New Electrical Store Help

NewBiz2011

I am in the process of opening up an electrical store(or chain of!!).What I am asking everyone is, as a consumer what would influence you in purchasing from me(apart from the obvious of low price) compared to the larger outlets.Also if you have time please could you list your top items large or small that you purchase regularly and what retail services you feel are lacking in Ireland.

I appreciate anyones feedback positive or negative as it might sculp my business model.

knighted_1

what county are you opening in ?

have you experience in the industry ?

NewBiz2011

35 years in the industry and opening firstly in Dublin then wherever the model works

AstonMartin

Whats different about your model?

how can you compete with the large chains on price?

NewBiz2011

I may not always have the cheapest price but I do hope to be there or thereabouts.Negotiating with suppliers is key I and this is something that I excel in.I also want to enhance the experience by offering add on services such as delivery and install and demo and not just box shifting.I have numerous other ideas but what I want to hear on this forum is what do customers want now???

AstonMartin

Delivery now pay in 10 monthly installments at a reasonable interest rate.

knighted_1

NewBiz2011 wrote: »

I may not always have the cheapest price but I do hope to be there or thereabouts.Negotiating with suppliers is key I and this is something that I excel in.I also want to enhance the experience by offering add on services such as delivery and install and demo and not just box shifting.I have numerous other ideas but what I want to hear on this forum is what do customers want now???

if your 35 years in the industry you will know that Dublin is going to be awash with stores as another 9 are planned to open on a phased basis from a franchised brand - unless your part of a bigger buying group you will find it hard
as for installing and delivering and demo , that's what powercity did electrical and currys do now anyway so it's not new
to compete with the big players you will really have to stand out

Homer

Location is of course a key factor and having the right location with associated parking and ease of access will most likely incur high rent and associated costs.
Whether you choose to go with a high volume/low cost model or a more bespoke service I think even with all your experience in the sector you will find it hard to survive against some of the bigger brand names who have been around a long time and have better buying power and established customer base.
I wish you the best with your venture in any event.

NewBiz2011

Thanks guys for your input,

Knighted first DiD,Powercity and Currys offer an install service offered by unqualified installers.My guys will have all the qualifications involved in installing electrical and gas appliances so i do not see the similarities.Maybe you are right and consumers want cheap and unqualified installs i know i wouldn't.As for other franchise openings i cannot see this happening....but we will see.and again thanks for input

NewBiz2011

Thanks Homer,

Maybe i am wrong and everybody is happy with PC, Harvey,DiD etc. and the level of service given but since I returned home I have not had too many pleasant experiences when visiting these stores.Is the cheapest original price the most important thing because remember the costs involved with returning product if a problem occurs maybe it is..when the product is out of guarantee do they offer help? in these tough economic times are the products disposable or would you like to get them fixed.please guys help me sculpt my model or am I wasting my time?.

Again homer thank you for taking time to post

AstonMartin

The average customer does not think about those things and most are not willing to pay more if they became aware of them imo.

knighted_1

you never said you were abroad - that throws a different light on things -White goods retailing is somewhat different in Ireland to elsewhere even the uk - negotiating with suppliers doesn't work the same - in the tiger years the big chains took very low margins to keep independents out but made money on quantity rebates ( high quantitys ) again , slightly different now -

what I said about the 9 stores is true , there is some units vacant at the moment but rent being paid on them , they will open soon

I was attached to one of the chains for a few years and also do contract work for some brand suppliers within the industry ,along with casual relationship with two other chains .

what you want to do is achievable but if you look at all the independent retailers out there now , they have either signed up to euronics or expert buying groups /franchisees to be able to compete with the big stores

if you have any questions get in touch and if I can help or point you in the right direction I will

best of luck

NewBiz2011

Thanks knighted,

Yes I have researched the Expert/Euronic groups and find Expert to be superior but as with the multiples they are still focused on the volume business which is no longer achieveable due to the slump.What franchise are you talking about can you PM me if you could as this might be of huge help to me.You obviously know the industry too do you see any niche market or just price price price

knighted_1

I will pm you tomorrow

TylerIE

NewBiz2011 wrote: »

Thanks Homer,

Maybe i am wrong and everybody is happy with PC, Harvey,DiD etc. and the level of service given but since I returned home I have not had too many pleasant experiences when visiting these stores.Is the cheapest original price the most important thing because remember the costs involved with returning product if a problem occurs maybe it is..when the product is out of guarantee do they offer help? in these tough economic times are the products disposable or would you like to get them fixed.please guys help me sculpt my model or am I wasting my time?.

