Rent as a % of turnover for eCommerce?

[JPMiddleton]

I posted the exact same thread as this 10 years ago, and rather than bring an ancient thread back to life I thought I would start a new one - but mods are free to merge with the below if it's better to do so.

Rent as a % of turnover for eCommerce?

I've been researching moving away from my current situation (working from home plus renting a storage unit locally) and renting an office in a local business centre and I've been trying to find average rents paid and rough percentages of turnover for ecommece businesses. So far I've mostly...

www.ukbusinessforums.co.uk

Long story short - since that original thread we have increased our rented space many times (6 to be precise, 5 within the same building) and vastly increased our external storage space, but our rent across storage and office is around 2 - 2.5% of turnover.

We have an opportunity to go for a new unit, which would give a greater opportunity to be more efficient and expand over time, but the rent % would be 4.5 - 5% (at least initially). Our profit allows this, but I wonder if it's too big a percentage realistically for an eCommerce business.

So - i'm asking the same as back then, roughly what % is your rent (preferably as an eCommerce business) of your turnover these days?

 

[LPB 123]

2.2% last year. We are in e-commerce as well.

I don't think the numbers you are looking at are unreasonable though, if you are still growing as surely in a few years the % will drop down to similar levels?

If either of our neighbouring units came up for lease today then we'd definitely take them as we can grow into them.

 

[JPMiddleton]

Yes, growth for us would come from more space for larger size items (which is where our growth it typically coming from right now).

It is also a much more modern building (we're in an old mill currently) which would allow us to more adequately store the stock in appropriate temperature and humidity.

We are pretty stagnant right now in terms of YoY comparisons (ignoring the covid peak) and probably would have been able to add growth in a larger unit.

Out of curiosity, are you in an industrial/hybrid type unit?

 

[Mister B]

We're currently at 3% of turnover, and eCommerce as well. We do have the space here to double is we're able so more than happy with the current figure.

 

[LPB 123]

Yes, growth for us would come from more space for larger size items (which is where our growth it typically coming from right now).

It is also a much more modern building (we're in an old mill currently) which would allow us to more adequately store the stock in appropriate temperature and humidity.

We are pretty stagnant right now in terms of YoY comparisons (ignoring the covid peak) and probably would have been able to add growth in a larger unit.

Out of curiosity, are you in an industrial/hybrid type unit?

Industrial unit with mezzanine across most of it. Small office downstairs.

 

[Paul Kelly ICHYB]

Rent to turnover is a pointless statistic.

You need the space you need.
The rent is what it is (based on many factors)
Your turnover does not generally/solely relate to space

 

[lesliedocherty]

Rent to turnover is a pointless statistic.

You need the space you need.
The rent is what it is (based on many factors)
Your turnover does not generally/solely relate to space

What a load of nonsense

 

[japancool]

Rent to turnover is a pointless statistic.

You need the space you need.
The rent is what it is (based on many factors)
Your turnover does not generally/solely relate to space

If you're in ecommerce, the amount of space used to store your stock all adds to your cost of sale. So it is relevant.

 

[Paul Kelly ICHYB]

What a load of nonsense

Why, how can it be compared generally?

If one person sells pencils and another steam engines, storage requirements will be different.
If someone wants storage in London the equivalent space will cost more than Scotland.
If one person sells charger cables and another computers, their turnover could be very different.

 

[Paul Kelly ICHYB]

If you're in ecommerce, the amount of space used to store your stock all adds to your cost of sale. So it is relevant.

The actual cost is extremely relevant, however, the % of total costs isn't. The cost is the cost based on your choices and decisions.

The only time it would be useful is when you are looking at your own space e.g. up/downsizing, relocation etc.

 

[japancool]

The actual cost is extremely relevant, however, the % of total costs isn't. The cost is the cost based on your choices and decisions.

Why? It affects your margins, especially if you're selling something relatively low cost and bulky, like plushies. It's the same as the cost of shipping.

 

[Paul Kelly ICHYB]

The % does not affect your margin. The amount you pay does.

I know your rent is, say 5% of your costs and mine is 10%, what does that mean? Without comparing £psf, service costs, rates etc, it's just a meaningless number!

 

[japancool]

The % does not affect your margin. The amount you pay does.

I know your rent is, say 5% of your costs and mine is 10%, what does that mean? Without comparing £psf, service costs, rates etc, it's just a meaningless number!

Of course it affects your margin. Any cost affects your overall net profit margin. Is that something that I really need to explain to you?

If you're selling the same thing as I do, and you're spending twice as much on rent as I am, then you're doing something different to me. Service cost, rates and everything else is irrelevant. The fact that you ARE paying a different amount is the key point. The WHY is a different question.

 

[Paul Kelly ICHYB]

In UK retailer terms, margin is the generally term for % profit (commonly ex VAT, but some use inc VAT). Profit is the value (Qualification - retail buyer although 30 years ago, responsible for £100m t/o).

As you mention, knowing what rent is as a % of t/o is irrelevant if you do not have the data behind it.

The fact that you ARE paying a different amount is the key point. The WHY is a different question

But a % does not indicate that you are paying a different amount, only that it is different!

Two identical businesses with the same costs could have different turnovers, profit etc, which would change the %.

 

[JPMiddleton]

The only time it would be useful is when you are looking at your own space e.g. up/downsizing, relocation etc.

Why is exactly the point of this thread. Feels like a little like arguing for the sake of it really, you just acknowledged that in my circumstances it is useful.

 

[JPMiddleton]

Of course it affects your margin. Any cost affects your overall net profit margin. Is that something that I really need to explain to you?

If you're selling the same thing as I do, and you're spending twice as much on rent as I am, then you're doing something different to me. Service cost, rates and everything else is irrelevant. The fact that you ARE paying a different amount is the key point. The WHY is a different question.

Have you increased your space in the last year or two yourself?

 

[japancool]

Have you increased your space in the last year or two yourself?

I did just over a year or so ago.