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Is the local dairy going extinct?

In days gone by the local dairy could be found gracing street corners or nestled in the small strips of suburban shops. These iconic stores were the realm of bread, milk and daily newspaper, 10c lolly mixtures and windows full of part-time job ads. Catherine Murray examines whether, in a rapidly-evolving retail environment, there’s still a place for the humble convenience store.

By Catherine Murray | April 16, 2019 | News

Greg Harford, Interim Chief Executive of Retail NZ.

New Zealand’s local dairies are still out there, but competition from the retail world at large and the impact of being a target for crime are slowly eroding independent convenience stores from our Kiwi landscape.

These small businesses literally rely on foot traffic and are directly competing with bigger and better-resourced retailers offering the same products – the larger convenience stores, gas stations, niche grocery stores and metro supermarkets.

It’s not just the competition with other stores that’s making life tough for dairy owners. Our local dairies are also competing with everything the new era of ecommerce retailing is offering, but which doesn’t quite fit with the dairy model - yet.

We talk to four industry experts to hear their views on the local dairy business model and how to improve its life expectancy.

The industry expert

Dairies live at the heart of local communities, yet their current format is under threat, concedes Greg Harford, Interim Chief Executive of Retail NZ. He says the main issues are declining sales, competition from other stores, the increasing mobility of New Zealanders and a reliance on revenue from tobacco products.

The Government’s goal of a Smokefree Aotearoa by 2025 has implications for dairy and convenience store owners and the products they’re able to provide their customers. New Zealand is nearing the end of a series of tax hikes on tobacco products that began in 2010, with tax on these products increasing by at least 10 percent each year. The programme is intended to discourage smoking, and is scheduled to end in 2020.

Data from the Ministry of Health shows the tactic seems to be working. On a per-capita basis, tobacco sales volumes have fallen 44 percent between 2004 and late 2018 from an annual 1103 to 623 cigarettes’ worth of tobacco per person. The rate of reduction clearly accelerated from the first round of tax increases in 2010, although supply data shows some annual stockpiling behaviour before each annual tax increase.

Harford says that if well-designed and risk-proportionate regulation is put in place as a result of the current review, dairies and convenience stores can play a key role in helping to achieve the Government’s Smokefree 2025 goal.

Store owners potentially have a new and alternative revenue stream to replace tobacco with heated tobacco and vaping products that don’t produce smoke and are substantially less harmful than traditional smoked cigarettes, says Harford. However, he says, at the moment owners are hamstrung by regulations that mean they can’t display the products, or even let their customers know about them, even though they offer a less-risky alternative to traditional smoked cigarettes and support the goal of a Smokefree Aotearoa.

The importance of being agile

While the ever-changing demands of customers is a common challenge across all retail sectors, Harford says dairies are in some ways better enabled to meet their needs.

“The great competitive advantage of dairies is that they are located in local communities and are in direct contact with their customers on a daily basis - many will be on first name terms. There is the opportunity for dairy owners to really understand their communities and their customers, as well as the changing face of communities, and tailor their offerings to suit.”

Harford suggests dairy owners examine and review their business and product lines on a regular basis and diversify their offerings to meet the changing needs of the customers.

“Dairies are a critical part of many communities,” says Harford. “They’re often the last business standing in many areas, providing a place not only to pick up items close to home, but also providing an essential forum for social interaction for isolated and less mobile people in the community.”

The retailer

Competition and crime are two contributing factors drastically changing the model of local dairies and convenience stores, says Raviraj Vansia, owner/operator of Mills Pricecutter in the Waikato town of Ngaruawahia. 

The challenges of fierce competition from larger retailers in the convenience space such as Foodstuffs and Progressive Enterprises naturally affect small business, Vansia says.

“Dairies, to a large extent, have adapted to this change. As they say, healthy competition always brings out the best in an individual, and the same applies to a business model.”

A key to keeping ahead of the competition is being proactive, says Vansia, by providing excellent customer service, understanding clientele needs, offering lines with regular specials and keeping your business presentable and clean with interesting merchandising displays.

Ludo Campbell-Reid, design champion for Auckland and general manager, Auckland Council Design Office.

Crime hits hard

The rate of youth crime is one of the big issues facing dairy and small business owners, Vansia says, with kids as young as 12 involved in thefts, burglaries and other nuisances.

“Creating an environment conducive to society and business prospering is the Government’s responsibility. I am hopeful with the more police numbers that are going to be on the ground, and I feel this is a good start and we’re heading in the right direction.”

The past year has seen some violent robberies happening up and down the country, with the prime target being cash and tobacco, observes Vansia. Black market tobacco seems to be fuelling theses robberies, he says, as it’s an easily saleable commodity. Dairy owners have responded by erecting metal cages around counters, installing metal doors with controlled entries and fog cannons, upgrading security systems and hiring security guards to protect their premises.

Regardless of any changes to the legislation around the sale of tobacco and vape products, Vansia believes dairies are here to survive, with or without it.

“The corner dairy is an integral part of the community that has filled the gap of quick and convenient for a very long time. Most dairy owners operate 365 days a year, and with that comes a personal touch with their clientele. Owners are personally involved with their customer base, giving them an unmatchable advantage over supermarkets and other convenience forms of business, including gas stations.”

