Deposit return scheme will put some retailers ‘out of business’

The owner of a small Glasgow convenience store has said she is “terrified” she could be forced to take back empty containers under Scotland’s forthcoming deposit return scheme, and warned that some in the sector will go out of business as increased costs are pushed through the supply chain.

Natalie Lightfoot has run Londis Solo Convenience for the past 16 years, operating as a licensed grocer out of a 500sq ft shop in Baillieston Main Street. Like all selling drinks to take away in single-use bottles or cans, she will be required to take back empty containers unless she is granted an exemption.

Under Scotland’s DRS, shops of less than 1,000sq ft may apply for an exemption on the basis that they do not have enough storage space to handle returns. David Harris, the chief executive of Circularity Scotland, has said that “by and large” he would expect those to be approved automatically, but added that “it can get complicated”.

“If you are the only shop for 100 miles, we would need to have a conversation,” Mr Harris said. “We or Zero Waste Scotland who operate the scheme may want to have a look at what arrangements could be made.

“That’s why it’s an exemption system, to make sure we don’t have black spots.”

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With at least four major grocery retailers in the vicinity, Ms Lightfoot said there will be DRS recycling alternatives for her customers. She intends to apply for an exemption, but if anything goes wrong and it’s not granted, she said she will be taking a loss on accepting returns.

“I am pretty much terrified, to be honest, that they are going to turn around and say no,” she said.

“It’s not like I’m making money on it, and it’s certainly not cost neutral which is the claim, and a ridiculous claim.”

Following an increase in handling fees announced in January, independent retailers using an automated reverse vending machine will receive 3.7p for the first 8,000 items returned each week, falling to 1.6p for each item thereafter. However, those taking returns manually over the counter saw no change in their commission, which remained at 2.69p per item.

Prior to the increase in automated commissions, Lanarkshire grocer Abdul Majid raised a court action challenging the legality of the handling fees set by Circularity Scotland, claiming they will undermine the viability of small businesses. Supported by the Scottish Grocers’ Federation, of which he is a former president, Mr Majid’s case is set for a hearing on March 30 at the Scottish Court of Session.

Even if she is granted an exemption, Ms Lightfoot has other concerns about the impact of DRS on her business.

One of the biggest problems is with price-marked packaging, where the manufacturer prints the recommended retail cost directly on their products. This is heavily relied upon by small independents such as Ms Lightfoot, and it is not yet known whether price-marks in Scotland will include the 20p cost of container deposits.

READ MORE: Deposit Return Scheme executive warns of higher prices for consumers

Noting that she ordered this year’s Easter eggs from her wholesaler back in August, Ms Lightfoot said too many important details about how DRS will work are being left to the last minute.

“DRS is just over five months away – how can they not know about the price-marks? The manufacturers are still trying to find out the answers because the government and Circularity Scotland haven’t come up with the answers,” she said. “And even if they have come up with the answers and somebody knows, they’re certainly not widely communicating that information.”

There are also cashflow considerations as retailers will have increased upfront costs.

“It [the 20p deposit] is an extra £4.80 on a 24-pack of juice that we will have to pay – that’s over a third of what you are already paying at the moment, and that doesn’t take into consideration that the wholesalers are going to find a way to backtrack their costs [from paying more to the producers],” she said.

READ MORE: Hospitality fears as DRS to go live at height of tourist season

“That’s not the [20p deposit], just the wholesale price. They will have teams amongst them that are having to deal with this and spend more man hours on it, so they are obviously going to knock the cost on to us.”

Ms Lightfoot said she and other retailers will in turn have to pass this on to customers at a time when inflation is already putting a severe strain on consumer finances. Over the longer run, she is also concerned whether her wholesale supplier based in England will eventually abandon the Scottish market because of additional operational difficulties north of the Border.

“The more I think about it the more I get agitated because all of this has been a real worry for the last few months,” she said.

Ms Lightfoot added that the overall impact on the convenience sector will be much greater than many seem to think: “It’s going to put some people out of business.”