Peter Jones: Keeping the customer satisfied

Lack of customers with money is the big problem for shops, vouchers for the poor could be an answer

WINTER’S winds along the High Street are already exceedingly chilly and not even Christmas seems likely to bring much warming cheer to the average shop-owner’s heart.

There are no obvious ways in which the retailing gloom can be lifted save for a big VAT cut and that, thanks to the government budget deficit, seems wholly improbable. But with some ingenuity and imaginative thinking there might be small micro-ways of making a difference.

Recent statistics telling of a severe frost gripping the High Street are a sign, I fear, that we are already in a downturn which may well turn into another recession. According to the British Retail Consortium, the number of people visiting Scottish shopping areas fell by 9 per cent between August and October compared to last autumn.

Sampling of shoppers’ opinions also suggests that people are cutting back hard on what they expect to spend this Christmas, with both the number of presents and amount of money spent on them slashed. These figures and anecdotes say that despite an awful lot of retailers’ best efforts to offer discounts and other ways to lure in trade, people are resolutely staying outside.

I confess to a bias in my shopping habits. I prefer small shops and family businesses. Generally, you get good service, help and advice. I don’t like big superstores much because you can spend ages wandering around before you find someone who can help you locate what you want.

These are, I admit, not universal truths. I recently went shopping for some items I needed for awkward little jobs about the house. Alright, I was only spending about £40, the profit from which isn’t going to pay for any retailer’s Christmas turkey. But hey, I figure that if you make a small sale and a satisfied customer, that customer is likely to come back and spend more.

I visited two shops, both empty of any other customers, and explained the problems.

In one, a sullen man listened silently, trudged about the premises, peered in a few boxes and eventually produced something which wasn’t going to do the job. I explained that, and with much heavy sighing and facial indications that I was a complete idiot, he eventually produced something which did do the job. Next time I visit, if I ever do, I’ll wear an elephant skin.

In the second shop, proclaiming to be a specialist retailer, an even grumpier man produced things which were totally useless and then told me that what I wanted wasn’t made by anyone.

Of course it is, and it is available in most big DIY stores, as I found out after half an hour of searching inside one. Experiences like these make me, however irrationally, begin to grudge the Scottish government’s small business rates relief scheme.

Aside from a few shop-keepers who have not yet got the message that they are in a service business, the High Street’s problem is lack of demand or, in plainer terms, a lack of customers with money to spend.

The shortage of money to spend is caused, yes by the recession, but more particularly by four things. Real incomes have shrunk, more of households’ squeezed budgets is being consumed by higher energy costs and other inflation, people fear that worse is yet to come including job losses, and credit is no longer as freely available as it used to be.

The stock of credit card and similar consumer debt which grew during the good years, reaching £210 billion in the UK in June this year, is now weighing down not just individuals, but banks too.

In the first three months of this year, banks wrote off £866 million in credit card debts, one reason why you and I no longer get those absurd mailshots from banks we have never dealt with before urging us to take out a credit card account.

So all that spending which was fuelled by expanding credit card debt has disappeared, meaning that a downward shift in spending patterns is taking place, which might as well be regarded as permanent. In time, when the economy resumes growth, spending will also grow again, but not to previous levels.

Can anything be done? Some have been suggesting an apparently absurd idea – that the government, instead of giving money to the banks in the form of the Bank of England’s quantitative easing (QE) programme, should just give money to poor people.

QE is the Bank of England’s invention of money out of thin air by buying government bonds owned by the banks. The hope has been that the £275bn in cash the banks are getting this way will be used by them to lend to small businesses, mortgage-seekers, and perhaps even credit card holders, thereby stimulating the economy. The problem is that it doesn’t seem to be working, certainly not as well as has been hoped.

Poor people, on the other hand, are very likely to spend any money they get. To stop it being spent on booze, fags, and the bookies, you would hand it out in the form of vouchers, redeemable for groceries and maybe furniture.

To prevent bureaucratic job-creation, the vouchers could be given out with welfare and student loan payments, and banks made to handle the accounting for nothing when they get the redeemed vouchers along with retailers’ takings.

Ridiculous? Actually the UK government does it already, but only overseas. According to the Department for International Development, its aid programme for India includes “newer forms of financing that put purchasing power directly in the hands of citizens (poverty-targeted vouchers and incentive schemes).”

Since some of our cities have areas where poverty is at developing-world levels, putting purchasing power via poverty-targeted vouchers in the hands of those citizens might just work. (I am not suggesting that foreign aid should be re-directed domestically, rather that this should be a wholly new short-term source of money).

I can think of other ideas as well, involving voucher payment for voluntary work and groupings of high street and shopping mall traders banding together to offer top-up discounts for voucher payments, that would magnify the effect of such a scheme.

It’s all a bit hazy and perhaps full of problems, I concede. But what works in India might work here. Such off-the-wall ideas are needed if our high streets are not to be permanently damaged by this recession.