The slow decline of the co-operative department store

The sun is setting on the co-operative movement’s department stores. Campaigners in the Heart of England are currently fighting to save some of the last non-food outlets from...

The sun is setting on the co-operative movement’s department stores.

Campaigners in the Heart of England are currently fighting to save some of the last non-food outlets from the axe. Six are set to close in Nuneaton, Rugby, Leamington Spa, Bedworth, Atherstone and Hinckley.

Nuneaton’s MP Marcus Jones and local councillors are seeking urgent talks with the society’s bosses to find out their plans for the store and the people who work in it. Their concern is not just for the workforce who will lose their jobs but the impact on local communities and town centres.

But a reprieve seems unlikely. The Coventry store has already gone and it looks like the end for the Heart of England’s remaining home and living stores, which currently sell furniture, electrical goods, carpets, textiles and menswear.

The society blames an increasingly challenging retail environment and huge growth in online shopping for the fact their non-food division is ‘no longer viable as a business’. The decision followed a review by the Heart of England board of its non-food operations and the proposal is that closures will be implemented over the coming year.

The society says it will invest in the profitable areas of its business, namely food and funerals, to ensure it has a sustainable future after more than 180 years in business.

Retail experts with years of experience at the sharp end of the marketplace agree with campaigners that the loss of the non-food stores is sad news for the co-operative movement. But they conclude the closures may have been inevitable as times changed – and many outlets failed to keep pace.

Gateshead-based retail consultant Graham Soult, who offers advice to stores throughout the UK, says: “Non-food stores have been such a proud part of co-op history. They had wonderful buildings at the heart of the community and it is remarkable how quickly they have gone almost without anybody realising and they are now at the point of extinction.

“Up here in the North East, the co-operative had built up an empire of 20 stores and even six years ago there were more than 50 across the country.

“But if you discount the Heart of England ones which are closing, there are now only a handful left on the UK mainland – in places like Tamworth, Chelmsford, Clydebank and Paisley.”

Some former co-operative department stores in places like Keighley in West Yorkshire survive under new ownership.

Graham Soult
Graham Soult

Others, like Anglia Home Furnishings, became employee-owned and are thriving.

But the vast majority of the non-food stores are now a closed chapter of co-op history.

“I think if you look at what happened to co-op department stores a lot of them have been quite tired,” says Mr Soult. “What might have worked in the 1970s and 1980s just does not cut the mustard in the present day.

“From fashion stores like Debenhams at one end of the market to Poundland at the other, all of them have been nibbling away at market share and the co-op operation was a bit slow to try and reinvent their department stores.

“But where they have tried to reinvent them it has worked.”

He adds: “Penrith had a department store that was profitable, but it has now gone because of the merger with Scotmid.

“Often it was a case of smaller societies merging with a bigger one which has no interest in non-food.”

But, as for other former high street mainstays, the final hammer blow for many stores was the rise of internet retail.

“It has had an impact on all stores in town centres,” says Mr Soult. “Maybe where the co-op has also struggled was the brand. It has certain associations which were not perceived as modern or forward-thinking.

“I would also argue department stores were also quite slow to try and adapt. One of the things I see with the independent retailers I work with is that they are thriving where they understand their community. They offer something you just can’t get elsewhere.”

This is something, given the co-operative difference, that the movement’s stores should be able to emulate.

“I would like to see the co-ops doing more of that,” says Mr Soult. “No store should be more independent and local than the co-op and there is a bit of a sense they have not had that connection to the community who helped make this business. It is sad all those foundations are being swept away.

He adds: “I went and visited all the Heart Of England stores and some are more challenging than others.

“But one of the ones being closed is in Hinckley where they invested a lot of money totally re-vamping the store. It had top-notch merchandising and is a lovely store to shop in. Where you have had investment in making a store look and feel more modern and making the range tailored to the town it has been proven to be workable.

“The question is have they got the cash and inclination to do it? The challenge also is if you have to spend hundreds of thousands of pounds to generate a reasonable modest profit. It is difficult.”

Despite the demise of most of the co-op’s portfolio of non-food stores, Mr Soult believes the retail phoenix could yet rise from the ashes.

“The co-op department stores which are left need to look at what the best independent retailers are doing to compete and try and replicate that in-store excitement,” he says.

In the course of his research Mr Soult has visited 500 stores and retail outlets over the last few years – and suggests co-op department stores play up to one of the movement’s core strengths, its capacity for member engagement.

“The survivors are clever in how they market online and capitalise on that. I hope the stores left can make it work.

“I grew up in Tamworth where the co-op still has a department store and I hope they can cling on. The message needs to be that we are local, independent and we care. That needs to be absolutely central and there is still a real opportunity to involve the members.

“Tamworth has more than 20,000 members yet at the annual AGM you get 30 or so. One feels there are thousands who want to be part of it and it would be such an opportunity to speak to those members.

“So many businesses would love to have 20,000 members to be a part of their business. I believe there is scope there to look at how you encourage and engage people.”

He adds: “Clearly the downturn has not helped but more fundamentally co-ops have been pulling away from non-food for a long time. The pace of closure has picked up partly because of competition, but the Co-operative Group also pulled out of non-food which made it harder for the rest to carry on.”

But he sees some signs for optimism – and again, co-op stores can benefit if they stress what makes them different.

“I travel round the country and I find plenty of department stores doing alright as they are rooted in the community and have something people want to buy into,” he says.

