Opening a store- new to this and need help

[Jess78]

Hello,

When I go into poundland or other pound stores most of their toiletries, shampoo, hand wash etc are all a pound with some being £1.25 etc.

However where do these pound shops buy their toiletries and other stock from, in order to get a decent profit. I saw one wholesaler who distributes to pound shops selling hand wash for £0.78 including VAT. How are pound shops making profit it they buy it at this price and sell it, that means for each hand wash sold they are making only 22p profit.

I have been doing research and people have been saying that pound shops buy in huge quantities and pay less thus creating a higher profit. However I have seen very little difference in the profit margin. For example before VAT the hand wash is priced at 65p per item, it I buy 300 of them the unit price is 64p per item. If I bought 450 the unit price is 63p. So it is only decreasing by a penny, thus the profit is not going to be higher.

How much do these pound shops actually buy their products for and where should I look for these? I have researched on google, looked at forums etc. However I cannot find a supplier that is profitable for toiletries.

What unit price should I be looking at to purchase products at in order to sell for £1 in order to make a decent profit? Does anyone know any good suppliers as I cannot seem to find any good ones?

Is it better to buy from a wholesaler or manufacturer as I have seen people saying both of these are good? However I can only come across wholesalers I am unable to find the manufacturers, where can I find manufacturers in general for pound shop products?

If you could please help me and answer my questions as well as guide me, I would very much appreciate it, I am very new to business.

 

[Shopclicks]

So you want to open a bricks & mortar shop like a Poundland store or sell online?

 

[MBE2017]

You are new to business but want to take on Poundland? As for how much they pay, a lot less than you think. The saying learn to walk before you run comes to mind.

I doubt you will ever buy at Poundlands rates, or pay as little rent as they do, low salaries, utilities etc. Don’t forget you will be paying cash or a 30 day account, whilst they will probably pay on a 9-12 month account. They have many years knowledge and are so far ahead of you your head would spin if you understood the difference.

 

[Socio South West]

The scale you are thinking of quantity wise to compare with Poundland is planets apart....
Poundland will be buying at least hundreds of thousands-if not millions - of a product. Thats when the price starts to seriously come down....
In your comparision, Your smaller quantities will mean hand picking of a quantity of cases at a wholesaler... A Poundland consignment is pallets only.

It's down to economies of scale - big scale - and its why they have stores in nearly every town so they can buy stock for them all at extremely competitive prices, with bargaining power to drive prices down further, and they will have driven a number of their suppliers into insolvency along the way.

If you want to take on Poundland you can beat them easily on quality and Customer service..... but I don't think anyone on the forum will give you a way to beat them on price to run a sustained portfolio of products.

 

[WaveJumper]

I have leased many a new unit to Poundland in a past life, you have no chance of beating them at their own game as above they buy in huge quantities and on whats known as the "black market" ie not all those brands you see in their stores are happy about it.

If you check out the hightstreet in particular looking at the shampoo, hand wash, skin care type products, You have Boots being under cut by Superdrug, Superdrug being under cut by Wilko's and the list could go on and on, its dog eat dog out there. Do your homework but personally I don't see a profitable business in this area for yourself unfortunately.

 

[ecommerce84]

We had an independent pound shop as well as a ‘discount shop’ on our local high street about 10 years ago.

Poundland opened and they were both gone within 2 years.

This is one of those areas that if you can’t compete in price, you can’t compete as there is no real other way to differentiate yourself.

The service in Poundland is pretty poor in my opinion with long queues when they are busy but people will do it for the savings.

Although for toiletries etc, Savers is a better bet in terms of price. If you have a branch of them nearby and a Poundland, your chance of success is remote.

 

[fisicx]

My wife did some insurance for Poundland and had to visit their head office. They buy in huge quantities think millions not thousands and have their own distribution network. They also invested a huge amount in logistics software.

They also consider locations to be temporary and will open and close stores as demand and competition changes.

 

[DontAsk]

Places like Poundland have the buying power to have specials made by manufacturers, e.g., different sizes that they can sell, profitably, for £1. Look at their multi-pack crisps. Often 5 bags, rather than the usual 6.

Poundland can be a very expensive place to shop if you are not careful.

 

[Ozzy]

They buy in huge quantities think millions not thousands and have their own distribution network.