Again homer thank you for taking time to post

The older customer doesnt like the larger chain store.

Where I live in Dublin has mostly retirees in the area. A shop belonging to the large chain is nearby.

One next neighbour recently bought a washing machine.

First they were charging €25 or so delivery for him to get a washing machine (as he seen it) 75m down the road. Older people dont understand that the van has to come from HQ or whatever for delivery - they just see the store up the street.

Then it was missing a component. He went back to the store and they said they "didnt have time" that day to deal with him, and wouldnt be free for at least 2-3 days. Thankfully he was handy and after a day of experimentation he got whatever part it was (some hose component) at a local hardware shop - with his own money.

He wont go back there. Neither of his neighbours either side will.

So product expertise and a willingness to serve the customer are important... will enough customers pay the extra cost of staff who will do this - I dont know.... I do know this man and his neighbours would...

ezspeeder

You need to segment your market insofar as different groups of customers will want different things. For example, as indicated in an earlier post older customers may have different needs to younger people. Personally, I will buy on the internet, e.g. amazon.co.uk, where I can. Even for large value items - free delivery is a big attraction and the prices can be considerably lower than local shops.

What would cause me to buy locally? An emergency where I needed the item immediately.

You need to look at where the market is heading - this may be quite different to where it is right now.

NewBiz2011

THANKS GUYS FOR YOUR FEEDBACK AGAIN VERY VALUABLE

TheCostumeShop.ie: Ronan

I think you need to be really careful here, Harvey Norman reported an accumulated 78.4Million loss, including 31.3Million loss Last year. These are the big boys and the ones setting price expectations. People simply will not pay an extra 200 quid for the latest TV, which may be just your break even once you calculate advertising and overheads. Harveys and Tesco are setting the price standards. In this economy its harder to ask people to pay more for a commodity based product.

The point about demonstrating while valid, but can be a real heart breaker. People come into stores, get the rep to demo it, scan the barcode on their Iphone and have someone on Amazon sell it to them cheaper than you can buy it for. I'm not exaggerating, some electronics you will find items cheaper than wholesale online, because people are not registered for VAT and / or have other tricks to try to build market share or just try to shift boxes in quantities. They get the credit terms from their suppliers to generate cashflow which they then use it to finance other high margin pre-paid ventures.

Also cost of capital is an issue the store will have to be full at all times so you need .5 - 1m in cash for products, suppliers are slow to give credit knowing the success rates of the industry at the moment. Very few in Ireland are able to turn profit / break even at this game, its not impossible but it's a hell of a battle ahead.

To succeed here you really need to niche.

knighted_1

harveys are no fools they have a plan to climb out -thier cost base is way too high but that is changing -
thier new ad on tv is one of the best i have seen ,entitled 'who are we' -really engages the customer and gets the message across
any one see it ? might be a turning point for them if this gets customers in the door

Kinetic^

TheCostumeShop.ie: Ronan wrote: »

To succeed here you really need to niche.

This is the key here. I'd have a look at Richer Sounds tbh. They offer great advice that you just wouldn't get in Power City/Harvey Normans/Currys. They also offer good value and great deals to their existing customer base.

Homer

knighted_1 wrote: »

harveys are no fools they have a plan to climb out -thier cost base is way too high but that is changing -
thier new ad on tv is one of the best i have seen ,entitled 'who are we' -really engages the customer and gets the message across
any one see it ? might be a turning point for them if this gets customers in the door

Having been in their Airside store recently it was a dramatic improvement on the last time I was in there. They seem to have a plan to renovate all their stores on a phased basis I believe. Their TV section is second to none having been in all the big sheds on the lookout for a new shiny flatscreen.
I agree though that the likes of Harveys and Tesco/DID etc are working on very small margin and high volume to survive. I wouldn't envy trying to raise enough capital to compete with them. I know you have said you want to be different but at the end of the day you will still have to box shift to a certain extent to keep cash flow rolling to enable you to buy stock and pay overheads etc.

antoinolachtnai

What I would want to know before shopping in your store is how much reserves and what scale of backers you have, and how strong you are in the market. My initial view is that you will be losing money for years and you will be in a weak position with suppliers because you are not able to deliver volume to them. For me the customer, this makes it less likely that you will be able to deal with customer service and returns.

