Opening a Small Convenience Shop in a Regional town ? - Help

Albert E. Arkwright

Opening a small one person convenience/newsagents shop in a regional town - Help

Dear all,

I am currently in full time employment, but I envisage this drying up in 3 or 4 years time, and the only opportunities will be self employment. I would like to have my own small business lined up by then. I'm getting to the age where working for someone else, watching their back, and keeping them right, way above and beyond the call of duty, is going beyond my tolerance.

I would like some advice and pointers from experience users here regarding opening and operating a small convenience shop in a regional town. I have no experience in the retail trade, so I’ll have a steep learning curve to climb, but I intend to learn as much beforehand as is practically possible.

I’m looking to rent premises in a good location and small enough, say 300-400 sq feet, that can be run as a one person shop, as I envisage one of the largest and most crippling cost will be staff. (Granted, I'll still need one or two other staff capable of working on their own, to cover the shifts I can't)

I have no delusions of grandeur or expansion. I think a small shop has a much lesser risk / lower cost base / and much greater chance of success in this climate, and I intend to work a 40 hour week in the shop myself, and I only want an overall income of appox. € 300 per week.

I think it’s a good way to try and learn the business for a year or two, and I also think today most convenient shops are too large for their own good in terms of staff, running, and management costs these days, and they have lost that local shop feel.

I would imagine location is key, but this also needs to be balanced with rental costs.

I intend fitting out the shop with used shop fittings and equipment, and I intend to copy the look, feel and stock of the most successful and busiest small shops I can find.

I’ve no firm views about a franchised store or an independent one, though I would imagine in a regional town the franchise name above the door is not as important as it would be in a city. If I do go the independent route, I would still intend to recreate and operate an efficient franchised look and layout.

It’s early days yet, and I intend putting as much work and research as possible into the business and operating plan on paper before I commit to anything, and I want research everything from sourcing normal stock, sourcing bargain stock lines, to rates, insurance, payroll, health and safety, recruitment, contracts, and costing every cent up front.

Current 300-400 sq foot units in the town I’m looking at vary from €100 per week for on a moderately busy street, € 250 per week for main street, and €350 per week for the busier shopping centre. Bearing in mind this is a regional town, and footfall will be no where near as busy as any city location.

Any advice greatly appreciated, particularly with regard to fitting out costs, stocking cost, and footfall / min. numbers of required pedestrians passing by to choose a viable location, and franchisers/options etc. I should consider.

DubTony

Despite the silly picture you've attached and the username you've chosen, I'm going to assume you're serious about this.

The only way to learn about that business is to work in it. So you should probably get a job in a shop first.

While a small shop costs less to run, everything is relative. It's also limited in how much business it can do. Low cost can also mean low turnover if location isn't great, but consider that a bad location costs as much to run as a good one of similar size. Rates will likely be the same, while fittings, and ongoing costs will be the same. And without half decent footfall you'll become expert at sweeping the floor and tidying paper bags behind the counter. Pick the busiest location you can find.

You're unlikely to get any interest from a symbol group in a very small store.

Fitting out costs can be relatively cheap these days. Finding 2nd hand equipment will save you a lot. The trick is to drive the price down. Even half the price of new kit is probably expensive.

Good luck with that 40 hour week thing.

Costs of stock is hard to quantify, as I've no idea what sort of goods you intend to sell apart from the usual. But consider that the major distributors/manufacturers of confectionery, minerals, and crisps & snacks would easily have over 1000 lines between them. Then you've got greeting cards, news and mags, dairy, ice-cream, services (phone credit, bus tickets etc.) to name just a few on top of that.

Most suppliers won't touch you these days without bank guarantees or deposits. Certainly, you'll be buying cigarettes from a cash and carry as the tobacco companies just don't open accounts for independents so your margin will be reduced by half giving you less than 5% on each pack sold.

Newspaper and magazine distributors are to many retailers as bad as the shoplifters you're likely to encounter. They'll want a deposit up front and will then cost you an arm and a leg as you try to get back credit for undelivered product and uncredited returns.

To the experienced convenience retailer the business is a stressful minefield. Most of them have the map to get through it. Going into it blindly, and by blindly I mean without the necessary experience, is foolhardy at the best of times. And this is not the best of times.


