As industry data appears to show that local shops in the UK are resisting the expansion of the multiple grocers, a possible reason for their success may be contained in an analysis written by FT writer Tony Jackson of the problems big banks face.
“Most economic activities work best if people on the ground are free to make decisions,” he says.
In the world of banks, decision making has been centralised, he argues. As training local people is expensive, the banks prefer to build mathematical models of the world that they can control from the centre. This is why they prefer to invest in mortgages, which can be commoditised, rather than in small businesses, where local knowledge is needed.
When the world fails to meet the model, problems arise. This is why banks in the US often do not have proper records of the loans they have made. This is why they cannot tell the difference between someone in a secure job and someone who is just about to be made redundant.
“Proper banking requires an army of trained workers. That slows things down. But if you reduce everything to mechanistic models and harness them to modern computing, it goes turbocharged.
In the world of supermarkets the same drift towards centralised decision making also applies. While chief executives make noise to praise local managers for using their initiative, the trend is towards more and more centralised decision making. If they follow the turbocharged model, then they may not be able to properly assess the local demand.
This creates an opportunity for local independent retailers, armed with their own skills and knowledge, to provide a better service to local shoppers and win business. While some of the things you sell – lottery tickets, for example – are capable of being commoditised, there is a great deal that is not and where your sourcing and merchandising skills can win you the business.
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