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Business / Economic development chief challenges Co-op assumption on rural shop impact

The Co-op already operates two super markets in Shetland, one in Lerwick, the other in Brae. Photo: Malcolm Younger for Shetland News

THE ASSUMPTION that two new Co-op stores in Sandwick and Scalloway will not threaten the long-term future of local shops should be challenged, according to the manager of Shetland Islands Council’s economic development team.

Tommy Coutts said if worries around the expansion plans play out, there could be job losses in the local economy.

The Co-op plans to add to its Lerwick and Brae shops by building new stores at East Voe in Scalloway and Stove in Sandwick, but critics say they will have a significant impact on existing local retailers and the wholesale sector.

The developer behind the plans said earlier this month that a retail impact assessment and economic statement demonstrate the proposals would “not have a discernible impact on the vitality or viability of Lerwick town centre or on the shopping facilities within rural/village areas including Sandwick and Scalloway”.

Shetland Food and Drink, however, warned earlier this week of a “weakened local economy and poorer quality of life” of the Co-op expansion went ahead.

Writing on behalf of the council’s economic development service in response to both plans, Coutts said it is realistic to assume there will be some benefits from the two possible shops arriving in Sandwick and Scalloway.

The location of the proposed Co-op in Sandwick. © Google 2021

This would include greater consumer choice, cost savings, less need to travel and increased construction activity.

But he said the assumption there will not be a significant or long-term impact on local retailers should be challenged.

Coutts said in a response to the planning applications that “direct impact from displacement is an inevitable consequence”.

“Rural retailers operate with extremely tight margins and a limited customer base, therefore any sizeable displacement of activity (the report estimates cumulative ‘trade diversion’ from rural retailers of £0.49m) should be considered significant, particularly where this will lead to long-term change in customer behaviour,” he added.

He also believes that the assessments presented by the Co-op – which said local shops trade 19 per cent above average – paint an “unrealistic picture of rural retail trade in Shetland” due to the constraints of island life.

Coutts continued to say the assessments do not take into account the higher costs of operating in Shetland, such as in transport and energy.

“Rural retailers cannot operate with the economies of scale that supermarkets can, and are therefore likely to be challenged on price points as well as availability of goods and other considerations (e.g. opening hours),” he added.

“The assessment advances the purchase of goods from local producers as a net benefit to the Shetland economy. However, current Co-op stores in Shetland purchase from relatively few local suppliers.

“If the proposed developments threaten the viability of existing rural retail operations, with the effect of reducing their purchasing power, then this will impact on the ability of local shops to purchase from local suppliers and result in a net reduction in trade for local producers and wholesalers.

“This could have the effect of threatening the viability of supplier businesses in addition to the impact on rural retailers.”

Coutts concludes that if the development “leads to impacts on local retailers and suppliers as described above, it can be expected that the net jobs impact will be less than the overall, due to potential job losses in other areas of the economy”.

Property developer Seamount said building the two convenience stories at East Voe, Scalloway, and at Stove, Sandwick, would represent an investment in the region of £2.4 million.

Once completed around 20 full and part-time retail jobs would be created at each location.

The Co-op has always said it would stock local produce and enhance the shopping experience in Shetland, providing greater choice in Scalloway and Sandwick.

The two planning applications remain under consideration.