Memorandum by Michael Felton Associates
(MARKETS 05)
A. SUMMARY AND
CONTENTS
— The difference between local authority
markets (the municipal sector) and the non-local authority markets
(the private sector).
— The distinction between covered markets
(the "Indoors") and the uncovered or open markets (the
"Outdoors").
— The last 10 to 15 years.
— The specialist markets.
— The route to stabilisation.
— Socio-economic effects and their benefit.
— Future prospects—the next decade.
It is to be noted that we have directed our
expertise to the above subject matters only where it is felt that
our comments would assist the committee—not least the background
detail in paragraphs B1 to B3 inclusive. The name/location
of markets as businesses are set in italics.
B. COMMENTARY
1. Type of market operations—municipal
and private
1.1 The municipal markets both "Indoors"
and "Outdoors" are operated by local authorities and
are based on custom; royal charter; local acts of parliament passed
in the 19th century or under the Food Act 1984. The private sector
principally operates in the "Outdoors" arena with the
operators being individuals (ex traders or entrepreneurs); charter
holders; quoted and non-quoted companies. The bulk of the private
sector sites are held on licence or short lease from local authorities
who own the car parks; the central squares; the pavements or streets.
1.2 The industry's broad calculation is
that approximately one thousand one hundred separate markets are
trading today—roughly some 70% are in the municipal sector
and 30% in the private sector. It is thought that some one thousand
five hundred traded 12 or more years ago. This statistic
is misleading in that the municipal "Indoors" will usually
trade five or six days per week whereas the private sector mainly
operates "Outdoors" often on a one to three day week.
The footfall percentage in the municipal sector is therefore much
higher than 70% unit ratio. Therefore the overall footfall volume
may be up to 85/90% of total visiting for the municipal sector.
2. INDOORS AND
OUTDOORS
2.1 The "Indoors" represent the
bulk of market trade are almost all owned municipally. Many are
in splendid Victorian structures (Cardiff; Halifax; Leeds;
Newcastle; Newport, Spitalfields) or in the post war
modern period (Birmingham; Bradford; Liverpool, Plymouth; Warrington).
The "Indoors" are the significant part of the industry
by providing all-weather cover; some element of heating; toilet
facilities; a degree of security for the traders; six days or
a minimum of three days per week trading; fixed premises for cafes;
snack bars; chill rooms; office areas; storage etc.
2.2 The "Outdoors" are operated
in both trading sectors. In the municipal sectors often attached
to an "Indoors" unit eg Blackburn; Bury; Oldham
or "Outdoors" Cambridge; Newark; Norwich; Mansfield.
However, a substantial part of the "Outdoor" sites are
operated under licence from the local authority by the private
sector. There is scarcely a town in the UK that does not have
the benefit of a one or two day a week market—these are
too numerous to mention.
3. THE DIFFERENCE
3.1 These differences/distinctions are important
to understand their significance to the industry.
3.2 The profit motive drives the private
sector while the municipal is prepared to support its market on
social; economic; political; historic grounds. This is not to
gainsay that the municipal sector does not have immensely successful
outlets and achieves an annual surplus.
3.3 Notionally a municipal market provides
a surplus for the local authority and a margin for the trader.
The private sector requires a triple "profit" as the
operator also requires one. Paradoxically, the private sector
produces a larger percentage of gross income as profit as cost
control is strict. Local authority finance rules add back "capital
transfers" ie a hypothetical rent on its own property thus
reducing any surplus AND a prima facie "undue" (our
view) percentage of the central costs ie senior officers time/central
costs etc. etc. Our experience is that only their treasurer's
departments know how this is calculated.
3.4 The municipal sector invariably has
a hierarchy of council officers at four or five levels. The private
sector has immediate decision making as the businesses are relatively
small. Local authority control often rests with a members committee
which again, in our experience, does little or nothing to improve
a market's performance being primarily concerned with attaining
a surplus or avoiding a subsidy. It is noticeable that the committees
are taking more interest in performance of late.
3.5 Within our knowledge it is clear that
many municipal market traders have obtained security of tenure
and therefore subject to the legislation on occupancy. The private
sector cannot and will not provide this as their interests are
conditioned by a short period of legal occupancy—ie three
to 10 years—often subject to a negotiated renewal.
3.6 Overall, publicity and promotion is
more effective in the private sector. Principally because LA (Local
Authority) efforts are usually contained within a council's total
publicity package and therefore less prominent and less well directed
to the public.
3.7 The phenomenon of Sunday markets is
mainly in the hands of the private sector ie Bovington
(Herts); Blackbushe (Hants); North Weald (Essex);
Ingleston (Mid Lothian); Wembley (Greater London).