*DubTony Wealth Warning: Do not go into that business without the necessary experience*

Albert E. Arkwright

DubTony wrote: »

Despite the silly picture you've attached and the username you've chosen, I'm going to assume you're serious about this.

Yes, very. The light hearted picture was merely just to brighten the thread up. No one successfully makes it through tough times without a sense of humour.

DubTony wrote: »

The only way to learn about that business is to work in it. So you should probably get a job in a shop first.

Thanks, I intend to, if I can get a job. I started out working in a shop and thoroughly enjoyed it, but that was many years ago, so I intend to go back and see what the latest is.

DubTony wrote: »

While a small shop costs less to run, everything is relative. It's also limited in how much business it can do. Low cost can also mean low turnover if location isn't great, but consider that a bad location costs as much to run as a good one of similar size. Rates will likely be the same, while fittings, and ongoing costs will be the same. And without half decent footfall you'll become expert at sweeping the floor and tidying paper bags behind the counter. Pick the busiest location you can find.

As I said in my post, location and footfall is a major concern for me, however, I have to gauge if its worth paying an extra 3-400 per week every week for what might be only a marginal increase in footfall, as even the busiest place in town, might still not make the shop viable. Is there a guideline of what sort of footfall would make a small shop viable ? Is roughly counting the number of people passing per hour in a location, at different times, a way to compare, or is there a better way ?

I don't intend to put a penny into this until every cent has been costed and all the figures stack up.

DubTony wrote: »

You're unlikely to get any interest from a symbol group in a very small store.

Agreed, but is there any that do supply small shops and that I should at least try and talk to and suss them out, would they also be willing to give advice on layout and most profitable / best selling product lines ?

DubTony wrote: »

Fitting out costs can be relatively cheap these days. Finding 2nd hand equipment will save you a lot. The trick is to drive the price down. Even half the price of new kit is probably expensive.

Agreed.

DubTony wrote: »

Good luck with that 40 hour week thing.

You might misunderstand me there, I intend to work a 40 week in the shop effectively as an employee, and expect another 40 at home on organising and admin, and I currently work those type of hours anyway. Yes that's crazy to earn 350 a week, but dole is not an option for me, and I'm not burying my money into a larger store starting out.

DubTony wrote: »

Costs of stock is hard to quantify, as I've no idea what sort of goods you intend to sell apart from the usual. But consider that the major distributors/manufacturers of confectionery, minerals, and crisps & snacks would easily have over 1000 lines between them. Then you've got greeting cards, news and mags, dairy, ice-cream, services (phone credit, bus tickets etc.) to name just a few on top of that.

Depending on the location i.e. shopping centre or nearer residential, I intend to sell anything and everything that suits a small convenience store / newsagents, from stamps to mass cards, to top up groceries. Like the Dun Believable's I'll sell tyres and first communion dresses as well if it brings the punters into the shop and gets them into the habit of doing so.

DubTony wrote: »

Most suppliers won't touch you these days without bank guarantees or deposits. Certainly, you'll be buying cigarettes from a cash and carry as the tobacco companies just don't open accounts for independents so your margin will be reduced by half giving you less than 5% on each pack sold.

Newspaper and magazine distributors are to many retailers as bad as the shoplifters you're likely to encounter. They'll want a deposit up front and will then cost you an arm and a leg as you try to get back credit for undelivered product and uncredited returns.

Are papers and mags a dying trade anyway with more and more online reading, the floor space might be more profitable selling something else ? Or are they still considered essential to bring the punters in, and get them in the habit of calling ?

DubTony wrote: »

To the experienced convenience retailer the business is a stressful minefield. Most of them have the map to get through it. Going into it blindly, and by blindly I mean without the necessary experience, is foolhardy at the best of times. And this is not the best of times.

*DubTony Wealth Warning: Do not go into that business without the necessary experience*

I appreciate the straight talking advice, but I'm no shrinking violet with delusions about the human race. I've spent 20 years in one of the most corrupt gangster ridden cut throat industries in Ireland bar none that would makes 'love hate' look like and episode of barney, so I'm no stranger to minefields and stress let me tell you.

Thank you for the advice so far, and I'd be grateful for any more practical advice you might have.

DubTony

Albert E. Arkwright wrote: »

As I said in my post, location and footfall is a major concern for me, however, I have to gauge if its worth paying an extra 3-400 per week every week for what might be only a marginal increase in footfall, as even the busiest place in town, might still not make the shop viable. Is there a guideline of what sort of footfall would make a small shop viable ? Is roughly counting the number of people passing per hour in a location, at different times, a way to compare, or is there a better way ?

