It may have started as PR or as genuine community responsibility, but the cosying up of supermarkets to village shops represents just one aspect of a lasting change to trade dynamics says Steve Hemsley The Kent branch of the Council for the Protection of Rural England has launched a Village Shop Suggestion Survey picking the brains of locals worried about the threat to their community stores. Don't be surprised if some respondents urge further cooperation with supermarkets. Just five years ago the notion of getting into bed with the multiples would have been unthinkable. But, slowly, such a meeting of minds ­ and alignment of business strategies ­ is taking place across the great retail divide. And this is going to become more commonplace. Many European retailers ­ notably Dutch giant Ahold ­ have successfully combined supermarket and wholesale businesses for decades. Sainsbury was the first to go c-friendly with the launch of SAVE (Sainsbury's Assisting Village Enterprises) in 1998. There are no preferential terms for the c-store but the multiple argues that small outlets benefit from the association with the JS brand. Somerfield began its own version of c-activity with trials of a free delivery service to village stores in March this year ­ more to do with finding a job for all those unneeded 24-7 vans than a cohesive business strategy, cynics argue. And a new Budgens Local franchise fascia, unveiled in August, tempts independents ­ who meet certain criteria ­ to enter the Budgens fold. Such schemes may be given a Blairite seal of approval next month when the government announces what action it will take to meet the recommendations of the Policy Action Team 13 report into improving shopping access for people in deprived areas. Supermarkets could do with a bit of a backslapping after months of negative press, but have been inexplicably reluctant to get involved. Why the supermarkets have so recently decided to befriend their smaller brethren is a moot point. Cynics within the independent sector believe the schemes will be withdrawn as quickly as they were introduced and are purely PR and marketing exercises designed to transform the supermarkets from villain to hero. Others feel the supermarkets have accepted they have a social and moral responsibility to work in partnership with local communities, and these moves are evidence that large corporations can be persuaded to use their business expertise to ensure small communities retain their local services while accepting the reality that a car-obsessed population prefers to do the bulk of its shopping out of town. More likely, conscious of slowing sales growth, the multiples want ways to improve turnover and grow their businesses. One person glad to see the multiples offering support to independents is Toby Peters, director of Community Owned Retailing, an industry initiative to support and encourage neighbourhood based entrepreneurial retail activity backed by Booker, The Grocer's publishing parent William Reed, Business In The Community, Mace, and nine manufacturers. He agrees that the multiples' involvement does reflect to some extent the failure of the wholesalers' own brands to gain critical mass or credibility. "We cannot lay all the blame for the demise of local shops at the supermarkets' doors. The guardians of the independent sector have failed, too, in terms of marketing and staff training. The supermarkets have set the standard and we need to get to the position where people want to shop locally. A neighbourhood store must aspire to have a range of products and services provided economically and at convenient times." Sainsbury's SAVE was launched following a barrage of press criticism about the death of the rural shop. Seeing the attacks as an opportunity to help its subscribers, the Village Retail Services Association (ViRSA) wrote to all the multiples to see if they would like to work with it. ViRSA came close to signing a deal with Tesco but eventually teamed up with Sainsbury to launch the SAVE scheme. Tesco, meanwhile, has been rather slow off the blocks and is still looking for a scheme to match those of the competition. ViRSA assistant director Mike Goodman says: "The supermarkets were being attacked for their legal business which we felt was unfair. We do not blame them for the current situation. It is the consumers who have switched allegiance, so we needed to help smaller stores fight back. A lot of independents were struggling to meet customer demands, and we felt people would want to buy a respected brand from their local store." SAVE, endorsed by Action with Communities in Rural England, allows shopkeepers that meet certain rules to order Sainsbury's own brand and proprietary non-perishable products in bulk to sell at a premium. There is not a preferential rate for retailers buying in bulk. Eight shops took part in the original trial and Sainsbury now has 170 stores signed up, of which 70% are post office counters. The chain has a target of 200 stores by the end of the year. The company insists the SAVE scheme puts something back into local communities by providing village shopkeepers with a real opportunity to improve their overall offer. Yet the chain is strict about who can take part ­ perhaps wary that people might be deterred from driving to the nearest Sainsbury's branch ­ and shops which apply are sent a detailed information pack and then visited by a duty manager to ensure the outlet meets all the criteria. Geraldine Gono, SAVE's project coordinator, says: "This is purely a rural scheme and a shop must serve a community of fewer than 1,000 people and clearly be the centre for local provisions and groceries. We look at how poorly served the community is by public transport while shopkeepers are not allowed to spend more than £1,500 a week at their local Sainsbury's store." Yet Sainsbury has aligned itself with a number of other organisations to ensure it gets maximum PR benefit from the scheme. The chain, like Tesco, Safeway, Asda and Booker, is a member of Business In the Community which works closely with Community Owned Retailing and the Countryside Agency. Business in the Community's regional director for the West Midlands, Peter Lambert, says the actions of the multiples to support local projects, whether specifically to help small shops or Tesco's scheme for schools, make perfect sense. "The