The Association of Convenience Stores (ACS) has noted that the Treasury Sub-committee is conducting an inquiry into HM Customs & Excise and although we realise that the deadline for evidence was 1st October 1999, we have only very recently received the results of a survey conducted by Independent Retail News (IRN) on the impact of bootlegging on retailers and believe they will be useful to the committee's inquiry.

THE ASSOCIATION OF CONVENIENCE STORES

  ACS is the trade body for the convenience store sector. It represents the owners and managers of over 1,500 retail companies, who operate around 20,000 stores, between them employing over 190,000 staff. Members include independent retailers, multiple convenience stores and affinity groups such as symbol and buying groups.

  A convenience store is a small grocer, CTN, off-licence or petrol forecourt shop with between 500 to 3,000 square feet of selling space; the majority of outlets fall within the 1,000 to 1,750 square foot bracket. Trading seven days a week, typically from 6 am to 11 pm, ACS members are characterised by the convenience they offer in terms of location, range of goods, opening hours and service. The typical convenience store sells "top up" goods, emergency items and is orientated towards tobacco, confectionery, snacks, soft drinks, alcohol and newspapers. Many stores provide services such as a Post Office counter and National Lottery terminal. Convenience stores trade in a fiercely competitive environment, with tight margins. Overall net profit is low, and typically around 1 per cent; in comparison, a supermarket will operate on a 5-7 per cent net profit margin.

IRN SURVEY INTO THE IMPACT OF BOOTLEGGING ON RETAILERS

  IRN surveyed its readers asking for details on how bootlegging of alcohol and tobacco has effected their trade over the previous 12 months. 514 storeowner retailers responded. Answers show that on average independent retailers have lost 16.04 per cent of their trade in tobacco and alcohol in the last 12 months to bootleggers. An average small store will therefore lose £1,200 a week in takings. This figure, if spread equally across the whole convenience sector could adversely effect a large sub-strata of stores that are functioning at the limit of their ability where profits are non-existent or minimal. It should be noted that this decrease is only on trade from the previous year and therefore does not reflect the total amount lost to bootlegging in the years before this.

  Licensed small stores enjoy a relatively large profit margin on alcohol, and their off-licence section is often a key part of the store, bringing in additional customers in the early evening period. All lost alcohol trade has a severe impact on overall store profitability. Although tobacco margins are smaller, buyers are more regular and frequent. Both alcohol and tobacco are products that increase footfall, bringing more customers into the shop, and therefore increasing trade from other buys, either impulse or planned. If customers no longer buy alcohol or tobacco from a store, they may not buy other goods there either.

RECOMMENDATIONS FOR ACTION

  The IRN survey shows that 46 per cent of independent retailers are in favour of a cut in excise duties on both alcohol and tobacco. ACS believes that the disparity in duty rates between the UK and other countries is the root cause of bootlegging, but recognises that a cut in duty rates may not be politically appealing and therefore supports other suggestions made by the respondents such as increasing Customs & Excise manpower and giving stronger sentences to convicted bootleggers. ACS is set to join the Excise Alliance, and hopes to assist Customs & Excise in their work against bootlegging.

  Making cigarettes produced in this country for export "not for sale in the UK", or obliging all EU manufacturers to mark their tobacco products with the country of origin is another option. This would make it easier for consumers, retailers and enforcement agencies to spot bootlegged goods and prove that they had been illegally imported. ACS wishes for this to be given serious consideration.

8 October 1999