The challenges facing the high street have been much documented over the past couple of years. Crippling business rates and the rise in online shopping have meant small retailers have had to be savvy to survive. So how can small retailers make efficiency savings without compromising customer service?
One issue that has always posed difficulties to small retailers is e-commerce, says Michael Weedon, deputy chief executive of the British Independent Retailers Association (Bira), which provides support, business services and representation to independent retailers. "They've always struggled when it's come to e-commerce. If you've got to build your own website and look after it, it can be a hell of a strain on your resources," says Weedon. One solution for small businesses is the site myhigh.st, which supports indie retailers and features products from almost 400 shops from 160 towns. "Independents can be on there, they have a web presence, but they don't have to pay anything unless someone buys one of their products. That's a big time saver," says Weedon.
One area where it's possible to make efficiency savings is music, says Weedon. Music creates atmosphere in shops and has a big impact on the overall customer experience. Studies have even shown that background music can prompt people to impulse buy. However it comes as a price to the retailer, who has to buy a Performing Rights Society (PRS) and Phonographic Performance Ltd (PPL) licence. Bira offers its members a royalty free in store music service at a lower cost, says Weedon. "If you play music in your shop you pay licences every year. Bira Music is streamed, it's unpublished music, royalty free, it's all good quality stuff. A big cash and carry in the north have just told us they're saving £5,000 a year doing that. Retailers pay for the service but it's much less, the top cost is £300."
Renting office space in London can be a drain on the finances of a small business. However e-tailer Amoralia, a luxury maternity lingerie company, has managed to find a way around it. The business shares office space with a bigger company, Carbon Smart, and just pays for the desk space it uses. This means lower business rates and lower overheads. "We're in Central London, SE1, so it would be extortionate to get an office on our own. We minimise costs by sharing with a bigger company," says founder Jules Canterbury. "We are a small team, there's only four of us, so it's not only sociable but it also saves money." The agreement was initially for six months, then a year. "We don't have to take out a five year lease. It gives us a lot more flexibility, we can grow or shrink if we need to." Amoralia pays a flat rate, which also includes business rates and the use of Carbon Smart's IT services. "It's hard to find IT guys to work for SMEs. They have a proper IT department so it's great we are able to use theirs and they bill us accordingly if we want them to do extra work."
Another way the business saves money is by co-marketing with non-competitive but complementary businesses in the sector. These are companies that have the same customers. Canterbury says: "We try and find other brands that operate in our sector so we talk to maternity clothing companies etc. So, for example, they put our leaflets in the orders that go out, and we do the same for them. We might run a competition on their site and vice versa. It's a way of broadening our customer base. They get something out of it and we get something out of it. We also share stands at trade shows with other brands. The cost of a stand can be quite high when you're starting out."
The e-tailer uses a third party warehousing system to take care of that side of the business. "We have all our products in a warehouse. We have £70,000 worth of stock. Imagine having to pick a packer or shipping it out ourselves. We subcontract that to a dedicated warehouse who do it for lots of other customers and can negotiate on courier costs." Amoralia also outsources as much as possible to reduce payroll. "We outsource design work, PR, IT, as much as we can." Does the company have any more efficiency plans? "I think one of the next areas is cloud computing, they've made huge strides and you can have your data backed up for free," says Canterbury.
If small retailers are looking to reduce costs while continuing to run a successful business they should spend time planning, says Jonathan Pritchard, managing partner at digital communications agency Tangent Snowball. "Take a customer-centric approach and plan around your customers. Spend time getting to know them as this will ensure greater efficiency." They should also consider negotiating: "Don't be conned into buying from your suppliers for the sake of a deal; focus on what your customers need and then negotiate to get better deals. Ensure your suppliers are focussed on you, whilst your focus should be on your customers."
Reducing energy use is another way small retailers could cut costs. Across retail businesses an average of 28% (1 - see key) of energy is typically used on lighting. By switching to low energy LED lighting, customers can save up to 75% (2) on that energy consumption. More than a third (37%) (1) of energy use in retail businesses goes on room and water heating, with savings of up to a 15% (3) possible by improving heating controls.
Iain Walker at E.ON says: "Small business owners are often tied up doing lots of things – they are the boss, sales agent, secretary, procurement department and accountant all in one. It's safe to say that no business owner wants to waste money, yet that's what using unnecessary amounts of energy does."
Energy and money saving tips for retailers from E.ON:
Your customers' comfort is key so being able to control settings is invaluable – especially with the front doors opening and closing all the time. What's needed is a responsive heating system that gives you good control over temperature and environment of your retail space.
Do away with draughts – a huge amount of heat is lost through opening doors and gaps around windows and doors. Think about fitting automatic doors and good quality door and window seals
Choose LED spotlights – they use less than a fifth of the energy of tungsten halogen (2).
High-efficency condensing boilers are 90% efficient; running costs on older boilers can be more than a third higher (4).
Heat water at the point of use – in areas with light usage, like staff rooms and toilets, it's much more efficient and will let you turn the main boiler off in summer.
Use motion sensors where possible – light toilets, cellars and stockrooms only when needed.
Key
1. Details on energy consumption available at www.eonenergy.com/for-your-business/small-to-medium-energy-users/energy-toolkit/retail
2. Choosing modern LEDs over tungsten halogen lights will use less than a quarter of the energy. Using a 7W LED instead of a 35W tungsten bulb will save 80% (7W / 35W x 100 = 20%) (For more information on lighting see Carbon Trust: Display Lighting)
3. The Carbon Trust have shown that just a 2C increase in office temperature can significantly impact your costs and the environment. For calculation showing how a change of 2C can affect your costs, see Carbon Trust: Poster Calculations (PFL307 – Employee Awareness Poster – Heating).
4. Figure taken from Which?. Older boilers may operate at less than 55% efficiency, which means running costs are over third higher.
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This content has been paid for and produced to a brief agreed with E.ON, whose brand it displays
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