In a recent TRDP survey, over 80% of respondents believe that cost increases from the Living Wage pose a threat to their convenience retail business. We spoke to retailers to find out more about this issue.

February 28, 2017
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Retailers React: Are living wage costs a threat?

In last month’s Retailers React, we explored retailer opinions on price rises in convenience as a result of Brexit. Retailers consistently responded that they considered substantial Living Wage cost increases as the biggest threat to their business this year.

Interested to find out more, we surveyed retailers to find out whether this worry was present across the industry. Of the 144 respondents, over 80% reported that so far, the national living wage has had an impact on their business.

To better understand this issue, we approached the respondents to get their opinion regarding the Living Wage.

NicholasNicholas Johnson – Sedlescombe Stores and Post Office

Nicholas Johnson is the owner of Sedlescombe Stores and Post Office, located in the village of Sedlescombe in East Sussex. His catchment area is small, but he has little competition allowing him to claim most of the convenience trade available in the area.

Nicholas sees the living wage as nothing more than a cost that a small business like his will struggle to absorb.

The Living Wage is nothing but an extra cost for us. We are a village shop and the last shop in the village. We cannot stand any more additional costs put onto us otherwise we will have to close. As a result of the living wage going up we have had to sack three part time staff and cut back the hours of others. Those that remain now earn less than they did before as my wife and I have taken up the extra hours.” – Nicholas Johnson

Simon Dixon - Premier ExpressSimon Dixon – Premier Express Convenience Store – Lancashire

Simon Dixon runs Premier Express convenience store, located in Lower Darwen, Lancashire. Being located close to a small industrial estate and a housing estate, the store benefits from plenty of passing trade, especially during the lunch hour.

Despite this, Simon is worried that he will have to cut down on staff to keep his business running with increased wage costs. He does have a potential solution for the issue however.

I will have to cut down on staff from April as my wage bill will be too high. I think a good solution would be to have some kind of compensation to help only small businesses, as I fear they will start to decline leaving only the large multiples on the high street. – Simon Dixon

Paul Butler - Tamerton Village StoresPaul Butler – Tamerton Village Stores, Plymouth

Paul owns Tamerton Village Stores in Tamerton Foliot, Plymouth. He believes that the living wage is by far the biggest threat to his business and the jobs that he has created. Paul has been thinking ahead however and has put together a four part plan to combat the increased overheads on the horizon.

Paul’s comments are extensive as he is very passionate on the subject and we wanted to give him the chance to share some of his insights.

The living wage is by far our biggest overhead to which we have no control. I have never believed in a national living wage as the concept is fundamentally flawed. We don’t have national business rates, council tax, utility bills etc. as different parts of the country have different costs of living. It doesn’t make sense to have a living wage that applies to everyone outside of London when living costs vary so much.

That being said, I have a four pronged attack to minimise the effect of the rise. First we have to increase sales where possible, not an easy task. Next is to increase prices by small amounts on things that will not stand out, a couple of pence on bars of chocolate, for example. Next is to increase margins; plain packaged Tobacco is a great opportunity to ignore the incentive points from the Tobacco companies and instead charge an extra ten to twenty pence above RRP. I’ve increased my margin on Tobacco to ten percent with this strategy. Finally, we have to reduce hours but I have ensured that staff will not be out of pocket by offering pay rises above inflation. This is not a long term solution however as I cannot cut hours any further without looking at the opening times of the store. If we get to that then redundancies are inevitable. I feel that it is unfair that hard working small business owners are expected to fund a political move directly out of their pockets. – Paul Butler

Bay Bashir - Belle Vue MiddlesbroughBay Bashir – Belle Vue Stores, Middlesbrough

Bay Bashir is a leading light in convenience retail. An award winning retailer who is revered for his business acumen and refreshingly positive attitude. I met him recently during a retailer profile visit and discussed with him at length his thoughts on the living wage. Ever the optimist, Bay saw the bright side of the rise.

Read our Belle Vue Stores profile here

The great thing about paying your staff more is that you can expect more out of them. I don’t want my staff to just stand behind the till; I want them to be a positive presence while they’re at work and the living wage helps ensure that this happens. – Bay Bashir

The convenience retailing industry has always been a challenging one. While many of the retailers above are unhappy about the living wage and the turbulent future it creates, they all have their own solutions to deal with the problem. Remember, with some clever planning and pricing, you can cover the extra wage overhead by increasing sales and margin.

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