A high-service concept is a great idea in principle, but who will actually pay for it? People talk a lot about wanting better service, but mostly they are not prepared to actually pay the extra for it.

I think this is what Discount Electrical were trying at and they seemed not to be able to carry through on it in the end. D.i.D. are in the middle somewhere. I have no idea how they are doing financially, but they have been in the game a long time and I imagine they will get through. The international multiples are having a tough time, but their sheer buying and marketing power is incredible. I remember a few summers ago, 2007, I think, the international multiples cut their prices and basically drove everybody else out of the consumer laptop business.

Power City are at the other end of the game as you have correctly identified. They have such volume it's incredible. My preference is to deal with Power City because of the volume and the market strength it brings. In practice, this means that Power City have much better deals with their suppliers as regards credit on returns, and this translates into greater certainty for me the customer.

Personally if I were going into this business, and I wanted to do quality and service rather than low price and volume with the demos and installation and all the rest, I would try to get a major brand on-board, be a flagship store to develop that brand and go with a high-end retail location. To make this work would obviously depend on having a strong relationship with the brand. You need an arrangement so that you will make money even if all the customers leave your shop and head for the discounters.

knighted_1

heres an insight into one model by a large irish retailer

see if you can beat this (should be easy )

if you buy a washer you must pay €26.99 delivery charge
if you want them to install it its an extra €49.99 and you are given the hard sell on this as the sales staff are on commission ,up to €4 on the transaction ,and they must justify to head office why or when they cant sell one to a customer

so thats nearly €77 inc vat on top of your machine ,€99 if its integrated

they let thier drivers install washers cookers etc and pay them €30 plus vat per delivery and install
so thats €36.30 plus up to €4 to salesman ,leaving €30 plus vat profit for themselves on a service

second way is that they have there own employees now in four(?) vans ,all eastern europeans being paid the mimimum wage €8.65 an hour plus €3 per install or €5 euro per integrated appliance doing up to 10 installs per van
so 2 on van at 8.65 per hour plus 5 per appliance plus 4 salesman times 10 per day equals €999.90 income versus outgoing of 8 hrs x 8.65x 2 plus 100 (5 per install x 2) plus 40 sales man equals outgoings of 278.40

leaves 720 inc vat to run a van ,times this by 4 vans
outlook doesnt look good for the irish self employed drivers

so while they are failing to shift the high volumes of boxes they used to they have taken a bigger chunk out of the customer thru this service
will only last a while like it did in the 80s as these installers are unqualified in any area just learn as they go along .insurance companys will stop them

if you can provide a service where, if the customer wants a cooker installed ,and for €77 you would really expect a qualified electrician or registered service engineer to provide the service ,you will be on to a winner.

a point i often think about is ,would it be fair or advantagous ,for a start up business with all the proper qualifications and services to highlight the flaws and inexperience in thier competitors service or offerings ? i dont know the answer to this but maybe one of the better business brains on here might answer

antoinolachtnai

It depends on how much capital and market power you have. If you don't have much of either, it would be a pretty bold thing to do. You can't just go into the market and start dissing a big player with loads of market share. Can you really be sure that service is going to be better, on a consistent, large scale? Service is about a lot more than just competence. Will customers really like it if you diss the competitor? Will the manufacturers?

In reality, the big difference would have to be that you would pay the sales people a much better commission than the opposition.

I cannot really see that the risk involved in installing a washing machine in a correctly plumbed house is that big a deal. Most houses are now correctly plumbed, something that was not the case in the 1980s.You can certainly carry this risk if you are making 2800 euros a day.

If you want to provide high end service, mainstream appliance sales is probably not the first market to tackle. You are better with some niche, high-end product/service.

