perceived importance and role of the small shop in

Scotland (and more generally) and has allowed a number of conclusions and recommendations

to be drawn.

Small shops play a vital function in certain areas and locations, typically a convenience and

community function in rural villages and isolated locations. In other locations they may play

an ancillary function providing reasons for visiting certain locations and extending choice. The

neighbourhood centre format is failing to provide its proposed function and small shops within

these centres have major problems. Small shops provide a colour and character to Scottish

retailing and act as seed-beds for some Scottish entrepreneurial talent. Small shops also

provide valuable finance to other business services, often on a local level, through the services

they purchase.

Small shops in neighbourhood centres are being by-passed by many consumers. They need to

be enhanced where the catchment has potential or removed where there is no viable future and

alternative facilities are available. Activities in the area of business development and

environmental improvement would seem to have potential for significant expansion in selected

locations. Financial constraints on many small shopkeepers are real and could be eased

through selective assistance - alone however this will not be enough. The biggest potential

benefit for individual small shopkeepers would be in the provision of co-ordinated business

development. For groups of small shopkeepers this could be developed in association with

consistent improvement and marketing schemes

Planning policies affect the small shop to a considerable extent, with restrictive policies

reducing competition and limiting the effects of ‘undesirable’ developments, and positive

policies e.g. shop support schemes, appearing to be of benefit, though a thorough evaluation


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of these has not been done, and they are in some disarray given local government re-

organisation. Selected secondary streets could be designated commercial improvement areas

and benefit from co-ordinated improvement activity. It would be necessary to restrict the size

and lines of business of shops in these areas. Village shop support schemes in rural areas

should be introduced or expanded and the ‘hurdles’ for entry considered carefully. An

evaluation programme should be introduced. These village shop support schemes should

concentrate on business advice and training as well as capital improvements. Such advice and

training should be compulsorily linked to the provision of assistance and the impact of the

schemes should be monitored and assessed fully. Planning policies should have presumptions

against developments which compete with supported shops. The village shop support scheme

should be extended to cover isolated shops that are seen to have a community function, in

both urban and rural areas. Neighbourhood centre provision could usefully be re-assessed

given modern shopping patterns and a withdrawal from some centres and their replacement by

other non-retail facilities may be appropriate. Those that are left need to be subject to

improvement. Pharmacy and post office locations should be restricted to local, community

type functions and locations in the main with other provision near places of work and high

traffic levels. Petrol filling stations with convenience style shops should be located very

carefully in rural areas so as to avoid the introduction of disadvantage to some local

consumers at the benefit of passing traffic.

Note : 1 - The study reported here was commissioned by The Scottish Office and it is withtheir permission that this paper is presented. The results and findings are those of theresearchers however and must not be taken to represent views of The Scottish Office, nor ofthe Secretary of State. The full version of the project is reported in Smith and Sparks (1997)and is available for purchase from The Stationery Office Bookshop, 71 Lothian Road,Edinburgh EH3 9AZ at a price of £5.00.


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Bolton Committee. (1971). Report of the Committee of Inquiry on Small Firms. Cmnd4811. HMSO. London.

Davies, R.L. (1976). ‘Planning Solutions to the Problems of the Small Shop’, Town andCountry Planning, 44(4), April, 215-220.

Davies, G. & Harris, K. (1990). Small Business: The Independent Retailer. MacMillan.Houndmills.

Dawson, J.A. (1983). Small Firms in Retailing: Terminal Illness or Just a Cold? IRSWorking Paper 8303, University of Stirling

Dawson, J.A. (1994). Review of Retailing Trends. Scottish Office, CRU Papers, Edinburgh

Dawson, J.A. and Kirby, D.A. (1979). Small Scale Retailing in the United Kingdom.Farnborough : Saxon House.

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Howe, W.S.(ed). (1992). Retailing Management - Ch 5 The Small Firm in Retailing.Macmillan : London.

Jones, B. and Oliphant, R. (1976). Local Shops: Problems and Prospects. Reading : Unitfor Retail Planning Information.

Kirby, D. A. (1981). Aid for Village Shops: A Consideration of the Forms of Aid and Scopefor Aid in Britain, Workshop paper URPI S3. Reading : Unit for Retail Planning Information.

Kirby, D.A. (1984) ‘Training for the Small Retail Business: The Results of a BritishExperiment’, International Small Business Journal, 2(3), 28-41.

Kirby, D.A. (1985) ‘Management Training for the Smaller Retailer’, Retail and DistributionManagement, 13(5), 42-47.

Logan, S.N. (1994). ‘Small store survival’, International Trends in Retailing, 11(2). 71-85.

Smith, A.P. and L. Sparks (1997) Retailing and Small Shops. The Scottish Office CentralResearch Unit : Edinburgh.

Sparks, L. (1996a). ‘ The Census of Distribution - 25 years in the dark’, Area 28, 89-95.


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Sparks, L. (1996b). ‘Challenge and Change : Shoprite and the restructuring of groceryretailing in Scotland’, Environment and Planning A, 28, 261-284.

Sparks, L. (1996c). ‘Space Wars : Wm Low and the Auld Enemy’, Environment andPlanning A, 28, 1465-1484.

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