These can and do achieve a take-up of thousand unit plus. Local
authorities say that they do not have the labour available to
operate these! The reality is they do not own a sufficiently large
area of land for these purposes—ie former aerodromes; farmers
lettings; derelict/cleared sites.
3.8 The object of this paragraph (No. 3)
is to demonstrate the variety in market operations, ownership
and management and to infer that no single panacea is the answer
to the industry's problems.
4. THE LAST
10 TO 15 YEARS
4.1 We have deliberately extended the time
period as it is our firm belief that the industry's gradual decline
is at least 15 years old. We bring to the committee's attention
an article we published in the Estates Gazette (14/3/98) which
wherein we highlight on page 3 the multiple causes of negative
growth (Appendix E.G.) To add to this list we would mention e-bay
sales and the use of extensive cataloguing Argos; Freemans;
Great Universal; Littlewoods and surprisingly Tesco.
4.2 These pressures have continued. It is
a matter of great concern that the pace and range of competition
has increased.
4.2.1 The supermarkets have grown in number and
size well before 1998. The benefits are obvious—substantial
parking space (free); indoor comfort; modern toilet facilities;
payment by credit cards; provision of trolleys; AND we emphasise
the increase in non-food/drinks products—clothing/footwear;
household goods/gardening etc.
4.2.2 In parallel the National Market Traders
Federation (NMTF) is likely to point to an increase in membership
but we say that this is entirely due to the insurance cover they
are able to arrange, encouraging membership
4.2.3 The discounters—Primark; Poundland;
TKMaxx; Wilkinsons are a growing threat—again selling a
vast range of goods competing directly with the traditional market
and providing a relatively comfortable shopping arena.
4.2.4 The lack of investment in markets in contrast
to the regular refit by chain stores/supermarkets. Local authorities
have been unwilling or unable to invest in the markets other than
a "tarting up" or essential structural repair. Their
markets priorities are (and properly so) at or near the bottom
of the list. Unhappily the "cash-cow" is supreme and
until fairly recently most market departments have been unable
to retain their surpluses which have gone into another "pot".
4.2.5 The shortage of traders is evident from
statistics supplied by LAs retaining us; the number of advertisements
in the trade press (Market Trader/Market News) seeking further
traders; the unwillingness of the younger generation to follow
in their parents' businesses—principally the excessive hours.
A successful trader standing in an open market say on four/five
days which means daily setting up and taking down stalls will
be working a 10 hour day.
4.2.6 Traders are burdened by an inherent lack
of capital and have difficulty in persuading banks—that
is the historical position—in assisting them in expansion.
That situation will be almost impossible today. While there are
many very prosperous traders, their number within the UK market
community is insignificant.
4.2.7 Traders do not have the advantage of powerful
block purchasing and rely upon the small/medium wholesalers whose
numbers have decreased over recent years.
5. EFFECT OF
THE DECLINE
5.1 The above subsection 4.2 (not exclusive)
simply illustrates the problem of the industry. We have already
said that the number of markets (and consequently the number of
market days) has declined.
5.2 The setting up of a new market is a
rarity. There are very few centres of population where a market
does not exist. The set up costs and an initial subsidy period
in both the municipal and private sectors is not one that any
operator would wish to risk today. Additionally there is no certainty
that a sufficient number of traders would be available.
5.3 There is a trend for LAs to outsource
markets to the private sector by way of short-term renewable licence.
We see this trend increasing but fear that some markets will cease
trading or more likely become unviable as early as the first six
months of 2009.
5.4 Although this assessment is relatively
gloomy, the prospects for various parts of the industry differ.
The following comments differentiate between the prospects for
range of markets trading today.
"Indoors"
(a) The large "Indoor" municipal
markets that are centrally positioned are not matters of concern.
We define "large" as a minimum of 150 stalls/pitches
(some have space for 300). Our proviso requires a sufficient mix
of users—ideally 25% foodstuffs' 25% clothing/footwear;
25% household goods/materials/gardening; 25% the balance (including
some odd ones eg cycle repairs at Cambridge; headgear at
Kilburn; tattooing at Coventry). Toilet and seating
facilities must be improved AND investment must be available on
a continuing basis.
For the few private sectors large "Indoors"
repeat the above.
(b) The stability of the medium market (50—100 stalls).
Some will lose traders and customers; others will remain on an
even keel as long as the location is unchanged and management
is positive.
We consider the critical mass occupancy level
is at worst 75-77.5%. Today (2009) the above category achieves
87.5-95%.
