Profit
Like any successful retailer community owned shops must make a profit to survive. We hope that this network will help you find ways to improve your profitability.
Please join this debate with your ideas and concerns and see what solutions and ideas evolve.
We know that the recession has had an impact on all shops and our sector is no different. What has been the impact on your product range? On your margin?
We look forward to hearing from you.
We are finding that more products are arriving with Price Marked status - this invariably means that the margins are low and usually well below 20%. You can opt for unmarked items and then you find you are paying more to the wholesaler. There is a balancing act to determine if it is worth paying the extra in order to get higher margins!!! We need around 30% gross margin to sustain our shop. Over the past 18 months of our existence we now fully appreciate the importance of getting the margins right - in the early days when we were still walking on clouds this did not seem too important and a general feeling was that as a community shop we should keep prices really low for the benefit of our community. This is clearly not the case. A long hard look is required and importantly do not be swayed by supermarket pricing. Our EPOS has been a great help (now that we are able to use its full potential) in that margins and best sellers may be had at the touch of a button. Long live technology!!!
Since we opened we have found that there has been a shift from higher priced premium products (with higher margins) to lower priced economy products with a tendency to attract lower margins. We have realised this now and are adjusting the economy product pricing to recover some of the lost margins.
Some economy lines can attract quite healthy margins, for example the Booker EuroShopper lines usually generate between 30 and 40 % POR. They may be worth a look but it is possible that switching to economy lines may have have the effect of increasing gross profit percentage margins but at the same time decreasing actual gross profit due to the potential decline in overall sales from selling cheaper goods. It should however be easy to monitor this with EPOS.
David
Thanks David - we are very focussed on gross margins - we need at least 30% to keep our head above water and in a very deprived rural area this can be very difficult. We try to match a Euro product with a premium product to get around the accusation that we are providing only for those with more money and ignoring those with larger families. Its a fine balance but certainly no one expects us to even try and compete with the big boys!
We stock economy and premium products and find PM products quite popular. Overall we achieve 27% gross. We price check most of our popular products against the major supermarkets using http://www.comparesupermarketprices.co.uk/ and similar sites and where our wholesaler is very uncompetitive (wholesale price sometimes higher than supermarket retail) we source elsewhere. We also identify special deals for branded products at supermarkets and buy them. Gross margins are checked against every item with every delivery even though we don't have EPOS yet (coming shortly). We have also identified key products which are price indicators for customers, such as milk bread, eggs, baked beans, cereals, confectonery etc and make sure that these are within a few pence of expectation. We purposely sell our milk and eggs at the same price as Tesco and strongly promote this to our market.
Hi Bryan
We at Blockley have been in a similar situation to you and having just spent loads on a new till I am finding it a lot easier to manage my margins. 30% is hard to achieve but what I do is just get one section of PM items (like biscuits say) and publicise it a lot!!Try and get a blackboard on the wall and advertise the PM things you do get
One of the biggest truths I have found is that when people come in to a village shop they expect to be paying more than anywhere alse so even if you are cheaper or the same price as other places they will still leave thinking that they have spent more. So you might aswell keep the extra margin. Obviously keep the everyday items that people know the prices of as low as possible and don't take the Michael!!!!
Good luck. If you solve the issue please let us all know!
Chris
Blockley
Thanks Chris - will pick up on your idea of the board.
Our shop has been open for over two years but as I am now chairman of our committeeI feel I should have a better understanding of profit margins & mark ups. This is my first visit to this forum & I was very interested to read your initial comment & the various replies. We too ideally need a gross margin of around 30% but it is not that easy to achieve, especially as we sell newspapers on which we make virtually nothing. However, it is a service we wish to offer &, of course, newspapers bring customers into the shop who often buy other things too. Like you, we have had to rethink our initial wish to keep prices on the low side for the sake of the community!
We always stock the basics such as bread, milk, fruit & veg etc (including a fair amount of local produce) but try to vary the remaining stock, including higher priced products. This probably accounts for the yo-yo effect of our weekly turnover but our view is that varying the stock is more likely to encourage customers to return.
We buy a lot of our stock from Booker & generally follow their RRP. On other goods we add a mark-up of about 30%, but as I have discovered, that does not equate to a gross profit margin of 30% so we shall have to increase that. I'd be interested to hear what mark-up other people put on different types of goods. Our village is fairly affluent but that doesn't mean people readily part with their money, and we have to compete with a Co-op a couple of miles away.
