The way rates are calculated is wrong
In our April issue, I recounted Thair Majid’s view that the Valuation Office Agency (VOA) got its sums wrong when calculating business rates Thair put it down to the percentage the VOA takes on tobacco.
John Stevenson, MD of Stevenson Group, headquartered in Stockton, says he read the piece with interest.
"I, like Thair, have had a substantial increase in my rates at one of our sites resulting in them more than doubling. Having investigated the cause of this it would appear that it is the shop that, in my opinion, is calculated incorrectly/unfairly. The VOA apply a blanket 5.5% charge to shop turnover (excluding lottery and PayPoint).
"My family have been involved in petrol retailing for nearly 40 years and have experienced the many changes within the industry and in 2010 we decided to take the plunge with a full knock down and rebuild at our main site, forfeiting a car wash and jet wash to build a large shop with plenty of parking. In my opinion the doubling of our rateable value (RV) is a direct result of that investment.
"As an example (rounded figures) excluding any fuel RV, our shop RV including stores and offices calculates at £222sq m. Aldi less than half a mile away pays £139sq m and Sainsbury’s that sells fuel less than a mile away pays £175sq m. So if I used Sainsbury’s RV on our shop our rates would be £19,000 cheaper and if we used Aldi’s our shop RV would be £33,000 cheaper. How can we be competitive? These guys have bigger buying power and more centralised costs probably adding 5% to their margin (assumed)."
He adds that his business can no longer sell bread and milk at £1 and can’t even run the c-store symbol leaflet due to some of the front page deal margins being lower than the RV charge.
"These deals were a crucial part in driving footfall to our store. Any forecourt retailer over the past seven years selling price-marked cigarettes probably sold them at a loss. Today 52% of our tobacco income is taken by the RV charge and now the higher margin 10s have disappeared I foresee this rising to 60%."
He lays out the problem as he sees it: "Assume we make a 21% shop margin and our wages run at 12%, the RV charge at 5.5% and electricity at 1.5%, that’s 19% of our 21% on only three overheads. How do we pay for maintenance, telephone, water, insurance, bank charges, bank interest, credit card charges etc? Our shop requires 85-90% of the above overheads so even if we apportioned some of these to the fuel the shop would still trade at a loss!"
I can only agree with him when he says that the fundamental way his shop’s RVs are calculated is wrong and this system directly penalises investment in stores.
"Why in our industry are we the only ones to have our retail shops rated on turnover?" asks John. "As a starting point Thair makes a good point that if we drop the percentage applied to tobacco to take more like 20% of our income, that would be a help but not a complete solution."
The PRA and ACS, both of whom lobby hard on this subject, are aware of the Stevenson Group’s situation.
Can you recommend a good POS supplier?
Last autumn I reported on the 18 months of grief that Pearl Motors in Sheffield had suffered with its computer, till and back office supplied by Htec.
Owner Andrew McDonald said that loss of links between back office and till meant everything had to be backed up, there was a lot of lost data. It was a long list which added up to literally hundreds of calls to the supplier.
By this February it was better but Andrew was still experiencing weekly issues. His wife couldn’t reconcile the accounts and the store still couldn’t take Chip and PIN (leaving the business at risk). He was looking for compensation. He had been offered £2K but thought that all the aggro was worth twice that.
When I caught up with him last month he said that he had been to the Forecourt Show "and I asked around and found that no one gives a 100% guarantee". He took the £2K compensation in the end but adds: "Then they want another £2K a year £50 a week for ongoing upgrades. I’m not a happy customer but I guess I’ll stick. They’ve got me by the short and curlies."
So, is there anybody else out there with a single-lane checkout and joined-up epos that works a treat? I only ever hear from retailers when it goes wrong.