This is the key thing here; when they buy that shampoo they buy millions upon millions of bottles sometimes from bankrupt or stock or similar. So when you look at that 22p profit, what they look at is 1 million x 22p
As also mentioned, they don't pay the usual lease/rent you may expect. They find a desperate location and pop-up a shop there for a short while, make a few bob, then often disappear to the next. It's a completely different market to "typical" business and one every business expert would advise against trying to start in, unless you have extremely deep pockets.

 

[japancool]

Leeds Kirkstall Market used to have a number of stalls selling confectionary and biscuits at discount prices. Most of what they sold was short dated, or out of date. Not sure if this is a similar business model.

 

[Mark T Jones]

No retailer is going to give away their supply chain - it's essentially their USP.

With regards to Poundland, what is common knowledge is that they rely on:

- End-of-line / short-code products.
- Bespoke sizing/packaging, so their £1 products aren't the same as those in normal retail.
- Own-brands.
- Loss-leaders.

All of which ultimately rely on huge buying power.

 

[Shopclicks]

Taking on Poundland is dead in the water but there are ways of buying at huge discounts.

Approach wholesale distributors of non-perishable goods and talk to them about what they do with their surplus and superseded stock. Offer a solution that removes the problem for them. You can get huge discounts on older stock that their customers (retailers) are not interested in. Distributors constantly over-order to cover what their forecast tells them they will sell.

I have a client who started this 10 years ago with one distributor and has run this as his sole business with the same distributor. He has a daily updated stock file of all the excess and older lines, which he uploads to his sales channels. They dropship for him with an unbelievably low minimum order value.

The price he is invoiced for is scaled based on the length of time they have been sitting on the stock. They need the space for new lines, so he's solving that problem.

Obviously, you need your own sales channels set up (websites, Amazon, eBay).

Go solve someone else's problem.

 

[The Byre]

If I buy 300 of them the unit price is 64p per item. If I bought 450 the unit price is 63p. So it is only decreasing by a penny, thus the profit is not going to be higher.

And if you buy 1m bottles?

How much do these pound shops actually buy their products for and where should I look for these? I have researched on google, looked at forums etc. However I cannot find a supplier that is profitable for toiletries.

They are called Unilever and P&G. Others are available.

I am very new to business.

In which case, some basic maths -

Lets talk Poundland - not a big chain as chains go and ASFAIK only in the UK - so nothing like Aldi or Lidl! (Now those two really do move in bulk - as in not for one store, but for one planet!)

But Poundland does have 756 stores (Google tells me) so not without buying power! Let's put one measly pallet of gunk in 500ml bottles in 15-bottle packs, 10-deep and 5-high - so 750 bottles of gunk per pallet. That comes to 567,000 bottles.

Except that we ain't gonna buy just one line - let's buy ten lines from the one supplier. And if they are all 500ml things, that is 5.67m items. We're not talking about 60p a bottle anymore - that's for sure! More like 40 - or if it is a slow mover, a lot less!
___________________________________________________

If you really want to open a store, there are two things you need to understand -

1. Retail is all about shelf space. You must calculate how much each foot/yard/meter/whatever is earning per week. That means one running meter of the fast movers that earn 10p markup and are gone within one day are better than slow movers that take a week but earn 50p gross margin. In fact, they are a massive 40% better!

And if one running meter has 50 items, your gross markup is £35 per week for the fast movers and £25 for the slow items. 50p markup looks a whole lot better than 10p - until you calculate properly!

The Aldis and LIdls of this world have these kinds of calculations down to a science. Every inch of every store has to earn its keep.

2. Manufacturers have massive fixed costs and set-up costs. These have to be calculated into the manufacturing costs of each item and this includes such things as overheads and interest payments.

That means that bulk orders for end-of-line products are mostly gross profit.

A bit more number-crunching - One factory that costs us £10m a year to run. It has 10 production lines and each one costs £10m a year and £10m to set-up and each line has a life expectancy of ten years. (Yes, I know these are strange numbers - just live with them!) Each bottle of gunk that comes off those lines has marginal costs of 10p - 5p packaging, 3p transport and handling and 2p contents.

One production line is coming to the end of its useful life - what (the plant or product manager asks his team) should we sell those nasty bottles of gunk for if we keep it going for a month or two and sell them to the likes of Poundland?

If they have a waiting time until the engineers and fitters tear down the machines and set up a new production line, that waiting time is wasted and we still have the staff to pay - so we keep the line going until the last minute. 10p marginal costs* and 40p from Poundland and others sounds like a great deal if we otherwise would have the machines sitting idle.

