New kid on the block

New Morrisons boss Dalton Philips has taken only a matter of months to decide that the company needs to be a player in the convenience store sector. The supermarket chain will trial three c-stores next year which, following Asda's acquisition of Netto and Waitrose's development of smaller formats, will complete a full house of multiple grocers in the neighbourhood store sector.

And I mean full. Competition has never been tougher, and with unfortunate timing it coincides with a period when consumers are less willing to spend.

I know many retailers who believe there should be a law to prevent chains with big stores from opening small stores. I wouldn't go that far myself after all, I wouldn't want to prevent an independent retailer from opening a large store if he wanted to but the point is valid because a multiple can obviously use its scale to withstand a loss on a particular store in order to fulfill regional or national objectives. An independent cannot afford such luxuries.

But, of course, Morrisons is interested in c-stores because the sector gives it an opportunity to grow its business. The small store sector has been growing faster than the large store sector for several years now, and last year's market growth of 6.3% looks very healthy compared with Morrisons' recent like-for-like increase of 0.9%.

The northern giant will be another shark in the tank, but it won't necessarily get it right straight away. But what its entrance will achieve is a rethink among the supplier community as to whether they are really taking the small store industry seriously enough. Many do, although there are others who merely say they do, but aren't structured to capitalise for mutual benefit. Perhaps this latest move will give them a further incentive.

Upward spiral

Increased competition in the c-store sector would be easier to cope with if it wasn't for the fact that the cost base is rising at the same time. Ever since its inception in 1999, annual increases in the National Minimum Wage have been rubber-stamped as it was felt that the business sector could afford them.

Not only has the economy changed dramatically, but as ACS' survey shows, many store owners have cut back on their staffing in recent years to keep costs down. This is to the detriment of employment levels, not to mention customer service and retailers' own health and wellbeing.

Most sectors of the economy have experienced a wage restriction or freeze in recent months, so now would be a good time to break the cycle of constant NMW increases and instead give a proper appraisal of the stresses felt by small businesses in the current climate.