Expand shop or second one?

Palmach

I run a gift shop in a tourist area. Busyish in summer quiet in winter. We sell paintings, glassware, gifts souvenirs etc I have come into some money and am wondering whether to increase the size of the shop I have or open a second one in a nearby town. This town is more commercial than my village. I wonder if anyone has experience of this conundrum.

Graham

At a really basic level, would increasing the size of the shop get more people through the door and/or get the average spend per customer up?

osearcaigh

Is the size of the current shop a problem? For example, on the busiest day of the summer, soes the size of the shop result in loss of business because people can't get in and about, and is it a big enough problem that it needs solving?

In terms of thinking about a second shop, scaling to a second can be a significant cost. You can't run both yourself, so you'll need someone else. They'll need cover at times, so you'll need at least two more people. That said, you should try to assess the market in the larger population centre and its always no harm to look around at properties to rent. Perhaps you can test the market by putting some of your products into a shop there or try a weekend stall. That will give you some feedback without the larger risk.

ssbob

Palmach wrote: »

I run a gift shop in a tourist area. Busyish in summer quiet in winter. We sell paintings, glassware, gifts souvenirs etc I have come into some money and am wondering whether to increase the size of the shop I have or open a second one in a nearby town. This town is more commercial than my village. I wonder if anyone has experience of this conundrum.

Another thing to consider is if you do decide on a second shop that you may be entitled to LEADER funding to help with the initial cost or even on expansion of your own shop if you can prove you will create employment.

I guess the decision is yours but you need to look at Payback on your investment, how long will it take me to recover the capital invested based solely on the additional profit you will make from having extra space/new shop? Would you get better payback investing your money elsewhere or in a seperate business? Would you be better off putting this money on deposit?

Great position to be in, good luck to you.

Palmach

Graham wrote: »

At a really basic level, would increasing the size of the shop get more people through the door and/or get the average spend per customer up?

It would make little difference outside of peak season as the people simply are not there.

osearcaigh wrote: »

Is the size of the current shop a problem? For example, on the busiest day of the summer, soes the size of the shop result in loss of business because people can't get in and about, and is it a big enough problem that it needs solving?
risk.

There is plenty of space. If we expand the shop it would be to put in different lines that we can't at the moment. It would increase turnover for the summer months but outside of that I doubt it.

ssbob wrote: »

Another thing to consider is if you do decide on a second shop that you may be entitled to LEADER funding to help with the initial cost or even on expansion of your own shop if you can prove you will create employment.

Thanks.

osearcaigh

Palmach wrote: »

There is plenty of space. If we expand the shop it would be to put in different lines that we can't at the moment. It would increase turnover for the summer months but outside of that I doubt it.

Well, considering you have plenty of space for people to mill about, can I suggest you think about putting some of that finance into trying out some new product lines and displaying them in your existing space. It might add a bit of a squeeze in terms of people traffic, but it will give you a good low-risk assessment of whether the new lines would be profitable enough. If you havent heard of Paco Underhill, I can recommend some of his books which are great to think around general strategies for shop layout.

If you're thinking of trying new product lines, an online shop might be a good gauge of interest before a physical expansion.

Then again, I'm all about the low risk! The entrepreneur in you might well want to expand your empire quickly

Palmach

osearcaigh wrote: »

n.

Then again, I'm all about the low risk! The entrepreneur in you might well want to expand your empire quickly

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Thanks. I'll go to sleep tonight with the word Empire in my head.

antoinolachtnai

If there is really a niche in the town for what you do (i.e, there are tourists there that aren't in your current area, and there is not too much direct competition) then I would be inclined to go for that. It probably seems more risky, but I don't know if it really is. You might extend your current operation and find that you don't really sell that much extra stuff. Now, once you have two stores, you are into a whole different world of management and operations. It's a matter of what you want to do personally as much as anything else.

If you do invest in your existing store I would look at the alternatives to actually making it bigger. Improving the shopfront and the way the space is arranged might be a better way to invest the money. But it really depends.

I would also look at the return on capital. Make sure that whatever investment you make is a good use of your funds.