I extended and rebranded a store. The store became a destination store for many people. There was no increase in the numbers passing the door, just an increase in the numbers coming in. If the store is worth going into they'll go in, but if its not ...

Agreed, but is there any that do supply small shops and that I should at least try and talk to and suss them out, would they also be willing to give advice on layout and most profitable / best selling product lines ?

Your local Musgrave cash and carry operates the Daybreak symbol. That might be your best bet. I think Barry's (Costcutter) have a similar brand, but can't remember the name.

You might misunderstand me there, I intend to work a 40 week in the shop effectively as an employee, and expect another 40 at home on organising and admin, and I currently work those type of hours anyway. Yes that's crazy to earn 350 a week, but dole is not an option for me, and I'm not burying my money into a larger store starting out.

Yeah. I'd be inclined to set up the shop so that all the admin and paperwork can be done there, while keeping an eye on the business at the same time, and cutting costs by not having to have anyone else there. Unless, of course, you intend to operate short hours ( the average shop is open is over 100 hours a week).

Like the Dun Believable's I'll sell tyres and first communion dresses as well if it brings the punters into the shop and gets them into the habit of doing so.

Did you say you were serious?

Are papers and mags a dying trade anyway with more and more online reading, the floor space might be more profitable selling something else ?
Or are they still considered essential to bring the punters in, and get them in the habit of calling ?

Yes, but not dying fast enough IMO. Unfortunately they're a sort of necessary evil. Only the best of shops (very busy) and smartest and most disciplined operators really make money from news. The cost of operating the section can be very high if not managed properly.

Albert E. Arkwright

DubTony wrote: »

I extended and rebranded a store. The store became a destination store for many people. There was no increase in the numbers passing the door, just an increase in the numbers coming in. If the store is worth going into they'll go in, but if its not ...

Agreed. Is there any rough rule regarding passing numbers to make a shop viable, or at the end of the day if it looks busy enough you just have to take the plunge ? Makes calculation projections hard though.

DubTony wrote: »

Your local Musgrave cash and carry operates the Daybreak symbol. That might be your best bet. I think Barry's (Costcutter) have a similar brand, but can't remember the name.

Thanks Tony, I'll check them out. Would they give advice on layout and display ? Also will they be willing to disclose all their best selling items ? Apart from their offers, and having a brand name, what other advantage would being a Daybreak branded store have over being an independent ? What would be the disadvantages ?

DubTony wrote: »

Yeah. I'd be inclined to set up the shop so that all the admin and paperwork can be done there, while keeping an eye on the business at the same time, and cutting costs by not having to have anyone else there. Unless, of course, you intend to operate short hours ( the average shop is open is over 100 hours a week).

Worth considering all right, the shop counter could be adapted to this, with a printer underneath etc. As the shop is likely to be only 400 sq ft and designed for requiring only one person there, I want to keep as much space as possible for selling. Staff costs seem to be the big killer, with the staff taking home most of the money instead of the owners.

DubTony wrote: »

Yes, but not dying fast enough IMO. Unfortunately they're a sort of necessary evil. Only the best of shops (very busy) and smartest and most disciplined operators really make money from news. The cost of operating the section can be very high if not managed properly.

Will keep that in mind, as you say a necessary evil that needs very tight control.

Also what goods can you get on sale or return basis ?

DubTony

Albert E. Arkwright wrote: »

Agreed. Is there any rough rule regarding passing numbers to make a shop viable, or at the end of the day if it looks busy enough you just have to take the plunge ? Makes calculation projections hard though.

Any time I opened a shop it was trading as one beforehand, so it was easy to judge. Simple rule, the more people/traffic passing by, the better. I've nothing else to offer regarding this.

Thanks Tony, I'll check them out. Would they give advice on layout and display ? Also will they be willing to disclose all their best selling items ? Apart from their offers, and having a brand name, what other advantage would being a Daybreak branded store have over being an independent ? What would be the disadvantages ?

