By Marcus Chidgey | CEO
I grew up in a place called Wallington on the outskirts of South London. Just down the road from me was Carshalton, Beddington and Sutton.
When I was younger, I wondered what the fascination was with the ending everything with ‘ton’!
Well, ‘ton’ or ‘tun’ is the Old English word for town. It’s german in origin and means ‘fortified place’. In the Saxon, Norse and Dutch languages, ’tun’ is derived from the word for “fence” or “hedge”. As far back as Roman times, settlements were built with safe zones for their citizens in mind. There was the concept of a boundary within which local customs were honoured and the community was protected.
In fact, many of Europe’s great cities – Paris, Madrid and Vienna – built defensive walls that protected critical infrastructure. The walls were a feat of engineering for their time. In the UK, you can still see substantial remains of defensive walls in over 80 towns and cities. York, for example, has more miles of intact wall than any other city in England.
So what’s happened to the boundaries that protected our towns and cities? Over time, they’ve become obsolete. Most towns and cities have grown beyond their original limits and we don’t tend to have marauding invaders any longer!
Today our towns are open, welcoming places. We encourage people to visit, to trade with us and experience all the fantastic things we have to offer. The question is have we been too open and too trusting? Were we right to completely get rid of all the walls? Have we put our guard down?
Physically perhaps yes, but digitally we’ve left our towns wide open to the ravages of the free market and global competition. Cast your mind back to the noughties when e-commerce was evangelised as a way to empower small business owners. “Sell to anyone in the world” they said, “At any time of the day, all at the click of a button”. The Internet was supposed to be the ‘great leveller’.
Fast forward to 2022 and the idea of a global market for most local businesses hasn’t materialised. The vast majority of small business owners don’t have huge numbers of customers around the UK or abroad. They are selling to the same people they have always done – the people in their community.
What went wrong? Well most local businesses, especially in hospitality, are just that – local. Or, they lack the money, time or skills to dedicate to grow their own digital shop window. Instead, business owners have turned to digital aggregators and delivery services that ‘serve local’ but in practise are huge multinational corporations, backed by profit-hungry VCs.
The amount of money leaking out of town centres to delivery firms is breathtaking. Take a small high street with say 5 restaurants and takeaways registered on these platforms. Combined, they will pay £8,000 to £10,000 a month to these platforms – more than the rent for their premises in many cases.
That’s £8,000 to £10,000 which is not being spent by business owners locally. Money which could have been circulated amongst other local businesses. Repeat this scenario 7000 times for all the high streets around the UK (ONS) and at least £20 million is being leached from UK town centres each and every month. Whisked off to the US or Europe depending on who owns the platform.
The irony is that 80% of the orders on these platforms will come from existing customers who live within 2 miles of the business. So, once established locally, what value are these platforms adding? Practically nothing other than being the customer’s preference for ordering. They offer rapid, convenient service, yet they take a massive 15-30% slice of revenue for the privilege. (The Guardian)
You might think business owners would put their prices up to compensate. Well, where they can, they are … and hard-up consumers end up paying a premium. In reality, most food providers can’t as customers are highly price sensitive. Instead, what it means is they have to cut back on the staff/ingredients or stay open much longer to make anywhere near the same buck. That’s if they are located in an area where orders still come in at 3am!
With energy costs rising, many business owners are struggling to make ends meet. Competition is fierce and the little guy is now always outgunned.
Some are finding that new “independent-looking restaurants” are launching a few doors down the road with incredibly attractive prices. Low and behold they don’t have proper kitchens. All the food is shipped in from a kitchen on a trading estate a few miles away. It’s then simply reheated and served. These ‘dark kitchens’ are owned by … yes, you guessed it, the food delivery platforms, once poachers now gamekeepers.
How are they able to guarantee these kitchens will be successful? These platforms have data and plenty of it – e.g. what kinds of foods are popular where, what the busiest times are, and most important of all, they own all the customer data! They can sell direct to the same people their ‘competitors’ are.
To some extent, ‘local’ has always been under threat. There were the ‘chain stores’ of the 80s and 90s and the ‘out-of-town’ retail parks loved by people in the 90s and naughties. But what is happening now is far more insidious in that that food delivery platforms have a monopoly online. There’s a mentality among local restaurants that they can’t afford to not be on these platforms. What a terrible basis for a working relationship where one party is under duress.
This online monopoly is true of e-commerce and social media giants too. There is simply no way to compete unless … local people collaborate at a town level.
I think it’s time to put the walls back up again. This time ‘digitally’. Walls that keep data in and keep local people engaged. We need a local platform that delivers as professional a user experience as its VC-backed competitors.
This is what we are doing at Loqiva – working with towns to build ‘walled gardens’ that nurture, grow and look after local people and businesses. This requires more than just ‘an app’ or ‘loyalty points’ – it requires us to completely rethink how data and interfaces are used in towns and cities.
We need to put the ‘ton’ back into ‘town’ together.