Reward cards, wi-fi, apps . . . the old corner shop has it all
IS there a village, town or city that hasn't seen the loss of the once ubiquitous local shop, corner shop or convenience store?
Once the hub of the community, anecdotal evidence suggests that this sector has suffered most as consumer spend has lessened. Indeed research by the Convenience Store and Newsagents association (CSNA) revealed that as many as four convenience stores a week have closed their doors since the start of the recession but despite this the right shop with the right person at the helm will always make money.
Whilst the halcyon days of the thriving, family-run local shop in the 'open all hours' ilk are consigned to nostalgia there are reasons for optimism in this sector – an optimism which should be further strengthened by recent trends in consumer confidence.
Consumers are more value-conscience than ever and demand much more of their local store than simply bread and milk.
The modern convenience store needs to be enticing, recognising the demands of its customers whilst offering everything from lotto to liquorice at any time from dawn till dusk.
Since the arrival of the 'Homestead' brand in the Sixties a few strong brands have dominated this particular retail landscape. Those looking to break into the sector should take note that competition amongst brands may be narrow but is intense with plenty of room for bargaining.
All brands offer franchisees, to varying degrees, a standard of produce and service, strong buying power, marketing expertise and a support network that may prove invaluable to a novice.
Any brand will obviously oblige you to buy predominantly from their wholesale group and will set an upper limit of local suppliers of your own choosing.
There are still a number of shopkeepers who continue to trade independently and whilst it is certainly the road less travelled it requires real expertise. The secret to their survival and indeed success is that they know exactly what their customers need and as long as they can price competitively their customers will oblige.
A strong managerial presence that can sense what's hot and what's not on the shelves is invaluable whilst the personal touch is as relevant now as it has ever been.
Whether branded or not the viability of the local shop depends largely on a few fundamentals: Who is likely to pass the door? What can I offer to get them inside? What else might they buy and can I get them back again?
Those shops that have perished may not have recognised the changing demographics, were unwilling to change with customer tastes and the customer experience may have been altogether underwhelming.
An example of the required initiative can be seen in Byrne's Spar stores on the Oakpark Road and Monavalley in Tralee. The Oakpark store which opened in the early Seventies was originally a family-run business and served the needs of a growing residential hinterland.
In 2001 this family-run business was sold to Byrne's Spar and when the North Campus of the Institute of Technology opened just a kilometre away they were quick to spot the change in demographics.
This convenience store now 'ticks all the boxes' in terms of the service lines it offers and while its business is very much focused on the 3,500 student population it still looks after their local residents client base who have been pulling into the shop for the past 35 years.
It continues to have its finger on the pulse with its pioneering of a unique loyalty card service that hither to fore was the preserve of the national and international supermarket chains.
This innovative rewards programme known as "My Spar Rewards Club Card" is a prepay facility and can double up as a debit/savings card and can either be topped up in store or online.
Those that have a rewards club card can often pay less on certain products as part of a dual pricing system and can expect to save up to 50 per cent on dual price products to availing of regular promotions and discounts.
A new Spar app is to accompany the rewards club card allowing the smartphone generation to get information about offers at their local Spar and access to the national network. Aside from reward cards and apps, BWG intends to introduce Eircom wi-fi in 150 of its Spar, Eurospar, Mace and XL Brands.
In any store the role of the owner/manager cannot be underestimated. An investment in their time and shop floor presence may see greater returns on the balance sheet than any marketing gimmick or new line.
Standards of service together with sales targets are best set by an owner/manager and they will drive the business towards these figures.
Often though the most difficult thing for an owner to do is to look at his or her business, perhaps a family business, without sentiment. The ability to perform a health check audit of the operation can be key to identifying waste and keeping gross margin in line with industry average.
An audit will coldly examine staff costs, staff numbers, product range, and stocking levels. Shop layout and even size need to be scrutinised. Larger stores cost extra to insure, heat, clean and light even before they are stocked whereas a clever remodelling can turn an uninspiring poorly stocked store into a compact, vibrant space.
There are of course other important factors. Depending on location, parking could be key whilst a quality coffee machine is always a winner. No more will commuters settle for stodgy tar when the next shop will offer a fresh brew with a chocolate bar thrown into the deal!
Most shops will be expected to carry an off-licence or just a wine licence whilst a fresh deli, lotto facilities and even washrooms are increasingly becoming the norm.
The small number of recent sales of convenience stores are not a fair reflection of the health of the sector as many sales are conducted off market. Margins and multiples which were used to value such businesses have reduced, however the reductions vary per location.
To gauge the future for the convenience sector simply look at the Mace brand. Mace, who opened 28 new stores countrywide last year, intends to roll out 100 new stores by 2016 with the creation of 1,200 jobs.
This is the strongest signal that the future is bright but only for those with a good business head, great work ethic and a total commitment to their enterprise.
CBRE is actively involved in this sector providing advisory and valuation services to existing retailers, as well as being a significant player in the acquisition and disposal of stores on behalf of a range of operators.
Eithne O'Neill is an Associate Director in the Valuations Team at CBRE