*Marginal costs are those costs incurred by making one more item. i.e. they are the actual additional costs for making just one more bottle of gunk.

 

[DontAsk]

This is how book clubs used to work ( do they still exist?). Once a print run is complete, it costs peanuts to print a few thousand more copies for alternative sales channels.

 

[WaveJumper]

And if you buy 1m bottles?

They are called Unilever and P&G. Others are available.

In which case, some basic maths -

Lets talk Poundland - not a big chain as chains go and ASFAIK only in the UK - so nothing like Aldi or Lidl! (Now those two really do move in bulk - as in not for one store, but for one planet!)

But Poundland does have 756 stores (Google tells me) so not without buying power! Let's put one measly pallet of gunk in 500ml bottles in 15-bottle packs, 10-deep and 5-high - so 750 bottles of gunk per pallet. That comes to 567,000 bottles.

Except that we ain't gonna buy just one line - let's buy ten lines from the one supplier. And if they are all 500ml things, that is 5.67m items. We're not talking about 60p a bottle anymore - that's for sure! More like 40 - or if it is a slow mover, a lot less!
___________________________________________________

If you really want to open a store, there are two things you need to understand -

1. Retail is all about shelf space. You must calculate how much each foot/yard/meter/whatever is earning per week. That means one running meter of the fast movers that earn 10p markup and are gone within one day are better than slow movers that take a week but earn 50p gross margin. In fact, they are a massive 40% better!

And if one running meter has 50 items, your gross markup is £35 per week for the fast movers and £25 for the slow items. 50p markup looks a whole lot better than 10p - until you calculate properly!

The Aldis and LIdls of this world have these kinds of calculations down to a science. Every inch of every store has to earn its keep.

2. Manufacturers have massive fixed costs and set-up costs. These have to be calculated into the manufacturing costs of each item and this includes such things as overheads and interest payments.

That means that bulk orders for end-of-line products are mostly gross profit.

A bit more number-crunching - One factory that costs us £10m a year to run. It has 10 production lines and each one costs £10m a year and £10m to set-up and each line has a life expectancy of ten years. (Yes, I know these are strange numbers - just live with them!) Each bottle of gunk that comes off those lines has marginal costs of 10p - 5p packaging, 3p transport and handling and 2p contents.

One production line is coming to the end of its useful life - what (the plant or product manager asks his team) should we sell those nasty bottles of gunk for if we keep it going for a month or two and sell them to the likes of Poundland?

If they have a waiting time until the engineers and fitters tear down the machines and set up a new production line, that waiting time is wasted and we still have the staff to pay - so we keep the line going until the last minute. 10p marginal costs* and 40p from Poundland and others sounds like a great deal if we otherwise would have the machines sitting idle.

*Marginal costs are those costs incurred by making one more item. i.e. they are the actual additional costs for making just one more bottle of gunk.

Blimey I read this post this morning and it all came flooding back to me, I could still roll off all the figures relating to running meterage, per department, per panel and chrome bars, 50cm or 70cm how many garments you had on each, the size range the split of sizes and how some sizes had to be replenished throughout the day or risk loosing 50% of your sales thanks @The Byre think i need another cup of coffee now, but your right retailer can be quite the scientific art get it wrong and it can be quite mind boggling how much turnover you can loose in an hour.

Interesting I was in a Poundland store Gosport high street last weekend, which (the high street) now seems to be filled with barber shops, charity shops and an array of the 'pound shops'. Poundland for some time has drifted away from the everything is a pound concept and it was quite noticeable while pursuing the DIY section I ended up at one of their competitors where I picked up 3 paint brushes in a pack for a £1.00 rather than a fiver in Poundland ....happy days ?

 

[MarkOnline]

Blimey I read this post this morning and it all came flooding back to me, I could still roll off all the figures relating to running meterage, per department, per panel and chrome bars, 50cm or 70cm how many garments you had on each, the size range the split of sizes and how some sizes had to be replenished throughout the day or risk loosing 50% of your sales thanks @The Byre think i need another cup of coffee now, but your right retailer can be quite the scientific art get it wrong and it can be quite mind boggling how much turnover you can loose in an hour.

Interesting I was in a Poundland store Gosport high street last weekend, which (the high street) now seems to be filled with barber shops, charity shops and an array of the 'pound shops'. Poundland for some time has drifted away from the everything is a pound concept and it was quite noticeable while pursuing the DIY section I ended up at one of their competitors where I picked up 3 paint brushes in a pack for a £1.00 rather than a fiver in Poundland ....happy days ?