“We could be offering really interesting products and playing on the heritage thing which is something to really celebrate. Unlike stores like M&S and the House of Fraser, the co-op is coy about selling its story.

“I wonder how many people in Tamworth for example understand where it has come from and that it is not part of the Co-operative Group. Lessons could also be learned from places like Rutherford’s in Morpeth which has been trading for decades and decades and has created a really nice upmarket boutique feel and is doing something quite different.

“Quite a lot of the independent stores that work are slightly more high-end. Then there are the international giants like IKEA. Stores like John Lewis make a real go of it and are famous for super customer service and advice.

“The days when everyone would head to the co-op department store as default may be gone but they could be major online players.”

Business and retail strategist John Chillcott is managing director of Chillcott Consultancy and a former chief executive of Anglia Co-operative, which had its own estate of non-food stores. He says there has been a ‘seismic shift’ in the way the market operates.

“In terms of the time scale the market changed quite dramatically from the 1990s onwards,” he says. “You have the development of brands like IKEA and they are good at what they do. They also have strength and a national and international reach when it comes to brand and buying power.

“Technology has moved the tectonic plates of the retail environment when it comes to logistics and procurement and there are now very specific in-store customer offers, identity of product and genre. The co-op lacked in development of those things.

“In terms of the legacy of the stores, there was also a lack of investment problem in terms of not being able to raise the capital needed and they were rather fragmented in terms of the buying element – buying in limited ranges of different brands.

“They were also not specific or specialist enough and there was this idea of a ‘bit of everything’ and hoping it was good enough.”

He adds: “There were organisational issues too like the fact the wider co-op never really had a recognisable non-food brand. Anglia’s was Westgate Stores. Our legacy was big department stores which had been very successful in the 1940s and 1950s in a very different retail environment.”

Like Graham Soult, John Chillcott agrees that the rise of John Lewis is a successful role-model which offers lessons to the co-operative movement – but warns it has trouble on the horizon.

“It is an interesting case,” he says. “However, while it is seen as very successful, the same kinds of issues we had will be on horizon for them as there are a lot of costs involved in servicing stores.

“They are more now a ‘shop window’ and use services like ‘click and collect’ where customers order goods online and pick them up from stores. They are also clear about what their market is but their difficulties will come.”

He argues one way forward for the co-operative retail sector is to expand its online operation.

“The co-operative e-store, which sells electrical appliances, has done well. It has parity of market share and quality, and a good reputation for delivery and has consolidated itself in the marketplace. It is a good example of how the right thing was done.”

He also cites the example of Anglia Home Furnishings, an offshoot of the old Anglia Co-operative Society, which is now one of the biggest employee-owned co-ops in the UK with 200 members and a £13m-a-year turnover.

“It has done well,” he says, “because it was released from the confusion of being part of a bigger organisational structure and modernised itself with new IT and procurement systems which enabled it to thrive and have a real online presence.

“I think the co-op needs to look in terms of the strength of its food estate, use the existing store space and do non-food offers online.

“It could follow the John Lewis/ Waitrose model and create a credible online offer where you can order goods and collect from the stores throughout the UK so people can pick up goods from the store just down the road and maximise the potential market for household goods, electrical appliances and fashions.”

He concludes: “At the moment the Co-operative Group is understandably focussing on what works and getting into the non-food market is probably not top of the agenda, but it is the kind of development I would like to see.”

Case study: The last two co-ops standing

One of the last remaining co-operatives to run a department store is Chelmsford Star.

It runs two department stores, one in Braintree and the other in Chelmsford, which has a modern look and runs a number of lines from fashion and furniture through to electrical and housewares.

It has focussed on fashion concessions that has brought many high street brands, such as Clarks, Miss Selfridge, Topshop and Wallis. The Chelmsford store has just opened ToyTown as a new department.

Last year, the co-operative’s board devised a strategic plan for its department stores, which reconfirmed “the desire to remain trading within the sector”, according to the latest interim report. The half-year review, for the

Chelmsford Star runs two department stores under the Quadrant branding
Chelmsford Star runs two department stores under the Quadrant branding

28 weeks ended 15 August, sees the result of this report in action, which attempts to minimise losses. So far this year, gross takings for the year amounted to £10.08m, which is a 4.2% increase on last years figure of £9.6m.

On a like-for-like basis, taking into account 53 weeks and the closure of Canvey Bed Centre, gross takings have grown by 3.5%. In the last two annual reports, the total non-food sales (after concession sales and bill payments) has accounted for 7% of total turnover.

The strongest lines in the stores are furniture, housewares, ladies’ fashions and luggage. A statement from the directors read: “The turnaround strategy of the departmental store business has focussed on a number of factors including driving efficiencies, identifying cost opportunities, working in conjunction with our concession partners to grow net income, improving the knowledge and level of customer service our colleagues are providing, and adjusting labour scheduling to the needs of the business.”

Earlier this year, Chelmsford appointed Stephen Roger as its head of department stores, who is expected to drive “momentum” in the business, according to the director’s report.

The turnaround plan has also helped losses in department stores have reduced to 1.3% compared to 3.95% last year, an improvement in real terms on a “like for like” basis of £210,204.

The only other co-operative that runs a department store is Tamworth. The store contains three floors of fashion, furnishings, household goods, an opticians and a Funeralcare outlet.

Its last annual report, for the 52 weeks ended 24 January, said trading has “remained very challenging”, while the store continues to incur losses, although they are reduced by £55,000 on the previous year.

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