Recently betterRetailing went to visit award winning independent retailer Rav Garcha who operates a number of stores in and around Birmingham.  One of the many things we discussed was Rav’s love of social media to connect other retailers and industry figures and share ideas.  He told us about one particularly interesting twitter exchange with retail analyst Neil Saunders where he ended up having an impassioned discussion over the role of government and the free market.

Retail Newsagent’s Tom GK reunited the two to hear more of what they had to say.  Here’s the exchange in full.

RETAIL NEWSAGENT Earlier this month you had an impassioned debate on Sunday trading. What set this off?

NEIL SAUNDERS My original tweet stemmed from the fact that I was browsing, surrounded by staff, in John Lewis, but was unable to buy anything because of Sunday trading regulations. It’s ludicrous that this archaic law imposes these kinds of restrictions in today’s 24/7 culture.

RAV GARCHA The argument about 10am regulations for shops is very similar to the one that we have on Sundays when we are open but cannot sell alcohol. We adhere to that law because it’s there for the good of the public. Similarly, this law offers government protection to small businesses.

NS The restrictions on alcohol should be lifted too. The fact that you can’t sell alcohol before 10am is absurd. A customer could be coming in to buy a bottle of wine for their dinner because they won’t have time later on. I don’t only believe in lifting regulations which help larger shops.

RG If we were taking that free market approach there’d be a lot of situations where larger companies, rather than government, would be guiding the direction of the country. Independent shops are an important part of this country’s identity.

NS This point about the government is interesting. I wonder whether independent retailers should sit down and accept the business rate increase that they’ve been given by government. Often, government doesn’t act in the best interest of the business economy.

RN Is this the right time to be removing something which is helping so many businesses during the recession?

NS I don’t understand the argument that a restricted level of Sunday trading is a saviour for local shops because the number of hours we are talking about is very small. If independents are relying on such a small window of time – if that’s their margin between success and failure – then that business isn’t robust in the first place. The biggest threat to smaller independents is the grocers entering the convenience market with small stores where Sunday trading rules do not apply.

RG We’re quite lucky that we’re doing okay generally, but for us, Sunday is a day where we see sales of everyday and other items rise across the board. We see a lot of mothers buying lunchbox items for their children. It’s also the day of the family roast dinner and that means a lot of chilled and fresh produce. Sunday is our most profitable day and we saw how a 20% dip in sales affected us over the Olympics when larger stores were able to stay open all day. The ACS has calculated that could mean £1,500 per store.

NS Looking at the ACS figures if that’s per week then that’s a £3.12bn hit which, given the size of the grocery market, I don’t believe is right. If stores are making £3.12bn because of Sunday trading they must account for the vast majority of grocery sales in the UK, which they don’t.

RN Whether or not you agree with the figures, Sunday trading laws clearly benefit independents.

twitNS I would ask whether that uplift is purely due to regulation. Sunday has a different dynamic for people. Nobody wants to get in their car and drive 10 miles to pick up bottles of milk. That’s not going to change because we remove regulation.

RG Convenience stores give more money back into their communities. The multiples tend to give 40p per pound back to the community through wages and so on whereas, for independents, that’s 60p to 70p. That’s a powerful difference.

NS Those figures come from the New Economics Foundation and it’s relatively true – independents do have a vibrancy that they can inject into the local market. How much do local businesses give to Britain’s pension pots or the tax fund that contributes to the NHS, though? The answer is not that much. That’s fine because they’re not there to do that; they’re there to make a living for themselves and their families. The big stores contribute a huge amount to government coffers and pension funds, however. The trouble with that argument is that it may be true but it doesn’t take into account all of the other funding paid by the larger retailers which then goes on to help people in the local community too. Both bring good and you can’t say that one is better than the other.

RG But then you look at Asda, they’re owned by Walmart so their profits are going to America, whereas with an independent store at least the profits will stay local.

NS It is an issue for some, but if you’re talking about Asda, they paid £163m in corporation tax last year. I wouldn’t say it’s a paltry contribution to the UK economy, especially as their American ownership means that they could fiddle it to pay less.

RG It’s a reasonable amount based on their profit and turnover. I pay taxes every year based on the profitability of my business. It’s not that we do better or worse, but local businesses are in a far better position to support local needs.

RN Whether you agree with removing Sunday trading rules or not, is this really the right time to do it?

NS It wouldn’t be at the top of my priority list, no. There are many more things that the government needs to do. It needs to get taxes and business rates down for all businesses, especially for retailers. It also needs to stop regulating and interfering with labour markets and to reduce national insurance. Having said that, as a part of a wider repeal of regulations and red tape, Sunday trading is definitely something worthy of consideration. If we get rid of the regulation some retailers would be a little worse off, but all would benefit from lower business rates. It’s about reducing government interference in retail.

RG If it was removed now it would be just an additional problem to deal with. It’s slowly becoming the fourth major issue for convenience stores today. First is looking for a cap on business rates, second would be spiralling energy costs, third would be employment costs. A very close fourth now is the protection of independents. There’s been little protection for pubs and many are closing.

NS Let me come back on that. There are two principle reasons why pubs have closed, both government driven. The first is the smoking ban which has driven down footfall enormously, and secondly the duty which is applied on trade sales which has driven people out of pubs for cheaper alcohol. I dispute that pubs are in decline for a lack of government action: they’re in decline because government has put forward regulation that has destroyed livelihoods.

RN Do you think it’s likely that we will see the regulation repealed in the near future?

NS I don’t think there is a chance of this legislation going through: the government has more important things to do. It doesn’t have a broad consensus in the Commons. Mrs Thatcher was the first person to try and get it through in a serious way. She had a huge majority and she still couldn’t get it through because of extensive opposition from the church and the Labour Party.