Small grocery shop

June Bird

Hi All,

I am looking at setting up a small grocer's shop.

Can anybody give me an idea of typical margins / where I could get sample accounts etc

Based in cork and have a location there rates not too bad and rent is ok

Just want to see if it would be worthwhile.

Thanks
June Birdy!

DubTony

June Bird wrote: »

Hi All,

I am looking at setting up a small grocer's shop.

Can anybody give me an idea of typical margins / where I could get sample accounts etc

Based in cork and have a location there rates not too bad and rent is ok

Just want to see if it would be worthwhile.

Thanks
June Birdy!

I've been accused of raining on people's parade on the forum when they ask a question like this.

So I'll use my usual "mantra".

If you're not a retailer, don't get into retail

There are a multitude of reason for saying this, but I won't get into it.
It appears you don't have experience in that particular business (based on your question about margin), but if you've retail experience from somewhere else, you might be able to adapt.

Have you got some experience?

jimmii

DubTony wrote: »

If you're not a retailer, don't get into retail

This is probably going to be the best response here to be honest! As soon as I see someone asking what sort of margins they are going to be making I worry as it suggests a lack of experience in that market. Retail is bloody hard work and if you come into without the experience you are going to need a lot more luck to succeed.

June Bird

Thanks for the responses.

The aim is to get an experienced 'hand' to look after the day to day running or come into partnership.

The footfall is very good in the location and the grocery shop that was their before did very well - so there's a successful history in 'retail'.

jimmii

That makes a big difference then for sure. They should be able to answer any questions like that you would have then. I would imagine it is a very tough market as the supermarkets would sell it at such fine margins it would be hard to compete with what they are doing. If you can put together a nice selection of locally grown products and really make yourself stand out from the supermarket selection then you could make it work. Go into a few grocers in the area and see if they will answer a few questions go into enough places and you will find a few who will be happy to help.

DubTony

OK. Well, a "small" grocery store is unlikely to be able to support the extra wage you're talking about. I sold a shop back in '06 to some people who were, in effect, trying it out. They had other successful businesses and it seemed that this was going to be "a business for the wife". They sold the shop 5 years later at a considerable loss after turnover had dropped by over a third. In fairness there was a recession started in that time, but they did have an experienced manager running it for them.

Aldi and Lidl continue to gain market share. Tesco and Dunnes have both lost share while the Musgrave group (SuperValu/SuperQuinn) is also gaining share, but their focus has been solely on price of late. The market is in turmoil, and it's all down to price. Even small local shops are being forced to compete.

Source: http://www.kantarworldpanel.com/global/News/Grocery-Market-Share-Ireland-Challenging-Times-Ahead-for-Traditional-Multiple-Retailers

The margin you make will be determined by how the product mix in your store sells. If the bulk of your sales comes from kids sweets, crisps and minerals, you've a better margin. If it's all milk, bread and tins of peas, it's not good. If you've a busy deli you can do really well there, but if it's not busy you'll have more waste than you'd like, dragging profits down significantly.
High volumes of cigarettes, lottery products (you'll need big deposits for both of these) and services (phone credit, bus tickets) drag your margin down significantly. The store I spoke of above never achieved more than 22% gross due to these products having a high participation rate (a combined 45% of turnover), even though there were huge sales on confectionery and minerals, incredibly high margins on milk and bread, and better than average deli sales, and a customer base willing to pay the high prices. But the combined rent and rates never exceeded 5% in 15 years, and was significantly lower than that in 2006. Wages were pretty consistent at 10% (including mine)

There are guys on this forum whose shops returned a gross of over 30%, but they may be under pressure now.

The footfall is going where prices are cheapest. It's as simple as that. A better idea of your location would help determine what kind of shop would have the best chance.

A good neighbourhood mix near the location is a pub, some other shops (butcher, dry cleaner etc.) a couple of schools, a park or other public area. Failing that, a "city" location has a better chance than a suburban or rural one. But even good stores in towns outside cities are struggling. In Tallaght one shop has closed and reopened with a different owner 3 times in 5 years.

I've got a couple of decades of experience in the business and would be very wary of going back into it while the economy remains stagnant, as it is at present. Even the best operators are finding it very difficult.

edit: BTW, why is the grocery shop that was there not there anymore?

June Bird

Many thanks for the detail and words of wisdom

Owner is now retired hence willing to let out.

It's definitely food for thought, i have a few USP's which the traditional grocery store would not have.

Thanks again