Yeah, they'll help with layout and design, but will push for you to buy new kit (for the kickback, I assume).
Best selling items. You see, this is the reason why I believe inexperienced people shouldn't put money into that business. There are lines that are must haves, but if you don't have them, your customers think you're a moron and go elsewhere. This is the stuff you need to know. When I jumped into the business in 1984, I hadn't a clue. But my total investment at the time was less than £5000. I got help from wherever I could, and that included well meaning and honest reps. But those guys didn't have the pressure to sell that today's reps do, so had my interests at heart as much as their own. A Coke rep today will have you selling 15 shades of water if he thinks he can get away with it. The guy from Cadbury will want you to stock every line he sells, including cocoa.
My cash and carry was happy to provide me with a list of best sellers, followed by a truck full of best sellers, with an agreed credit term, effectively a stock loan. That stuff doesn't happen today AFAIK. (I'm open to correction)
I was in the business 8 years before I knew what a KVI line was. I wonder how much that cost me in lost turnover and credibility.

Daybreak operates some central billing accounts which means you pay Daybreak instead of the supplier and you may get a small rebate a couple of times a year. But I'd imagine all sorts of guarantees are required.
Disadvantages? Well, all sorts of guarantees will probably be required.

Also what goods can you get on sale or return basis ?

News and mags obviously, and dairy products (to a point). Very little else except maybe a small guy looking to get his products onto shelves. But you don't want to stock unknown lines. They generally just keep the shelf warm.

I was in the business for 25 years, and the only way I'd get back in at the moment is if someone handed me a free fully fitted shop and a 6 month stock loan to get started.

The business is a lot different now than it was 30 years ago. There was less competition then. The symbol groups were nothing like as strong as they are now. People accepted that you might not be fully sure that you knew what you were doing but gave you a chance anyway. Customers are a lot less forgiving today. In your opening post you mentioned many stores being too big and that they've lost that local flavour. The truth is that most people don't give a damn about the local flavour. They want their stuff, and they want it cheap. If you don't have it, they go elsewhere, and they won't be back. This is partly the reason for larger shops. More space means more lines and a more diverse offering.

One more thing ... DO NOT SIGN A PERSONAL GUARANTEE FOR ANYTHING. If a company won't deal with you on a level playing field find one that will. Take higher prices or, in the case of banks :rolleyes:, a higher interest rate, but don't sign guarantees. You need to be able to sleep at night, so set up a company and protect yourself as much as you can.

Trojan

This thread has been interesting reading, and in particular the mention of KVI "Known Value Items" got me doing some follow-up research into that and retail pricing - great stuff

DubTony wrote: »

I was in the business 8 years before I knew what a KVI line was.

http://www.readability.com/read?url=http%3A//usefulinformationandtechniques.ludlowsurvivors.com/cheapshop.html (Readability link to bypass the Comic Sans).
http://www.floradelaney.com/2011/06/known-value-items-critical-for-retailers/

Albert E. Arkwright

DubTony wrote: »

Any time I opened a shop it was trading as one beforehand, so it was easy to judge. Simple rule, the more people/traffic passing by, the better. I've nothing else to offer regarding this.

Thanks for your valued opinions Tony

I'm sure you've taken over shops that were making a loss and turned them around to become profitable. Are there any other typical mistakes the previous owners/managers were making ?

DubTony wrote: »

Daybreak operates some central billing accounts which means you pay Daybreak instead of the supplier and you may get a small rebate a couple of times a year. But I'd imagine all sorts of guarantees are required.
Disadvantages? Well, all sorts of guarantees will probably be required.

If you were with Daybreak or similar, do you have to buy everything off them, e.g. would they get pissed if you manged to source e.g. cheaper bottles of Coke / confectionery lines in the North for example, and sold them in your shop ?

Customers are a lot less forgiving today. In your opening post you mentioned many stores being too big and that they've lost that local flavour. The truth is that most people don't give a damn about the local flavour. They want their stuff, and they want it cheap. If you don't have it, they go elsewhere, and they won't be back. This is partly the reason for larger shops. More space means more lines and a more diverse offering.

Agreed, would I be right in saying it also very much depends on the location, e.g. a busy high street convenience shop, will have a different type stock to a busy residential area. It's the high street type shop I'm thinking of, that will also have a few residential apartment blocks nearby, but I'll really be depending on high street shoppers. Almost more of a larger kiosk style shop to be honest. I don't think any small shop could compete with a local medium sized centra people use for supplemental weekly shopping, I don't intend to locate near one of them, and they tend to be slightly further out of the town center I'm looking at.

