Saturday, 11 April 2015

So what exactly is wrong with Costa Coffee? Why national chains are important to the high street


Some long while ago the New Economics Foundation wrote a report where they coined the term 'clone town':

The report shows how retail spaces once filled with a thriving mix of independent butchers, newsagents, tobacconists, pubs, bookshops, greengrocers and family owned general stores are fast being filled with faceless supermarket retailers, fast-food chains, mobile phone shops and global fashion outlets. 

The report has been remarkably influential - it combined our like for traditional high streets with something that pretended to be economic analysis. From out of this idea - an a host of subsequent reports - has come a new model for the high street where words like 'sustainable' and 'resilient' abound, and where jolly bunches of community activists and local 'independents' create delightful people-focused places. It is quite idyllic and, if you go to well-healed market towns in Oxfordshire or North Yorkshire you see the model in action.

One such place - in Devon as it happens - is Totnes. I wrote about how the local planning and development agenda has been captured by a group of green activists calling themselves Transition Town Totnes. There was even a petition to the town council setting out local concerns around this capture:

While no one in the Totnes has voted for TTT to dictate town policy, it has enormous influence over town planning policy and the future economic direction of the town. No one in the town voted for TTT to run policy, and it is quite wrong that Totnes Town Council took the unilateral decision to become give us the label of a Transition Town. In fact, if TTT continues to implement its damaging policies it will succeed in turning Totnes centre in a ghost town and make all our lives far more difficult. We want choice, not just TTT's choices.

The whole thing came to a head because Costa Coffee submitted an application to open a coffee shop in the town. There were petitions against signed we're told by 12% of the towns residents as well as by folk from nearby communities like "Edinburgh, Glasgow, Kent, Leeds, London, Manchester, Norfolk, and Surrey, Australia, Canada, France, Germany, Italy and even Morocco".

The upshot of all this was that, despite getting its permission (quite rightly since planning is concerned with the use not the ownership), Costa decided not to open up in Totnes. And, as a result, Totnes lacks that little bit extra choice and variety. However, my question is rather to enquire what it is that is so wrong with Costa Coffee that its very presence in a small Devon market town would drag that place down?

The main protagonist here is a chap call Rob Hopkins who believes that his rather peculiar idea of 'resilience' is more important than that pesky thing called choice:

"Choice" is one of those motherhood-and-apple-pie words which can surely only be a good thing, can't it? We all love "choice". It is, of course, ultimately your choice whether you buy your coffee from an independent local business or a chain such as Costa. But would opening a chain in a local economy introduce more choice, or ultimately lead to less? Would it lead to job creation, or to greater job losses, to job displacement? Would the chain support the local bakers, farmers and services that enable more money to cycle locally and give a local economy its robustness?

Here we have the essential argument of the transition town people - that businesses like Costa Coffee don't create jobs and use low cost suppliers from some place other than the 'local' economy (however defined). The idea of resilience - robustness in the quote above - is, for Rob and his pals, predicated on limiting choice through a model of local protectionism. And, of course, as with any form of protectionism, this model results in higher prices and less choice. For high income residents of these market towns such things are affordable but for the poor or unemployed the supposed resilience comes at a cost since they are less able to afford what is on display in the stores as a result of the transition town policies.

I'm not so sure that this argument is right. It rests on two beliefs - that the local multiplier is significant and that substantially more of the money spent in an independent retailer 'cycles locally' as Rob Hopkins puts it. Both of these arguments are open to challenge. Firstly the multiplier, while an important concept in economics, is challenged as a measure in local economics because of leakages and the difficulty of measurement.

There is, however, a more fundamental objection - this is that any benefits from more money staying locally are more than wiped out by the higher prices that results from excluding chain retailers. The New Economics Foundation multiplier model (LM3) doesn't take account of higher prices as it only measures spending downstream. And these higher prices represent an opportunity cost - the consumers' money isn't going into other local spending as they are having to pay those higher prices. A complete assessment would subtact this opportunity cost from the calculated benefits from the LM3 calculation.