(c) The smaller "Indoors" (municipal
and private) we feel are at risk. We define small as 45-50 stalls
or under—often in suburban locations or those where demographic
shift is patent. There is always a point where benefit ceases.
"Outdoors"
(c) The large "Outdoors" in both
sectors will survive but with reduced trader occupancy and a consequent
reduction in footflow.
(d) The medium sized (50-100 stalls)
"Outdoors" in both sectors are at a degree of risk at
the lower occupancy end. A further drop from 2008 figures
of 12.5-15% vacancy is a distinct threat.
(e) The small "Outdoors"—below
50 units—particularly in the municipal sector is at
risk. Almost every small town (10-15K population) in the UK has
a single market day per week. The cost to an LA is utterly disproportionate
to income. The private sector fares better in that (i) its field
management will take charge of several markets in an area each
week (ii) traders will follow an operator in a given area (on
a weekly round) at location in two or more LA jurisdictions (iii)
private sector running costs are extremely tight.
6. THE SPECIALIST
MARKETS
6.1 In the traditional retail markets—we
exclude antiques, second hand materials, arts and crafts, car
boots—there are essentially two specialist groupings—farmers
and continental.
6.2 After an uncertain start the farmers
markets have established themselves. Much depends on how firmly
FARMA (the main organising body) can control these outlets. The
essence of "farmers" is fresh local produce. Ideally
greengrocers, fruit, flowers, fresh/dried meat, dairy products,
bottled food (honey, pickles etc.), confectionery. In practical
terms this is not always possible—an element of "buying"
in foodstuff from far outside for unseasonable goods. Providing
this is minimal then it is bound to be accepted.
Frequency of trade is a problem—nationwide
once or twice a month at a fixed location is the limit of trading
for each market to date.
It often happens that there are, in principle,
objections to doubled up users, say by one cheese producer competing
with another on market day. Paradoxically this may be beneficial
for the customer in that these markets are small—12/15—20/25 units.
Part of their success/survival is this trading infrequency.
In our view they will probably survive if farmers,
horticulturalists, nurserymen continue to see a margin in their
efforts. As at today it is accepted by LAs that there is no profit
for them at all and in some cases a loss (advertisements/cleaning
costs)—effectively a site subsidy.
6.3 Continental markets are a success. Part
of this is due to their infrequency. They will trade for two to
four days—often in a prime position not always available
to the traditional market. The French traders are by far the most
creative with smaller numbers from Holland and Germany. Their
UK customers are from ABs—Ds; their offer is not cheap—but
the excitement they generate for olives/gherkins; vast range of
cooked/preserved meats; cheeses; sweetmeats; leather/linen goods;
bottled drinks; preserved foods is considerable.
Their ability to trade afar is helped by the
excellence of their purpose built vehicles (never seen in the
UK) which are an engineering speciality; and their capacity to
resupply from abroad. This enables the traders to stand at a number
of locations over a period of weeks.
Briefly, their impact has been considerable
on the UK public—more so on with the ABs. Nonetheless C-Ds
patronise these outlets and are known to travel distances for
the occasional markets.
6.4 Whether these resources of both farmers
and continental markets can or will integrate with traditional
markets remains to be answered.
6.4.1 As to farmers markets, on the whole after
initial "differences" both sets of traders recognise
that each benefits the other. But traditional traders are hesitant
about the fairness of costs to trade together and the greengrocers
(the absolute sine qua non of any market) still resent a rival
presence. We suspect there could be considerable trouble if farmers
markets become a weekly event. We consider this unlikely at this
time.
6.4.2 As to the continental markets here there
is more difficulty. Not only are the continentals privileged—location,
subsidised rentals in general; effectively free advertising (by
LA). However, the public are very keen on these and the benefit
to an area is obvious.
We are aware of only one such market being held
at the same time as the traditional markets. This is St. Albans.
The regular market is held twice a week, is highly successful
and runs along the north west side of St. Peter Street; the continental
market is in a more spacious area on the other side of the street
usually with a fine display of French and North African food products
(and an "on the spot" mobile bakery!) and local clothing
items. Against a very successful operation but no sign of integration.
6.4.3 We have left out any discussion on the
one-off Christmas markets which are unique in themselves.
7.0 THE ROUTE
TO STABILISATION
7.1 Given the problems above and the pressures
on the industry—one asks what can be done? At this point
there is a distinct difference between the municipal and private
sectors.
7.2 The private sector
7.2.1 The private sector breaks down into
two large organisations; seven or eight medium/medium large businesses;
and a fluctuating group of operators with one to three markets—around
10 to 15 in total.
