August 11, 2011

London's burning! Aldi, Lidl, Makro going?

Riot In Tottenham (photo: Beacon-Radio-Flickr)
Hoodies go shopping: Rioters outside an Aldi store in North London
A tragic four nights of senseless violence, looting and arson have just passed this week in the UK. Whatever may be claimed to the contrary, the real aim of the hooded underclass perpetrating these crimes was to plunder retailers, especially those carrying sports goods, entertainment electronics and alcohol.

Thus the higher-profile victims have been HMV, H&M, Boots, JD Sports, Foot Locker, O2, Curry's, Argos, Orange, PC World, or Comet, and there have also been attacks on businesses ranging from Starbucks to a Jamie Oliver restaurant in Birmingham.

JD Sports was targeted in almost every location – presumably because the specialist retailer sells recognised international brands of young leisurewear and trainers, to which the feral young thugs aspire to and beyond which many are incapable of thinking.

Instant gratification for neds

However, their misdeeds and indiscriminate destruction have caused small independent local shops, many of them ethnically-owned, to suffer the most. The evident belief of the hooded and masked hoodlums that these are owned by "rich people" couldn't be further from reality. They are family-owned, and these families work very long hours, something the mindless neds would never contemplate in their search for instant gratification.

Richard Dodd, head of media at the British Retail Consortium, claims that the full bill could amount to "tens of millions of pounds in terms of damage to property, goods stolen, and lost business." The Association of British Insurers estimates that its members may face more than €320m in claims.

It must also be asked whether the appalling scenes witnessed on England's inner-city streets will deter or decrease the future foreign direct investment of German food retailers in the UK? When we put this question to Schwarz Group subsidiary Lidl, Aldi Süd and Metro Group Cash & Carry subsidiary Makro, Lidl and Makro UK duly came out with a clear commitment to continuing business in the UK.

Compensation under the Riot Act?

Neither the German nor the British retailers were prepared to answer our questions as to whether they would be claiming compensation from the UK government, for example under the Riot (Damages) Act of 1886.

There was also no response as to whether their insurance contracts covered the damage and loss of business incurred, or whether any such claims were excluded by their insurance companies on the grounds of force majeure. British premier David Cameron has since (August 11) outlined measures to help businesses.

Presumably, all the major retailers will now be obliged to increase their security personnel. Irony of ironies, this extra staff could well be recruited from the ranks of the very unemployed who have been rioting on the streets.

Meanwhile the German retail investors in the UK clearly wanted to avoid any unnecessary dramatisation of the recent "troubles" in their host country.

Lidl expresses concern

Stephan Krückel, Lidl Press and Media, 9th August: "Lidl has been following the events in Great Britain very closely and with concern. On the basis of what we know at the moment, neither staff, nor stores, nor any other property belonging to Lidl has been affected to any major degree."

"Despite this, Lidl has taken preventive measures, and will continue to do so in the future, in order to protect staff, buildings and property. Please understand that we do not wish to publicise such measures. Lidl stands four-square behind its commitment to Great Britain. In no way will this be changed by the current situation."

Only hours earlier, we had heard from a trade press correspondent in the UK: "My Dad works next to the West Croydon Lidl and has been sent home from work because that branch was set on fire."

Aldi confirms damage

True to form, Aldi was even more tight-lipped than its archrival. Kirsten Windhorn, Head of Communications, on 9th August: "We can confirm to you that there has been damage to one of our stores in London. Please understand, however, that we do not wish to answer any of your other questions for fundamental reasons."

Whatever Aldi's definition of "damage", a video clip showing flames around an Aldi store in Tottenham/North London had already been posted on the BBC website since August 7.

Makro closes earlier

A spokesman at Metro Group head office in Düsseldorf was more forthcoming: "All stores in Great Britain are running normally...Our outlet in Charlton (London) was slightly damaged with broken windows. Makro UK is watching the situation very carefully, and four London stores will close earlier in order to protect workers and staff." Later on, we were informed that there had also been a break-in and some pilfering at the company's C&C depot in Reading.

Retail expert Robert Clark, MD at RetailWeek Knowledge Bank in London, considers it very unlikely that Aldi or Lidl could exit the UK as a result of the "shopping riots": "Makro could leave, but probably largely because they are loss-making and not performing too well anyway and because they are pretty marginal to mainstream, multiple-dominated UK retailing."

"Despite damage to individual stores, Aldi and Lidl are far too well entrenched in the UK, with market shares and scale still rising, as well as probably being too profitable to want to depart."

Tesco and Asda downplay looting

With a characteristic British stiff upper lip, the UK's leading retailers were also obviously intent on downplaying the effect of the riots on their own operations.

James Wiggam, Head of Press at Tesco, on 9th August: "A number of Tesco stores in London and other major English cities were affected by criminal gangs of looters and arsonists overnight. Once again we commend the actions of our hard-working and courageous staff in opening all but one of these stores this morning, and we will cooperate fully with the police in bringing these criminals to justice."

Jo Newbould, PR Manager at Asda, on 9th August: "All our stores are open and trading, with the exception of the Tottenham High Road, because access to the store remains closed. The damage last night to a small number of our stores in the London area was very minor."

"We did close early in some locations on police advice and to allow our colleagues to go home to be with their families. We continue to work closely with the police and other authorities."

Sainsbury closes stores

A Sainsbury's spokesperson on 10th August: "As of 6 p.m. last night, as a result of police advice and as a precaution, we closed most of our stores within the (circle of the) M25 (motorway around London). Half a dozen stores were affected overnight, but only experienced minimal damage."

"All stores have opened this morning and are trading as usual. We will closely monitor the situation throughout the day as we did yesterday."

Despite this "Britain can take it" stance, the regrettable fact is that the looters and arsonists have hurt "brand Britain". It is also to be feared that some international tourists may have second thoughts about visiting the summer Olympic Games in London next year.

Damage to brand UK

Sir Martin Sorrell, CEO of WPP Group: "The violence and looting and damage are obviously totally unacceptable. Clearly (this) also damages the UK brand and raises issues around the Olympics...There will be a need to deal with the issues and remedy the causes and repair the brand damage, despite the constraints on spending."

Meanwhile, the police are becoming increasingly robust in their responses, aided by the CCTV evidence from the country with easily the most video surveillance in the world.

There have been well over a thousand arrests already, and many more suspects can expect the police to knock on their door as their pictures are identified. The magistrates courts have started working 24 hours a day in order to hand out swift justice to those charged with offences.

Smash & grab philosophy

And rightly so! The rowdies clearly believe not only that they can redefine traditional definitions of private property and of law and order but also rewrite the rules of retailing. For them it is no longer "come in, choose a product and pay at the till", but "smash a window, take what you want and don't forget to burn the shop when you leave."

All this will leave Lidl and Aldi to reflect on a strange paradox. Their discount stores thrive in the poorer areas of the UK, where rental costs and real estate prices are relatively low, but it is precisely in such troubled areas that they can lose everything in a flash.

Related article in German: By Mike Dawson in
Lebensmittel Zeitung, no. 32, 12.08.2011

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