The second objection is to the idea that substantially more money remains in the 'local economy' where it is dominated by independents. After cost-of-goods the biggest costs for a retailer are the premises and the employees. We can't assume that the rent is recycled, energy costs certainly leave the local economy as do any repayments on business loans, and there is a significant chunk of taxation (VAT and business rates in the UK). There's nothing to indicate that the employee in a Costa is less likely to spend locally but again most of that employee's costs - tax, rent, energy - leave the local economy.

Finally we need to challenge the idea that "the reweaving of local food webs, community-owned enterprises, a culture of entrepreneurship focused around community resilience" is somehow a stronger local economy than one which is linked with the wider national and international economy. When disaster strikes distributed and networked chains are better able to respond. Here's the example of Wal-Mart after Hurricane Katrina:

It is no accident that Wal-Mart had a strong, measured response in the aftermath of Katrina. Numerous local and state government and law enforcement officials credit the company with providing the first relief efforts in the devastated region, days before Federal Emergency Management Agency (FEMA) and Red Cross relief operations began.

“Wal-Mart was a lifesaver here in the city of Kenner,” says Phil Capitano, mayor of the New Orleans suburb. “They mobilized and brought food and water when others couldn’t or didn’t know how to get through. They provided anything we asked for when FEMA or no other federal or private organization did. And for that, we are deeply grateful.”

This large business with an international distribution network could respond - had there only been independents such a response simply wouldn't have occurred. And while coffee shops are less important in a disaster than grocery stores, this is a reminder that the approach to 'resilience' promoted by the Transition Towns movement is a false one - not only is it less able to respond to crisis but it is also predicated on higher prices and less choice.

There may be many reasons why Rob Hopkins and his friends don't want to drink in Costa Coffee (although beyond under-strength coffee and bad biscuits I can't think of one) but there is no reason for them to gang together so as to prevent people who might want to drink their coffee in big white cups on an off-centre saucer from doing just that. And suggesting that tourists wandering into Totnes will head to Costa rather than one of the delicious little independent cafes the town is so proud of says very little about those businesses' marketing and service offering (probably unjustifiably).

The 'clone towns' report was important and influential. But we have taken the wrong message away from it especially in a changing retail environment. Since 2005 we've had a massive recession tracked by the explosive growth of on-line buying. As the economy recovers it's unlikely that we will see a return to the sort of high street we saw before 2005. In some ways this is a good thing because we get to treat the town centre as a destination, as a place for events rather than as merely somewhere where we go shopping. But chain restaurants, bars and cafes are just as much part of the future mix as are a variety of creative independents.

Right now the only places that can sustain the sort of retail mix that Totnes is celebrating are either wealthy market towns, posh suburbs or places with a large visitor footfall (and the right sort of visitors). Most places are a very long way from being able to indulge in the slightly snobbish exclusivity that is implied by the Transition Towns idea - indeed many high streets and town centres are more challenged by what to do with a growing number of empty shops (not to mention proliferating betting and borrowing establishments).

Instead of the negative, Stop Costa, Stop Tesco, Stop Wetherspoons, approach places should look to the barriers to new initiatives - setting up bazaars and markets, encouraging busking and peddling, promoting street food and pop-up bars and using the public spaces as a stage for events that help attract people into the town. What we must stop doing is arguing that national businesses damage local economies when there is precious little evidence to make that claim.


1 comment:

Carl Minns said...

Interesting post and i support the thrust of your argument.

A minor point though. When you talk on cost I think you are a little out. The chain retailers are not cheap. At best there are no more expensive than local independents but compared to many, especially your cafe types you normally pay a premium.

In this respect chains are not like the large supermarkets where the customer benefits from economies of scale but more like the smaller chains who charge a premium for convenience

Oh....I find Costa decently strong. Now Starbucks, thats just flavoured water! :-0