7.2.2 Capital investment demand is low as
"Indoor" units in this sector are few—possibly
10 in all. Profit margins are greater than the municipal
sector as a more commercial approach applies. If a market is failing
and is increasing in deficit then any decision for action is commercial
and quick.
7.2.3 The private sector has the advantage
of a "traders round"—ie the availability of a
trader to work at four/five or even six markets at different locations
on different days of the week. The locations will often be within
differing local authority jurisdictions. The operator's porter/market
superintendent will work at each market. The system encourages
swift mobility of labour and reduces management costs.
7.2.4 The heaviest cost today is stall ownership
on the "Outdoors" units which as stated are the bulk
of private sector operational sites. There is an increasing trend
for the private sector to encourage or insist on traders using
their own stalls. If the operator owned stalls, it would have
to bear the cost and maintenance; transportation from site to
site; assembly and disassembly. The increasing trend is for traders
to have their own equipment. The expense variation between the
sector and the municipal sector is bluntly horrendous (see 7.3.6).
7.2.5 While it is accepted that the private
sector represents a minor share of gross market industry retail/fee
turnover, in our view the flexibility and cost and costing method
advantages suggest that the private sector on the whole has realistic
prospects of steady trading.
7.3 The municipal sector
7.3.1 The need for capital investment is
overriding. Until relatively recently that was either non-existent,
very low and only effected at the last resort. The cost of roofing
repairs, internal structural work, flooring, stall replacement
etc. is patent. Happily (and long overdue) some authorities on
their own accord or with developers are reinvesting—eg Bradford;
Blackburn; Burnley; Newcastle; Sheffield. The Regional Development
Agencies are playing their part in some instances.
As long as this continue and that attraction
within of a city centre is retained then a high level of stability
(ie 87.5% occupancy at the lowest) can be expected.
7.3.2 In addition LAs must accept that some
surplus must (we repeat must) be ploughed back in their market
without the whole surplus being transferred to other departments.
There are signs that internal investment is occurring.
7.3.3 Although there are a number of first
class senior market officers who run tight, successful, profitable
markets, all in the larger towns and cities, they are the exception.
In the case of the smaller towns then a full time officer cannot
be appointed—in consequence the market personnel are multi-functional!
7.3.4 The internal hierarchy is often too
lengthy and officers' proposals can be and are altered or cancelled
by members.
For instance: Market officer (floor level)  senior officer (office bound/accounting)
property officer (RICS or CA)
no. 2 department director
members. Our own experience (12 years plus) is that the officers
at floor level know exactly what is wanted but the higher a problem
rises the less likely it is to be implemented—Q.E.D. !!
This regretfully is typical. It often seems overlooked that markets
are one of the few sources in LAs income.
7.3.5 Promotion and publicity must be re-examined.
It should amount to 3-4% of gross turnover and controlled by the
market section—not centrally where—it is neither understood
nor properly directed.
7.3.6 As pointed out 7.2.4. the cost of
stall supply and movement is substantial. Leaving aside the capital
costs which are depreciated over a period, the expense of moving
stalls—from storage, erect, dismantle, return to storage
is at least £6.50/£7 per stall. This is the heaviest
charge for operators and may change at sometime with traders being
forced to purchase their own equipment—this may take some
time.
For example a small/medium "Outdoors"
of 45 stalls operating twice a week on non-continuous days—say
Tuesday and Saturday (thus needed to clear site on non-market
days)—would incur an annual charge of £33K. A large
five/six day "per week operation will remain in situ only
incurring an adequate security cost against theft or vandalism.
7.4 What can and should be done?
7.4.1 For "Indoors" and "Outdoors"
the approach to publicity and promotion must be replanned. Most
LAs do not seem to appreciate that the retail industry spends
millions of pounds on publicity and promotion—much of it
national on television and other media while an LA has limited
funds and restricted geography so much so that competition is
impossible. Promotion and publicity should not be dealt with by
a council publicity department. Not only does it become virtually
invisible but lacks punch. Promotion and publicity is best controlled
by the market sector and properly directed to where it will be
seen, read and produce results—ie entry to competitions,
discount days, leafleting etc. etc. Additionally a figure of 4%
of gross income should be the minimum to be directed to promotion
and publicity—this does not happen today.
7.4.2 Investment, investment, investment.
No further explanation needed.
7.4.3 A less complicated management chain
is necessary. This may or may not be possible within LA structures
but the need to retain a profitable business and to produce surplus
for the authority is paramount.
