Getting the Right Change – retail strategy for Scotland

Chapter 2 - Sector

2.1 Our Aim

A successful and profitable sector, by being more productive and innovative, and encouraging, promoting and celebrating entrepreneurial activity and business growth.

2.2 Opportunity for Change

Ensuring we have a successful retail sector is at the core of this strategy. Our aim is to strengthen the sector’s economic performance while, at the same time, tackling structural economic inequalities in line with the ambitions of NSET. To be successful the sector must drive productivity and innovation and play a full part in making Scotland one of the best countries in the world to start, scale and change a business.

Retail is a sector undergoing transformation, with changes in customer behaviour and market conditions accelerated by a multitude of economy-wide factors. The impact of the pandemic, leaving the EU single market, global supply pressures, growing cyber threats to businesses of all sizes worldwide, rising inflation and increasing costs are adding to what was for many a challenging trading position pre-Covid. Supporting existing and new retail businesses as they negotiate through these challenging times and transform will be key to unlocking the full economic potential of the retail sector.

Entrepreneurs will play an important role in this transformation. As the industry flexes and changes, new opportunities will emerge for those with an entrepreneurial mindset. Retail businesses led by talented entrepreneurs, whether start-ups, existing businesses or those with the ability and desire to scale, can create skilled jobs, deliver fair work conditions, boost productivity and inspire creativity across retail. NSET provides more on enhancing Scotland’s entrepreneurial capacity and thinking, including for those entering the retail sector for the first time or those looking to grow their existing business.

Rapid advances in technology are disrupting traditional customer behaviour but offer opportunities for both businesses and consumers. Consumers are looking for a seamless service between in-store and online, immersive experiences and more choice and competitive pricing. The wider availability of choice on offer through online shopping means that retailers cannot depend on consumer loyalty or habit, with many now offering multiple omni-channels where consumers can engage with a retailer both in-store and online. This underscores the importance of customer service skills, which are so fundamental to the face-to-face interaction we value on our high streets.

Incorporating these new channels and practices into business models is a considerable challenge, but one that many retailers have already successfully implemented across their business model.

With the internet widening the marketplace and offering new digital opportunities, the most popular online retail brands are global players such as Amazon, M&S, Wickes and Sports Direct.^[5] These companies have taken advantage of existing brand recognition, purchasing power and, in some cases, disrupting the supply chain, to create profitable online retail operations. While there have been notable successes, not all Scottish retailers have fully realised the opportunities of online. Improving the digital capability of Scottish retailers will be key to ensure that that they can grow to scale, increase their global presence and enshrine their long-lasting success.

While the increased use of automation in retail creates challenges for the sector – such as, improvements in productivity being offset by job losses – there are significant opportunities here, too. For example, automation can improve the standards of products so they last longer and contribute to reducing waste. Importantly, new technology has considerable potential to augment retail jobs which are likely to require new, different and higher sets of skills. It is therefore vital that this strategy has actions to support workers to continue to develop the skills they need for jobs of the future while at the same time supporting short-term economic recovery and safeguarding jobs.

2.3 What We’re Doing

Work is already being undertaken that will bolster the actions of the retail strategy. To help retailers weather the storms of Covid-19, over £4.5 billion has been provided to support businesses in Scotland, including 100% rates relief for Retail, Hospitality, Leisure and Aviation businesses in both 2020-21 and 2021-22. In 2022-23, rates relief will continue for retail businesses for the first quarter of the financial year, capped at £27,500 per ratepayer. The Scottish Budget also maintains the Small Business Bonus Scheme, which lifts over 111,000 properties out of rates altogether.

Non-Domestic Rates (NDR) was a concern to the Steering Group with some members requesting a review of the current system as part of this strategy. While appreciating that trading conditions have been difficult for some, the implementation of the Barclay Review recommendations must conclude and be evaluated before new reforms are considered. Consequently, this strategy will not look at NDR specifically, but would encourage stakeholders to provide their views through existing consultative structures such as the Scottish Ratepayers’ Forum.

The Scottish Government is committed to ensuring that businesses can get the right information, advice and support at the right time. Having access to a business support system that puts the needs of users at its heart and makes it easier for them to navigate is essential for new and growing businesses. FindBusinessSupport aims to do just that.

The recently published National Strategy for Economic Transformation (NSET) sets out five bold policy programmes of action to tackle the long-term structural challenges, build on our economic strengths, and position Scotland to maximise the greatest economic opportunities of the next ten years in a way that will transform the very fundamentals of how our economy works. It is imperative that retail fully contributes to and capitalises on the opportunities to build an economy that celebrates success in terms of economic growth, quality of life and equality of opportunity and reward.

NSET aims to establish Scotland as a world-class entrepreneurial nation, encouraging, promoting and celebrating entrepreneurial activity in every sector of our economy, including retail. It also focuses on digital technologies – particularly crucial for retailers – acknowledging that they are fundamental to productivity and underpin business growth across every sector of the economy by supporting innovation, enabling more efficient business processes, opening new markets, and helping tackle climate change.