Can you kindly explain EPOS (electronic point of sale?) to me. We are considering getting a new till so perhaps we should bear that in mind. Or it may be that our current one already does that but we don't utilise it properly. I have a lot to learn!
After some 2 years of trading we are now revisiting out mark up policy. Previously we have aimed for markups circa 30% but are now looking for circa 35%. Hopefully this will give us a reasonable margin and enable us to achieve a buffer savings account to cover unexpected demands for money! Over a 2 year period we have traded at a small loss (about £2k) and this year we are on course for a small surplus.
Re EPOS - this is a system that holds all the products in a data file enabling the till to use the bar codes. Benefits are almost immediate info on sales, performance, income, best sellers etc. Downside is that you have to load the data base and keep it up to date at least weekly. Beware organisations that promise increased sales etc and also be cautious about using it as a stock control system (unless of course you are happy to spend many hours feeding in data about incoming stock or you can afford to spend a few £k on even more equipment!).
Having said that we find the system works very well with about an hour per week on up dates and certainly provides key management info at the drop of a button.
Bryan Casbourne
Mortimer Country Stores
Dear Bryan,
I am very interested to see your comments on EPOS and two things stand out. That you don't use it for stock control and that it takes you about an hour a week to keep updated. Many shops, mine included, spend a lot of time feeding in the incoming stock and using the system for stock control. An hour a week instead sounds very attractive! So how do you control stock control? This is both in terms of knowing what to order on a daily/weekly basis and in terms of running your stock takes.Also what system do you use?
Thanks
Gill
Hello Gill,
As is recognised by many, using EPOS for stock control is time consuming unless you can download info on deliveries directly into the EPOS system (Bookers offer this service for some EPOS systems),or use a remote scanner to capture the data (approx £1500) and subsequently upload the data at an appropriate time.
Using people to do this work is time consuming and interrupts the normal use of the EPOS.
We keep a day book and an order book into which we enter shortages, requests, low stock etc and an appointed volunteer checks these every day or so and compiles a shopping list for the week. We then compile orders for the week using a monthly forecast spend schedule (to ensure we stay within our financial limits) and place phone orders. Our EPOS system gives us a best sellers list on demand over any period and this can be used to check future ordering patterns.
It usually takes about 1 1/2 hours per week to complete and as we are a relatively small shop it is fairly easy to see whether stock is running low (our policy is to minimise store room stock) and add to our order book.
As a guide to our size we order between £7k and £9k of stock each month.
Regards
Bryan
Hi
At Blockley we have managed to get the ordering/entering deliveries into Epos down to about 2 hours per week
We are, at the moment, using the facility on our till that tracks sales and uses outer size to suggest ordering and although tough at first it is really easy now. You just see what it recommends then add to or delete from it. It helps you avoid simply forgetting to order items. Entering the delivery notes from our main supplier P&H takes about 5 mins on a weekly order of over £4k. The key to all this is to not try to put all your stock on your epos just the stuff that it is easy ie stuff from a main supplier with barcodes and comes in the form of an electronic delivery note. Much quicker and easier to count up the odds and sods every quarter than to try and get it to do your entire stocktake. Just add the two figures together in an excell spreadsheet at the end.
Still I would recommend that if you are a small shop a £5k Epos system is just not worth the money and I would concentrate your efforts elsewhere don't think you have to have one
Chris,
Thank you for your very clear and practical advice on using EPOS for ordering/delivering. Really useful and we shall highlight some of these EPOS comments on our next newsletter to make sure lots of people see them.
Gill
Dear Bryan,
Many thanks for your reply. EPOS does sound interesting but as we are a very small shop which is run entirely by volunteers I think it would probably be a step too far for us at the moment. If we ever get to the stage of being able to employ a shop manager then it might be something to consider.
Jenny Eason
Redgrave Community Shop
Hi,
I suggest you also have a look at our Advice Sheet "Improving Gross Margin" which you can find in the Running your Shop section of our Information section - green tab at the top of the website.
This sheet gives some useful tips including recommended gross margins by product group. It also gives some suggestions on different ways that you can tackle improving your gross margin - such as controlling and reducing wastage as this will reduce your overall gross margin by a number of percentage points. Making that number as small as possible is worth it and can have a significant impact on the final year's results.
You have also highlighted the importance of understanding the difference between marking up and gross margin. Critical - and if any of you out there have some good hints on making sure this is really understood then it would be geat to hear from you.
Gill
Hi Gill,
Many thanks for that. Your Advice Sheet looks very helpful.
Jenny Eason