to compete, says Ronan Hegarty
Buying group Landmark Wholesale is in talks with its major suppliers to continue development of its Hot House initiative over the next four years.
Its faith reflects the success of the project to date. Since launching in 2002, Landmark has brought together 14 leading wholesalers and 33 of the UK’s biggest suppliers to offer independent retailers a professional retail package that does not entail joining a symbol group.
Landmark now oversees 450 stores, most of which are trading under the Lifestyle Express or Drinks Express fascias. The plan is to have 1,000 up and running by the end of the year.
So why has it been such a success and what is in store for retailers over the next four years?
Raj Krishan, trading controller for Landmark, believes that the Hot House scheme can stem the multiples’ encroachment into the convenience sector and drive growth for independents.
He says: “I am confident that the independent sector in a year’s time will look much healthier than it does now, thanks in part to schemes such as Hot House.”
The project’s objective is to enable independent retailers to compete with the big boys in an increasingly competitive environment.
The retailer is able to retain its independence while developing store standards and services that can rival and in some cases beat the multiples’ convenience offerings or the symbol groups, claims Krishan.
For what he describes as a “manageable investment” in their stores, the scheme’s members benefit from increased retail standards, access to and knowledge of correct product ranges and correct product visibility and placement. Once these improvements are in place, Krishan is confident that retailers will enjoy a sharp rise in sales. During 2005, like-for-like sales at converted Hot House stores rose 28.9%.
Of course, the Landmark scheme is not a charitable project: increased retail sales will lead to improved performance for Landmark wholesalers and suppliers. Retailers who sign up to the scheme must agree to source at least 75% of stock from the participating wholesaler for a minimum of three years.
Stuart Johnson, sales controller at Blakemore Wholesale, believes the arrangement places less of a burden on retailers than if they were to join a symbol group. “At the end of the day it is down to the retailer to decide what to sell in-store. We can suggest what we think will sell, but we can’t force products on retailers,” he says.
Retailers who sign up to Hot House receive the fascia free, but will be asked to invest in store equipment if, after a store audit, it is deemed necessary. This outlay pays for itself in the long run, believes Krishan. “If a retailer wants to be successful, investment is always needed. However, through Landmark, retailers have access to our preferred suppliers and very competitive rates. In fact, the equipment is 100% tax deductible, which works out more like a 0% loan.”
The scheme is not a cure-all, however. Much is still down to the retailer, says Krishan. “For this to work, we do need a certain kind of retailer. We need retailers who are genuinely committed to developing and improving their stores. It is crucial that they are prepared to listen to and act on the advice they receive. It will fall on the retailer to maintain the store standards every day, long after the conversion is completed.”
So far, this vetting process appears to be working. It involves advice on store planning and designs, retail planograms and access to drop shipments. It even offers retailers access to education and training with an NVQ in business management.
The stores are producing strong sales across a number of key categories. Last year sales of dry grocery grew 31% at converted stores, with wine also up 22%. Non food sales grew 14% and the stores even managed to buck the trend in categories that are struggling. Sales of crisps and snacks were up 5% against tough market conditions.
Blakemore’s decision to drive the number of stores it looks after under the Hot House scheme from 69 to more than 200 by the end of 2007 is testament to the benefit such a scheme can bring to a wholesaler.
Johnson says: “As retailers become more disciplined and start seeing the benefits of our promotions and advice, their spend with us naturally goes up. As our relationship improves they trust us more and are much less likely to spend half a day driving to five or six depots in search of killer deals. They want to spend more time in their stores because they are busier, rather than spending all that money on petrol driving around the country.”
As part of Landmark’s vision to use Hot House to increase independents’ share of the convenience market, it is enlarging the central office team through which it supports both wholesalers and retailers. Its team of retail development managers is increasing from five to six and it has just added a retail analyst to the mix.
Krishan believes this will stand the wholesaler in good stead to identify the trends in convenience retailing.
As the scheme evolves, it could very well become the blueprint for tackling the mounting threat of the multiples. The All Party Parliamentary Small Shops Group may well fear for the independent retailer, but those at the chalk face are doing everything they can to stay alive.
How Hot House works
Store name Bridgefield Stores, Bilston, West Midlands
Owner Tarpreet Hayer
Converted October 2005
When Hayer took over the store in July 2005, it was poorly laid out and didn’t cater well for impulse shoppers. There were also problems with the range, with some key brand leaders not sold; a lack of promotional activity and poor availability.
Another concern was the low-key fascia and poor signage, which led to a lack of passing trade.
Landmark conducted a full store audit, developing strong promotional activity and prominent impulse fixtures. Layout was restructured to get customers to move around the shop and increase basket spend. Landmark erected a banner on the main road nearest the store, pointing traffic in the right direction.
Hayer also invested in a multideck chiller from which he can offer a full chilled alcohol range.
There has been a 25% increase in turnover in the three months since the conversion. Some of the pre-Christmas upturn has carried through to January and February. Hayer says: “The difference has been fantastic.”
Store name New Cross One Stop, Wolverhampton
Owner Vim Patel
Converted November 2005
The store had been in the family for 21 years. Patel completed a major extension of the store in March 2005, but the resulting sales did not live up to expectations.
Despite being located next to a busy hospital, it was not performing at the level it should.
Blakemore Wholesale implemented a complete review of the stock range and re-merchandised to fit its Hot House planogram.
Patel added a wine chiller and bigger cabinet. He retained aspects of his own fascia, incorporated with a bespoke Lifestyle Express fascia, to retain the family business name.
Sales rose 20% and even Patel was surprised. “I had a few rows with the Blakemore guys about what would and wouldn’t sell. But generally most of it has been really good.
“Before, particularly in chilled, I had a lot of wastage, but now we have increased the lines we sell and it is moving much faster than it used to.”