Actions are underway to tackle the entrepreneurial gender gap which has particular bearing in retail, where over 60% of the workforce but just 17% of business leaders are women.^[6] The Scottish Government has committed £50 million over the lifetime of this Parliament to support more women into entrepreneurship.

National Strategy for Economic Transformation Programmes for Action

• establish Scotland as a world-class entrepreneurial nation founded on a culture that encourages, promotes and celebrates entrepreneurial activity in every sector of our economy
• strengthen Scotland’s position in new markets and industries, generating new, well-paid jobs from a just transition to net zero
• make Scotland’s businesses, industries, regions, communities and public services more productive and innovative
• ensure that people have the skills they need at every stage of life to have rewarding careers and meet the demands of an ever-changing economy and society, and that employers have invested in the skilled employees they need to grow their businesses
• reorient our economy towards wellbeing and fair work, to deliver higher rates of employment and wage growth, to significantly reduce structural poverty, particularly child poverty, and improve health, cultural and social outcomes for disadvantaged families and communities

To support retailers and supply chains, we have:

• collaborated with the Scotland Food & Drink Partnership on the development of an industry-led food and drink recovery plan
• committed to exploring the introduction of a new national digital sales tax in Scotland, and to consider whether this could help make the tax burden more equal between bricks and mortar and online retailers
• delivered the Scottish Government’s refreshed digital strategy A Changing Nation: How Scotland will Thrive in a Digital World which identifies digital technology as a source of incredible opportunity to open new markets, work in new ways, personalise services, innovate and scale rapidly, tackle climate change and make links across the globe
• supported SMEs to improve their digital skills, cyber resilience and online presence via the DigitalBoost programme, delivered through Business Gateway
• accepted the majority of recommendations of the independent Barclay Review of Non-Domestic Rates and considered how the non-domestic rates system could better support business growth, long-term investment and reflect changing marketplaces. This includes moving five-to-three-yearly non-domestic rates revaluations based on rental values one year prior instead of two. These changes will ensure that rateable values better reflect market conditions in the future. This change will take place from the next revaluation in 2023
• introduced the Business Growth Accelerator relief, which offers 100% relief for up to 12 months until after first occupation for new builds, and 12 months on eligible rateable value increases when properties are improved and/or expanded
• maintained the Small Business Bonus Scheme which takes over 111,000 properties out of rates altogether, including over 50% of shops
• expanded Fresh Start non-domestic rates relief for newly reoccupied long-term empty properties with a rateable value up to £95,000
• implemented the recommendations of the Logan Review to support the next generation of Scottish start-ups through a national network of ‘Tech Scalers’ and develop a skills development hub
• committed to delivering future-proofed mobile and broadband connectivity for homes and businesses in remote, rural and island communities through a combination of the R100 contracts, the R100 Scottish Broadband Voucher Scheme, the Scottish 4G Infill Programme and commercial build

DigitalBoost – Clothing brand revamps its online ordering

After launching in 2014, FINDRA, a Scottish-based company offering sustainable and versatile outdoor clothing, has made the most of funding access through DigitalBoost, Business Gateway’s national upskilling programme. This grant has enabled them to re-platform their website as well as review their ordering processing, CRM and stock management systems, ensuring a more efficient and smoother customer experience for every order. The funding through DigitalBoost has allowed their customers to order something with ease, allowing FINDRA the confidence to deliver to them quickly and efficiently.

“We knew that our website looked good, and showcased our range of products in a stylish way, but we were aware that we needed to improve what was going on behind the scenes. We are serious about being an effective, efficient e-commerce business and want our customers to have the best experience when ordering from us, so we looked for funding that would let us invest in our platforms.”

Alec Feechan, Founder of FINDRA

2.4 What We Will Do

To ensure future success, retail businesses need to commit to:

• investing in training and equipment for staff, including to allow them to transition into tech roles where required
• ensuring that businesses have in place robust and appropriate data management and cyber security policies and processes, including within their supply chains and from service providers
• considering the impact of increased automation on employees and consumers
• reviewing their digital capabilities to ensure they capitalise on online marketing and trade opportunities

We will:

• through the ILG, focus on the delivery of the actions in the National Strategy for Economic Transformation that will directly support the retail sector
• investigate “virtual high street” online platforms, for example through Scotland Loves Local, enabling consumers to spend money in local shops without losing the convenience of online shopping
• promote the DigitalBoost programme across the sector to provide Digital Support and advice
• maximise opportunities for retail to benefit from the Scotland Loves Local Programme by collaborating on cross-sectoral marketing, platform support for local economies and the SLL fund
• promote cyber security standards such as Cyber Essentials and resources such as the British Retail Consortium’s Cyber Resilience Toolkit for Retail so that retailers are more protected against the most common cyber-attacks and that consumers can be confident that their local online retail experience is safe and secure
• maximise the promotion of Scottish goods and examine the potential for branding for Scottish retail and ensure alignment where possible with other sectors (i.e. Scottish produce)