What are the margins like in this business? With the Flavel dishwasher at 179.95 in Power City (142 + VAT I suppose, and that includes the cost of disposing of your old dishwasher) it's easy to imagine why sellers might want to make some money on selling additional services.

knighted_1

well a start up is going to have a set capital and no market share ,as for paying salesstaff more commission ,i think the multiples have veered away from this as it is not in the customers interest .
if a salesman is on 2% commission for selling one particular brand and 4% for selling other 'selected' brands ,which do you think the salesman is going to push to the customer? this method of selling is dying out in favour of proper knowledgeable staff on a proper wage each week .

irelands consumers are changing ,and the only ones to react to that change so far are the likes of harvey norman,currys and even expert electrical franchises promote the independant feel even though they part of a group .

margins vary with quantity deals but anything up to 25%

antoinolachtnai

But the average margin is a lot lower than that, no?

Don't Currys et al. give their staff commission on the extras like finance, service and so on?

I would think that the days of paying commission on core sales are gone. It's all about the extras now.

If you don't incentivize good staff with commissions, how will you attract and retain the best sales staff? If you are service-led, then staff is the big issue.

knighted_1

antoinolachtnai wrote: »

But the average margin is a lot lower than that, no?

If you don't incentivize good staff with commissions, how will you attract and retain the best sales staff? If you are service-led, then staff is the big issue.

depending on the agreement ,margins vary with rebates etc advertising etc

to keep the best salestaff you must give them a secure job nowadays ,
in the boom there where salesstaff taking home 50k a year nett,but on paper thier wages were 18k gross a year gauranteed so couldnt secure mortgages and lifestyle loans on paper yet they had it in thier pocket .bonuses for financial targets is the way forward not different commissions on different brands and different services ,that can have no long term sustainability

NewBiz2011

Hi guys,

thanks a million for all the responses very valued info.I know this industry inside out and know most of the pitfalls out there but I do feel that there is a market for a quality service with some niche products.I am aware of the margins achieved and they are nowhere near 25%.Knighted although Harveys report a loss year in year out there is also a margin sent back to Australia ranging between 11% and 25% off invoice which is not included in any account.Power city are a huge machine and fair play to them they operate it well did I know are feeling the pinch as there locations are expensive .I am hoping there is a market for some portion of business i will keep you informed and again thanks for the input.

Lyn256

Just from a customer point of view, can you invest some money in training your staff well. Its one thing that bugs me sooooo much is going into shops where the service is poor.
You can tell where they staff are happy and motivated and it makes shopping within shops so much better.
Speaking of Harvey Norman's- I was in two different branches earlier this year with money in my pocket to spend and walked out of both because no-one came near me. Not a smile/hello/how are you doing?
In the end, I spent over €1000 in Peats in Blanchardstown (Bought TV and laptop)-very knowledgable staff and very very helpful! And thats where I plan to go back to next time I need to buy

maxer68

Basically you are looking at setting up a big version of Knowles Electrical. - I'd even look into buying the Knowles Electrical brand as it was synonomous with service for decades.

It went belly up recently, but I think more to do with not changing than anything else. - It operated out of a tiny premises in traffic choked dun laoghaire, where it may have succeeded if it had moved to larger, easier to access premises.

The servic element is one that is needed, but as said before, it is probably better served to an older well off community aka Dundrum, Goatstown, Stillorgan, Blackrock, booterstown.

Mr.Boots

I agree with the OP...service and knowledge in this industry in ireland is dreadfull.
The only place i found good was actually head and shoulders above the rest.
They knew their products inside out, were resonably priced, very polite, efficent and punctual with delivery (which was free)
Anyone i recomended them to was equally impressed.
Its Dominic Smith Electrical in Gorey.....i think it may have become an "Expert" store more recently but still has the great staff.
Its the only place i would go now........If you can match that model i think you would be on to a winner.

knighted_1

NewBiz2011 wrote: »

Hi guys,

thanks a million for all the responses very valued info.I know this industry inside out and know most of the pitfalls out there but I do feel that there is a market for a quality service with some niche products.I am aware of the margins achieved and they are nowhere near 25%.Knighted t.

you will go under if your not getting that type of margin -

what margin had you previously been operating

UrbanSea

I just saw this now. OP margins are in the 20-25% depending on brands, lowest would be about 18% and I think it's the likes of Miele who would be one of the lowest.

Service is a huge thing. Consumers don't like been fobbed off a week out of gaurantee or something which is often seen with larger electrical stores. Also,charging the guts of thirty euro for a delivery isn't liked.