Rules of retail

Posted: 26/07/2012

The more financially successful your shop, the more it benefits your community. So make sure you are an entrepreneur as well as an enthusiast.

When your community shop opens its doors for the first time and you’ve toasted your first takings, it can feel like the end of a journey. Along the way you’ve secured premises, raised funds and found volunteers. But opening up shop is just the beginning. Social enterprise retailers, just like any other retailers, need business ideas that continue to appeal to customers and which keep up with competitors’ most successful strategies – if they want their business to survive and do well.

Unique selling points

James Carpenter is manager of two community shops in Devon. He was invited to help set up and run Payhembury Provisions, having enjoyed success with Plymtree Community Shop. He says he had a clear vision about what would make the first shop successful right from the start. “We wanted our shop to be different because we thought that’s what would make it work,” he says. “So although we sell toilet rolls, kitchen cleaners and the things people run out of, we also have whole food, local food, and branded goods not stocked by the big supermarkets.”

The vision has worked. “For example, when we added Faith In Nature products to our standard toiletries lines, our sales tripled. Socks made of bamboo have also flown off the shelves, because they are a little bit out of the ordinary, and so became a bit of a talking point.”

He says that although it’s essential to ask villagers what they want in a shop, bear in mind, that people say what they expect from a village shop and not always what they will buy, so don’t follow surveys to the absolute letter. He adds that even quantities could be one of your unique selling points (USPs). “Many people in our village live alone or as a couple. People want to avoid wastage, just as much as they want to avoid travelling for their food, so our small quantities are another factor that makes people buy from us.”

Meanwhile Richard Mistlin of Urchfont Village Shop in Wiltshire advises that it’s crucial to ignore your personal preferences when ordering stock. Instead, think what will sell and why. It’s a strategy that stood him in great stead in the commercial world, where he built up a chain of successful health food shops. He’s now using this same business nous in his community’s shop.

“Everyday products, such as jams or honeys, can be unique, just by being branded with the village name. You can ask your suppliers to do this,” he says. He adds that visitors to nearby Urchfont Manor, looking for souvenirs, buy lots of the Urchfont lines, even if they are everyday products.

Getting the right suppliers

“I’ve not been afraid to say no to some suppliers,” says Paul Campbell of Long Stratton in Norfolk, where he has set up online retailer We Love Local Food. “Our business proposition is being an online local farmers market. If products do not fit with that brand, I won’t take them. Suppliers have to be in Norfolk or Suffolk because that is our USP. Of course, we have to make allowances in the ‘hungry gap’ time of the year so that we do not lose our customer base, but when there’s nothing to harvest locally, we make sure products are organic or fairtrade or even both.”

He says that being clear about his business idea and brand has directed his choice of suppliers and product lines. Nor does he use suppliers who don’t meet his merchandising needs. “I need suppliers that can package correctly and have the right labelling facilities, who can respond to our timetables, and who are certified with the local authority as a food supplier because they meet the right hygiene requirements.

“We explain to them we’re their extra route to market, not competition. We give them our leaflets so that when they’re selling at farmers’ markets, they tell their customers to buy through us as well. It helps us both make sales.”

Paul has also turned down suppliers who would be competition to existing suppliers. “We don’t want to force local producers into competing against each other because our aim is to widen the appeal of locally produced food and increase sales for rural businesses in the area providing it.”

Predicting demand to maximise your profits

“No shop should be without an electronic point of sale (EPOS) system,” says James. “At the most basic level it’s a bean counter. It counts all product coming into the shop and all product scanned at the till on its way out. But its best feature is its data. It can tell you in any given period, what hasn’t sold and shouldn’t be stocked again, what the wastage was on a product line, and what has sold well, including the profit margin.

“I use this information to predict future sales and most importantly, I can make sure I buy products from suppliers at the best price in advance of peak sale moments, thus maximising profit,” says James.

An EPOS system also helps the shop advertise products. “You know virtually every month that certain items will be popular; the EPOS data reminds you to jog customers’ memories.”

Richard, meanwhile, advises against putting price labels on stock: “Put labels on the shelves and let goods’ barcodes trigger prices at the till,” he says. Then if a supplier changes a product’s price, you can automatically alter the price of the whole line in the store. All you have to do is get the EPOS system to change the price generated by its barcode at the till. You only have to change one price on a shelf and most importantly, your profit margin is maintained,” he says.

Hours to suit shoppers and suppliers

Supermarkets have built their empires selling convenience to customers – whether it’s late-night opening or online shopping. But small social enterprises can offer convenience too. “We’ve always wanted our shop to attract working people, as well as those who are around during the day, because they tend to have a little bit more cash about them,” says James at Plymtree. The shop is open from 7am to 7pm, Monday to Friday, and at the weekends it shuts at lunchtime. “Our hours reflect that we want customers to shop with us after work and then go to the supermarket once a fortnight instead of every week so the local shop picks up the balance,” he says.

Meanwhile, Paul’s business model is wholly designed to enable shoppers to buy farmers’ market food at times convenient to them. We Love Local Food also gives local farmers a chance to sell outside farmers’ market hours, giving them convenience too.

Training and selling

The most important thing about running any shop will always be the people working there, says Richard. “And they have got to be trained so they know what they are doing. Otherwise they can’t ensure the shop’s making money.”

Urchfont Village Shop aims for a margin of 20 per cent on fruit and veg and at least 25 per cent for everything else. Calor gas and dry cleaning, which a local firm picks up and delivers back to the shop, provide the best margins. But unless volunteers perform their designated tasks properly and understand how they fit into the bigger picture, these margins would not be possible, he says.

James agrees: “One of the biggest challenges is training volunteers, including introducing them to food hygiene and EPOS.

“It’s so different from commercial work because you ask people to do things, rather than tell them. But you need the same standards.” Before Payhembury Provisions opened, James trained the new store’s volunteers in the neighbouring Plymtree shop.

“There’s also a great difference between selling and serving,” he adds. “When volunteers are selling, not serving, it’s much more interesting for them and much more profitable for the shop.

“To help volunteers sell, get them to taste or try new things coming into the shop. They’ll then both buy them and sell them more enthusiastically.” He adds that he also uses in-jokes and humour on his home-made signs and advertising.

“They create talking points and jokes within the community. And if there’s a shared community feeling, people are supportive of the shop.”

Costs and VAT

Finally, however great your business idea, if you’re going to be successful, you need to keep an eye on costs and outgoings. VAT is a good place to start. Richard stresses that if community shops want to cut unnecessary costs, they should pay VAT based on an input-output calculation and not flat-rate VAT, which works out more expensive. For more details see http://www.hmrc.gov.uk/payinghmrc/vat.htm.

He also advises that shops have a free water meter fitted because you’ll pay less for your water with a meter. Phone providers and debit card processing machines vary enormously in price so choose these carefully, he advises.

Successful social enterprise retailers are the same as any other retailers. They must understand their business and their customers.

 

This article was published in Issue 4 of The Local, the Village SOS magazine. Click here to see more inspiring case studies, tips and advice on setting up a community enterprise.