And there is a reason for the move by the discount retailers away from the £1 price point. Costs for stock have risen and the quality of products which fell into the price points the big players wanted to pay has fallen. The 3 paint brush example is a prime example, the quality of the stock is sh**e. The big players want to emulate the German discounters in their hardware type offers. A turd for a pound is still a turd no matter how you dress it up. The discounters want their customers to associate their brand with better quality value ranges rather than "cheap" Remember the hammers they used to sell that couldnt knock a nail in cos the shafts bent?

My take on the initial question, there is room for independent discount retailers but they can only scale if they can find products the big players dont want and can offer an alternative product mix which is very difficult. There is also room in buying relatively small parcels which are too small for the big boys to bother with. It takes specialist market knowledge, having enough money etc to learn the business is the major problem.

 

[The Byre]

The big players want to emulate the German discounters in their hardware type offers.

The UK big players cannot compete with the Lidls and Aldis of this world because they each have about 12,000 stores across mainly Europe and America and when it comes to hardware, they can reach deep into the supply chain. They also have their own factories for foodstuffs, drinks, packaging and coffee - for example, Lidl is Europe's largest manufacturer of mineral water and the second largest soft drinks manufacturer after Coca-Cola. They also have their own ships, trucks, distribution and harbour facilities.

There is also room in buying relatively small parcels which are too small for the big boys to bother with.

That requires some serious knowledge of the markets - but I've seen it done, especially in specialist fields.

It takes specialist market knowledge, having enough money etc to learn the business is the major problem.

If the OP wants to learn the business, getting a graduate training gig at Aldi or Lidl (Aldi is preferable) is the golden pathway to that knowledge.

 

[Newchodge]

Lidl is Europe's largest manufacturer of mineral water

I thought mineral water, by definition, was natural, not manufactured!

 

[DontAsk]

I thought mineral water, by definition, was natural, not manufactured!

See Dasani, although they call it bottled water, rather than "mineral" water. "Mineral" water, however is popularly used to refer to any bottled water. See also Only fools and horses Peckham Mineral Water

Quite a lot of processing can go into genuine mineral water, adding ozone, adding or even removing CO2 and adding it back later.

 

[WaveJumper]

And there is a reason for the move by the discount retailers away from the £1 price point. Costs for stock have risen and the quality of products which fell into the price points the big players wanted to pay has fallen. The 3 paint brush example is a prime example, the quality of the stock is sh**e. The big players want to emulate the German discounters in their hardware type offers. A turd for a pound is still a turd no matter how you dress it up. The discounters want their customers to associate their brand with better quality value ranges rather than "cheap" Remember the hammers they used to sell that couldnt knock a nail in cos the shafts bent?

My take on the initial question, there is room for independent discount retailers but they can only scale if they can find products the big players dont want and can offer an alternative product mix which is very difficult. There is also room in buying relatively small parcels which are too small for the big boys to bother with. It takes specialist market knowledge, having enough money etc to learn the business is the major problem.

For some reason I feel I need to add the £1.00 paint brushes were for applying some Hammarite paint .....then throwing away, for anything else only the best will do ?

 

[Mark T Jones]

Blimey I read this post this morning and it all came flooding back to me, I could still roll off all the figures relating to running meterage, per department, per panel and chrome bars, 50cm or 70cm how many garments you had on each, the size range the split of sizes and how some sizes had to be replenished throughout the day or risk loosing 50% of your sales thanks @The Byre think i need another cup of coffee now, but your right retailer can be quite the scientific art get it wrong and it can be quite mind boggling how much turnover you can loose in an hour.

Interesting I was in a Poundland store Gosport high street last weekend, which (the high street) now seems to be filled with barber shops, charity shops and an array of the 'pound shops'. Poundland for some time has drifted away from the everything is a pound concept and it was quite noticeable while pursuing the DIY section I ended up at one of their competitors where I picked up 3 paint brushes in a pack for a £1.00 rather than a fiver in Poundland ....happy days ?

There is a long history of single price retailers morphing into multi-retailers, including M & S and Woolworth (penny and dime stores respectively)

Thout to an extent Poundland has hampered itself with its name

 

[Bob Morgan]

G G G Granville - F F F Fetch a cloth!

 

[japancool]

G G G Granville - F F F Fetch a cloth!

Four candles?