The design champion

Considering the wider economic context, it’s not just the iconic dairy that’s at risk from competition and crime, says Ludo Campbell-Reid, design champion for Auckland and general manager, Auckland Council Design Office. 

“Street-based retailers in general are all under threat from a range of factors which have lured customers away from traditional street-based businesses to auto-dependent out-of-centre suburban products where you can shop indoors and without the challenges of parking.”

Campbell-Reid says the very real physical threat of crime has many Auckland dairy owners considering abandoning shop.

“The levels of extreme violence they are experiencing has reached unacceptable levels. They desperately need assistance from Government, police, local councils, industry and the New Zealand public before another person gets killed.”

Andre van Duiven, Sektor’s managing director for New Zealand.

Attracting the wrong crowd

The generic design of a dairy has changed so greatly to a point where it inadvertently encourages crime, says Campbell-Reid. Windows are often pasted over with advertising signage, preventing light and, crucially, the ability to see in and out of the store. For dairies to survive, they need to evolve and transform in design like banks have – in safety and their offering.  

“We know what’s for sale in these dairies. There is no need to advertise. But in many cases the big industries are actually paying some of the dairy owners to put the hoardings and advertising over the windows. This combined with large-format fridges to store a range of products placed indiscriminately around the store and often over windows creates a concealed, hidden internal store area, vulnerable to misbehaviour and crime.”

A key part of the problem is also the sale of cigarettes and high taxation on tobacco, creating a buoyant black market, says Campbell-Reid. Design solutions can assist in mitigating some of the risks. Locating cigarette vending machines away from the entrance could prevent ‘smash ‘n grab’ robberies; or the sale of cigarettes needs to be removed altogether or moved to a secure area, not right behind the shop owner, putting them in the direct line of danger.

Engaging environments

We must look proactively to find ways to design out crime to create safer, more attractive, more vibrant environments to help our main streets and communities thrive, says Campbell-Reid. This means looking not just at dairies, but at our streets and the wider public realm also, with a particular focus on reducing vehicle speeds, rethinking parking, increasing pedestrian accessibility and thereby creating economic vibrancy.

Campbell-Reid gives the example of Auckland’s Fort St, where retail hospitality rose by 440 percent in the shared space precinct.

He suggests making the dairies themselves more open and transparent, and therefore more welcoming by re-designing the internal layout by adjusting shelving heights, lighting, fixtures, entranceways and shop frontages. These measures would help prevents crime, he says.

“It’s a complex issue, so there is no clear-cut solution, but simply opening up the dairies so you can see in and out would help. People are unlikely to misbehave if they think they will be seen. And a more inviting, safe space will naturally attract more customers, helping to boost revenue and prosperity.

Yet while redesigning a dairy may help with curbing crime and deterring offenders, it only one part of the total solution, he says.

“It will take a combined effort to tackle aggravated robberies and keep our local business owners and their families safe. It's going to take a collective effort, and some smart design, to turn around their long-term viability.” 

The service provider

While the small corner stores have been a target for crime overseas, traditionally the local dairy in New Zealand has been more sacrosanct. 

But that’s not the case anymore, with an increasing amount of risk for owners from a physical aspect, says Andre van Duiven, Sektor’s managing director for New Zealand.

“We’re getting a greater sense of dairy owners being vulnerable and are getting more and more requests for cameras in that environment.”

Rather than hiding the cameras and the screens showing activity in the stores, van Duiven says dairy owners are keen to make them very visible, acting as a deterrent and showing that all parts of the store are being monitored.

Dairy owners have a huge challenge with the expenditure of security devices to ensure the safety of their stores, he says, with the capital expenditure sometimes unable to be justified.

In February 2018, greater support with crime prevention was initiated by the Government, building on the $1.8 million assistance outlined by the previous Government in June 2017 for devices such as fog cannons, audible alarms and DNA spray.

The subsidy now entitles at-risk business owners to contribute no more than $250 towards a fog cannon, which cost around $4000 each.

Eligibility is determined by the police through a series of security audits, and those businesses determined at most risk of robbery are eligible for subsidised assistance. Factors taken into account include the history of aggravated robberies, burglaries and thefts, and calls to police for issues like graffiti and suspicious activity.

The scheme means owners in high-risk areas can install even more cameras, increasing security for both owners and customers.

The heart of a community

Dairies are there for customers seven days a week, 365 days of the year, says Campbell-Reid.

“We rely on our dairies so much. Dairy owners are always with a friendly welcome and a smiling face whenever we are in a rush for a Lotto ticket, a morning newspaper, fresh bread and milk, an ice-cream, or a belated bunch of flowers on the run.”

Dairies are also a place where we expect kids to be safe when they stop there after school on their way home, spend their pocket money at weekends or are sent down the road for something at the last minute, he says.

“Dairies should be safe havens at the epicentre of our communities: police, business owners and operators, landlords, social services, suppliers, central and local government all need to work together, to find the right solutions to keep them safe so they can continue to be the iconic centrepiece of our neighbourhoods.”

This story originally appeared in NZ Retail issue 760 February/March 2019

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