One more thing ... DO NOT SIGN A PERSONAL GUARANTEE FOR ANYTHING. If a company won't deal with you on a level playing field find one that will. Take higher prices or, in the case of banks :rolleyes:, a higher interest rate, but don't sign guarantees. You need to be able to sleep at night, so set up a company and protect yourself as much as you can.

Agreed.

Regarding stock control and cash register, as its a small shop, I'm hoping to find a reasonably cheap stock scanning and POS system. Or is that overkill, Any advice on that ?

Also cheap accounting software like the big red book ?

OP if I were you I'd be bringing Tony down for a few days on a consultancy rate and getting his two cents for everything as your setting up. You cant beat the experience he has in this area.

sandin

aside for the specialist advice as above, my tuppence worth from being a medium size retailer but not in grocery, but living in a rural town that has one store.

1. Likeability. - Not important in Dublin, but very important in rural town. If customer like you, they'll support you.

2. Service service service. Make them depend on you. It may mean staying open til 8 most evenings or sourcing something fro them. Bringing the briquettes to the car or even having a delivery service after you close.

3. Would definitely go the franchise/symbol route as the info they can provide is invaluable. Gala / Mace could be a good option.

4. Keep the product choce focussed - don't be tempted to do something because one customer asked for it. Most customers will shop in aldi / tesco / dunnes for main items - you are there for top-ups or for the person that doesn't have transport.

5. Don't expect to make a killing. If you like retail, you'll enjoy the work (I'm in retail 29 years now and still love getting into the office at 8 every morning - even when times were hard and I could barely take out living expense, i loved it)

Albert E. Arkwright

sandin wrote: »

aside for the specialist advice as above, my tuppence worth from being a medium size retailer but not in grocery, but living in a rural town that has one store.

1. Likeability. - Not important in Dublin, but very important in rural town. If customer like you, they'll support you.

2. Service service service. Make them depend on you. It may mean staying open til 8 most evenings or sourcing something fro them. Bringing the briquettes to the car or even having a delivery service after you close.

3. Would definitely go the franchise/symbol route as the info they can provide is invaluable. Gala / Mace could be a good option.

4. Keep the product choce focussed - don't be tempted to do something because one customer asked for it. Most customers will shop in aldi / tesco / dunnes for main items - you are there for top-ups or for the person that doesn't have transport.

5. Don't expect to make a killing. If you like retail, you'll enjoy the work (I'm in retail 29 years now and still love getting into the office at 8 every morning - even when times were hard and I could barely take out living expense, i loved it)

Thanks Sandin, good down to earth practical advice.

DubTony

Deleted User wrote:

OP if I were you I'd be bringing Tony down for a few days on a consultancy rate and getting his two cents for everything as your setting up. You cant beat the experience he has in this area.

The last time I was asked to consult for a guy opening a similar sized shop, he met me, tried to get me to "help out for a few hours" and refused to talk about a fee. If he hadn't been so tight and paid me for a week, he might still be in business today. He said his budget didn't stretch to a "fancy schmancy consultant".

Albert E. Arkwright wrote: »

Are there any other typical mistakes the previous owners/managers were making ?

I wouldn't know where to start, but one of the real issues is not having enough interest, and not really wanting to be there. Unlike Sandin above, some retailers actually hate the business.

If you were with Daybreak or similar, do you have to buy everything off them, e.g. would they get pissed if you manged to source e.g. cheaper bottles of Coke / confectionery lines in the North for example, and sold them in your shop ?

Lets just say that they expect loyalty, and some of them will with-hold partial rebates when loyalty percentages aren't met. It can be a balancing act. Sometimes cash flow means that you just have to buy from "outside".

Agreed, would I be right in saying it also very much depends on the location, e.g. a busy high street convenience shop, will have a different type stock to a busy residential area.

Generally, but size matters.

Regarding stock control and cash register, as its a small shop, I'm hoping to find a reasonably cheap stock scanning and POS system. Or is that overkill, Any advice on that ?

Also cheap accounting software like the big red book ?

Not overkill. But the more info you require from your system, the more it will cost. The last system I bought, 3 tills and a back office system, cost three times what I invested in the first shop. You'll really only know what you want as you use it more and more. But there's nothing more frustrating than having a system that only gives you the bare bones.
Big Red Book is good.