supermarkets are a major part of the business and community structure and they recognise the importance of the long-term survival of these communities for the future of their own businesses," he says. Yet Sainsbury has not managed to convince everyone it is benefiting small shops. Alan Wyle, chairman of the National Association of Village Shops, has strongly criticised the chain, describing SAVE as a short-term PR stunt which offers the shopkeeper nothing. NAVS has, however, thrown its support behind the Somerfield scheme. Trials with two independent stores are continuing under the watchful eye of Somerfield's trading controller Ian Roope. A spokesman says that, despite a delay, around 800 outlets have expressed an interest. When it is launched across the country, independents will be able to order order own label and proprietary brands by phone, fax or computer and, unlike with the Sainsbury scheme, the products will be delivered to urban as well as rural areas, and a returns policy will exist. "End retail prices will be set by the retailer ­ who will of course need to make a profit ­ but will be in line with similar businesses. Goods will be more expensive than in our supermarkets but for most rural dwellers and those without transport, the convenience will more than offset the costs and time involved in travelling," said Roope when the scheme was unveiled in March. Wyle says there is no comparison between the Sainsbury and Somerfield schemes. "Somerfield has realised that its lorries are driving past or close by small shops all the time, while the flexibility to buy in small volumes might encourage the cash and carries to reduce their prices which would further benefit local stores." The wholesale and cash and carry sector is not yet up in arms about the supermarket schemes ­ the volumes involved and the number of stores taking part are as yet tiny. But concerns are mounting. The effect on the wholesale supply chain worries Trevor Dixon, chief executive of the Association of Convenience Stores. He believes the Budgens Local initiative offers the best solution to his members. This franchise programme was launched at a 2,200 sq ft store in Aylesbury last month and there are plans for at least 50 more stores over the next two years, all over 1,500 sq ft. "Budgens is offering a total package and not just own label, but c-stores must decide which of the schemes are the best for them," says Dixon. "If we assume those in the supply chain should invest in the wellbeing of their retail outlets, then it is the wholesaler and cash and carry outlets that should invest in our members. "This includes retail assistance not only in category management but in other areas such as computer based training for staff. The Sainsbury and Somerfield schemes don't offer long-term investment in the supply chain which could ultimately be undermined." Booker's merger with Iceland in March puts it in something of a grey area. Iceland own label has started to appear in its depots, so while the Booker boys may be happily berating the multiples' lack of commitment to the independent sector, they are hardly the unfettered ally they would like to convey. Despite the Iceland distraction, marketing director Stephen Sharp is putting a lot into his battle cry. The supermarkets, he points out, are not producing a sensible strategy to help small shops unlike the cash and carry giant. "Independents are our lifeblood and our businesses go hand in glove," he says. "Our proposition meets their needs and we do many things to support rural and urban shops and they know that. We are their allies while at the end of the day Sainsbury, Somerfield and Budgens are their competitors. Yet we are not arrogant or complacent, and if the trading situation changes with what we are seeing at the moment, we will amend our strategy to compete." Retail analyst Clive Vaughan of the Corporate Intelligence Group believes independents have every reason to be sceptical. As he points out, the Booker tie-up gave Iceland fulfilment sites for its home shopping operation. If Booker concentrates more on this in the future, where does that leave its relationship with independents? However Verdict's Godliman says there is no doubt we have seen just the start of more hybrid agreements between multiples and independents. Village and corner shops are ideal pick-up points for supermarket net orders. Independents could charge a commission and Sainsbury, like the others, says it is an idea under investigation. Dixon believes such a scheme would draw people into c-stores and increase sales of fresh produce, one of the poorest performing lines for the sector, and one of the most poorly serviced by the independent supply chain. For the independents happy to stock branded products from their supermarket rivals, the natural next step could be to become franchise holders for the multiples' brands. This appears improbable in the short term because, unlike in the US and Japan where such retail franchising deals are common, the costs likely to be demanded by the main franchise holder in the UK would probably be too high for most independents working on very tight margins. Verdict's Godliman says: "It is unlikely we will see the big supermarkets going down the franchise route because they do not want to lose control of their brand. The own label initiatives make more sense because they still get a revenue stream from the shop and cut out their competitors. Franchising is a very risky business for strong brands." Sainsbury has already ruled out asking SAVE stores to become franchisees. "We are playing a complementary role by allowing shops to stock the Sainsbury's brand. There is a fear that if a local shop were branded Sainsbury's, consumers would no longer view it as the community store, and that is not something we want," says Geraldine Gono. Rural village shops and stores in deprived urban areas may have different customer profiles but both face a constant battle to run profitable businesses. If schemes could be devised to suit everyone, linking with the supermarkets might not only increase foot traffic into a corner shop from a grateful community but ultimately secure a store's trading future for many years to come. However these are very early days and the supermarkets could well decide they have bigger ­ less quarrelsome ­ fish to fry elsewhere. {{COVER FEATURE }}