x Abu Dhabi, UAEWednesday 24 January 2018

Retail giants declare war on high-street shops

The View from Here Franchises are now the most common way to invest in a small business.

If Napoleon was around today, he could probably find a lot of ways to insult the British, without even having to mention the food. But dismissing them as a nation of shopkeepers would not be one of them.

More than one in 10 retail spaces in the UK is empty, a figure that is set to rise. This is the dismal conclusion from a far-ranging report by Mary Portas, the British retail guru, who was asked to see what could be done to rescue the country's high-street shops.

The high street was once where Englishmen bought their fish and chips. Now, all that is left in most town centres are greasy takeaways and video stores. Shoppers, meanwhile, prefer to visit decentralised centres, where ample parking and chain stores prevail.

Online shopping, too, has eviscerated the traditional weekend morning shopping trip.

In the US, the small trader has long since given way to the temple of retail, the shopping mall. It's a pity, because opening a shop - be it a hardware store, bakery, coffee shop or even a humble grocery, was once the first step for the small investor who wanted to be an entrepreneur.

You'd sign a lease with a flint-eyed old lady, whose pension was the street front space you wanted to lease, while she lived in a couple of dingy rooms upstairs. Today, shopping centres demand you sign away your first born and expect a cut of your turnover as well.

It's true that a chain store will usually be cheaper for the consumer than an old-fashioned "mom 'n pop" store. This is because small businesses work on the inverse principles of the big boys. Modern retailers expect high turnover and cut margins to lure customers in.

They don't make much profit on their goods, but this does not matter because they sell so many cans of baked beans that the sheer volume puts them comfortably in the black.

Smaller shops live on low turnover, so they hike their prices to stay in business. It's a strategy that proves fatal when a large chain store competitor moves into the area. This is why India, long a tempting target for large international chain stores, has been agonising over whether to allow Walmart into the country.

Last month, it appeared India would finally give in to international pressure and grant a trading licence to Walmart. But at the last minute, the country's parliament baulked. Afraid that sterile retail giants like Walmart, Carrefour and Tesco would wipe out the millions of small, family owned kirana stores that dominate Indian retail, it failed to pass a crucial bill that would have allowed them in.

Western analysts pouted. They warned that the decision was a blow to India's credibility with investors. And the major retailers were furious. Desperate to find new markets, they saw India's fast-growing middle-class population as ripe for the plucking.

I think that India's parliamentarians did the right thing. Consumers may be less than thrilled, but for the shopkeepers, this is a victory.

It's highly unlikely that countries such as Britain can reverse the trend towards retail homogenisation. They've gone too far down that road.

But developing societies still have a chance to retain something of a way of life that is fast disappearing in the West.

Abu Dhabi has some 1,300 groceries. Some are of dubious hygiene and their prices are higher than the likes of LuLu and Carrefour. But they add to the character of the city. There is always one open near you, no matter what the time may be. And they keep thousands of families employed.

Because these are family owned enterprises, they go the extra mile - most deliver free of charge. Even if the order is only a bottle of water.

No doubt, in time, India will capitulate - the lure of billions of dollars of investment will prevail eventually. And the millions of kirana store owners will be faced with a choice - find jobs, or descend into destitution.

There are still opportunities out there, however. Franchises are now the most common way to invest in a small business. It's possible to buy an off-the-shelf enterprise that can be anything from a hotel to a takeaway. One study predicts franchises will grow annually at 10 per cent in the UK over the next five years, in spite of the downturn.

In the US, brands such as Hampton Hotels, Subway, the sandwich franchise, and 7-Eleven, the convenience store, remain favourites with investors. And it is hardly a surprise; quick-service food franchises that include burgers are expected to enjoy continued high growth, according to the US-based Entrepreneur magazine.

The days of setting up your own greasy spoon may be over, but for the investor-entrepreneur, the opportunities do exist. You just have to know where to look.

Gavin du Venage is a business writer and entrepreneur based in South Africa.