7.4.4 Cost definition and control needs
completely revising—we have had the advantage over years
of seeing many markets annual profit and loss figures—we
always ask for four years figures during the course of our retainers—and
to paraphrase—"look upon me, ye confused and despair".
7.4.5 At today (Jan 2009) many small "Indoors"
are at risk—low occupancy, overburdened with excessive capital
costs, increased local competition, retail shift. Equally so many
small/medium "Outdoors" continue to suffer falling occupancy—even
by 40% on 2004 figures. As a result markets are being outsourced
and licensed markets to a private sector operator at Godalming;
Congleton; Sandbach; Waverley. For some years some L.A.'s
have outsourced a medium/large "Outdoors" to their benefit
of Milton Keynes; Rushmoor; Portobello Road (Northern section).
8. SOCIO-ECONOMIC
EFFECTS—THE
BENEFITS
8.1 Our overriding view after some thirty
years in the industry firstly as CEO of the largest market operator
(as it was at the time) and subsequently as an independent consultant
is that it would be a social, community, economic, regeneration,
heritage and political disaster if markets ceased to exist as
an effective force in U.K. trade.
8.2 Social demand
The need for social intercourse with a market
as a meeting place for friends; the relationship between a trader
and his regulars; the provision of service as compared with the
more clinical approach of many large stores and chains, the provision
of underprovided goods—scarce/unobtainable elsewhere eg
haberdashery; the excitement—noise, smell, crowds (pizzazz)—does
not exist elsewhere in UK retail.
8.3 Economic value
(a) Fruit, vegetables and salads are available
at competitive prices compared to the supermarkets (in effect
markets are the only real competition)—(the greengrocers
continue to decline in numbers).
(b) These foodstuffs are fresher spending little
or no time in chilled storage.
(c) Benefit of lower prices for the less well-off
is obvious.
(d) Increased employment as either a whole family
is employed or in the case of greengrocers with a four stall unit—six
or seven persons will be working on peak market days.
(e) Increased indirect employment—waste
removal, surface cleansing, equipment repair and replacement services.
(f) Additional footflow to the market area of
a town or city on market days—Adlershot; Hinkley; Leek;
St. Albans; Salisbury, Sowerby Bridge and benefit to adjacent
retailers. This is particularly relevant to a smaller town of
20,000 population (or less) on the weekly market day. It
is said that the Monday "Outdoors" at Darlington
is the second best trading day that threatens Saturdays.
(g) Income for the self-employed trader.
(h) Surplus (profit) for the LA.
8.4 As and when a market closes or circumstances
(retail shift) alter its popularity these benefits (8.2-8.3) cease
or are curtailed. The damage to a community and its heritage is
considerable—what replaces the market?
9. FUTURE PROSPECTS
9.1 Markets from Babylonian times; the Agora;
the Forum; the Champagne Fairs; charters; local legislation—have
obviously survived but can UK markets thrive in today's conditions?
In our opinion yes, on the following provisos.
9.2 (a) Continuous investment is essential
in structure; equipment and management.
(b) It has to be accepted that markets are not
in outright competition with other retailers but are complementary.
We define this state as the supply of relatively low cost goods
and services; the provision of personal service; the provision
of smaller cheaper units than the traditional shops; the benefit
of the large range of "offer" in one building or place;
a gradual build-up of trader numbers; the need not to upgrade
premises too far and turn them into shopping arcades in the hope
of AB and more CI custom; where possible the use of credit cards
for higher value items; active encouragement by the landlord including
increased or properly directed publicity; improved coordination
between trader and operator/landlords—a plethora of trading
standards.
(c) We realise that this is a formidable list
but effectively is no more than the High Street has to endure.
There are some excellent examples—Bury; Coventry; Blackburn.;
Oldham; Leeds etc. where the key component is the market officer
supported by his LA. These markets are "Indoors". For
the "Outdoors" Barking; Cambridge; Newton-le-Willows;
St. Albans.
(d) In our opinion the small "Indoors"
and the small/medium "Outdoors" will suffer and some
of the latter are likely to close. Overall we see a 5-7% decline
in market numbers from the present approximately 1,100 that
are trading.
(e) We doubt whether the present recession will
improve market income. While the number of ABs and more CIs will
pay more visits regularly, the volume and spend of the traditional
CIIs, D & Es will deteriorate.
(f) Our conclusion is that the market industry
will continue to be subject to extreme pressure but if the elements
in our paragraph (b) above can be broadly met then the tradition
will carry on—even so as the younger (under 40) population
will accept that market shopping while not comparable with other
retail, has considerable benefits.
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