News | Published December 12 2019

Chuckling Goat an example of how business rates impact firms operating on the high streets

The woes of Britain’s high streets have continued throughout 2019 so far, with research by PwC and the Local Data Company revealing that a net 1,234 stores closed down in the top 500 high streets in the first half of the year.

The woes of Britain’s high streets have continued throughout 2019 so far, with research by PwC and the Local Data Company revealing that a net 1,234 stores closed down in the top 500 high streets in the first half of the year.

Changing shopping habits toward online purchasing have been earmarked for blame, but the struggles of high street retailers have been exacerbated by business rates, culminating in the large scale closures all over the UK.

Boris Johnson pledged to review the business rates system during his election campaign in the run-up to Polling Day, Jeremy Corbyn promised that a Labour government would reform them, and Jo Swinson's Liberal Democrats wanted them scrapped completely.

But whatever the new government decides to do with business rates after today's election, the shortcomings of the existing system are highlighted not just by the rate of high street brands closing down, but also by the fact that successful businesses just are not willing to take the risk of going bricks and mortar and are choosing to operate online instead to keep costs low.

Chuckling Goat, first established in Brynhoffnant, Wales, back in 2014, is a business which manufactures a live culture drink known as kefir, and sells directly to the consumer. It also manufactures and sells its own kefir-based skincare products as part of the wider Chuckling Goat brand.

The business now turns over £4 million per year, a 7,900 per cent increase on when it was first established, and received the accolade of “Best New Dairy Drink” for 2018.

However, its directors, husband and wife couple Shann and Richard Jones, do have an anecdote to tell about a brief run in they had with business rates, which reassured them that running the Chuckling Goat brand 99 per cent online was the best route forward for the business.

Speaking to The Parliamentary Review, Shann Jones said: “We briefly experimented with opening a local shop, but we found the outlay prohibitive. The money that we might have spent on rent, insurance, electricity and business rates we have instead ploughed into creating a top-notch e-commerce website, hiring a talented website designer and keeping him on site with us four days per week, ready to respond to daily fluctuations and issues.”

Despite having to deal with physical accessibility to their brands being prohibitive, the Joneses decided to take advantage of shopping habits shifting toward online retail by providing free shipping of their product all over the UK.

Jones said: “Amazon has changed the world; customers are used to ordering whatever they like online, and having it arrive 24 hours later. Why would anyone travel to the high street, when the world is available at the click of a button?”

It is clear and obvious that manufacturing in-house and retailing online works as a model for Chuckling Goat and has contributed to their sharp but sustainable growth, with its kefir product now exported to 38 different countries, but the very fact that the business briefly tried to experiment with a bricks and mortar approach and were forced to sharply withdraw is reflective of the system's failings and the very struggles that high street retailers are facing.

Another cornerstone of the Chuckling Goat model is to grow sustainably and sell direct to the consumer and not bias third parties. This, as Shann Jones told the Review, has allowed the family business to avoid being ensnared in the so-called “Tesco trap” and instead retain full control of its product output and quality.

Jones said: “We do not sell through any third parties – we only sell direct to our customers. This stance has also enabled us to avoid the “Tesco trap” in which a small producer enters into a contract with a large supplier and scales up to meet the demand, after which the large supplier demands that the producer cuts corners and the quality drops, with the result that the producer goes out of business.

“The field is littered with the bodies of small companies who have turned over their souls to large corporations and lived to regret it. We prefer to retain control over our supply and quality.”

Business rate reform may well go some way toward helping aspiring bricks and mortar retailers establish themselves and stem the tide of high street closures, but for some it is not a risk worth taking operating in such a way. The Chuckling Goat story weighs up the shortcomings of bricks and mortar retailing against the appeal of operating online, which for them has been key to growing sustainably without added burden. For a manufacturer such as Chuckling Goat which already has production overheads associated with making its product anyway, burdening themselves with heavy business rates and other running costs was simply not viable.

Given that for all their success, the Jones family still opted against deviating from running the business online, it says a great deal about the failings of the business rates system. A rejuvenation of the high streets may come in future with necessary reforms, but businesses who have established a functional online model should not be expected to want to expand into high street premises any time soon. The future of bricks and mortar retailing will still, ultimately, remain uncertain.

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Authored by

Scott Challinor
Business Editor
December 12 2019

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