A few years ago some enthusiastic people planned to set up a greengrocer in a small local town. There were already three outlets selling fruit and vegetables in this town, but that didn’t necessarily mean that a greengrocer was a bad idea – where there is competition there is demand, at least. The plans included to also sell produce that could not be bought in the town, such as fresh fish. Again, nothing wrong in principle there either, but a couple of fundamental mistakes were made here.
The greengrocer outlet was aiming to set up next door to a Spar retailer, who also sold fresh produce. Out of curiosity when shopping in the Spar one morning I asked its owner how he felt a new fresh greens and fish set up next door might affect his own business?
‘It won’t at all’, he said. ‘Regular customers would ask me for it, but when I stocked fish, freshly caught from Devon that morning, hardly anyone bought it. I was losing £200.00 a week – not much reward for getting up at dawn!’
And what about possible affect on his fruit and vegetable sales?
‘The refrigeration unit for those costs £15,000 for a small area of shelving. It’s a specialised cooling system and essential, as people won’t buy wilting greens or tired fruit, but it means the margins are tiny as there is not a big enough demand and turnover here to make that work alone. A bit of locally reared meat, or locally grown veg gets my customers through the door, but they also want their staples and bogofs. I tried the whole deli route too, but people don’t buy artisan foods every day. It’s the combination and right balance of both treat and convenience that works here’.
A ten minute conversation with a retailer who had served his town for 30 years was a revealing and valuable insight, and yet when he and I spoke no one else had approached him about this. As it happened the greengrocer didn’t get backing, to a relieved Spar owner, and not for his sake alone.
It is dangerous to assume that simply offering new or different products or services equates to a demand for them. That seems blindingly obvious, but it’s crucial to understand not just what your competitors are offering or not, but also why.
It is also important to talk about a business idea to as many people you can think of, as well as those operating in the same sectors. Not all opinions count, but you will hear some that definitely will. And collaboration is just as, if not more, interesting than competition – more on that to come.
For more information on how we support start ups with business development planning, call us for an informal chat.