Nobody wants to think about their corner shop failing when they’ve just opened their doors. Positive mindsets are essential, but it’s also vital to be realistic about your prospects and the threats you’ll face.
Despite the high street struggling over the past decade, convenience stores remain surprisingly robust, with 49,388 shops employing 437,000 people. Still, despite the resilience of the wider industry, that doesn’t mean all owners have the same joy.
Let’s look at some of the main reasons why corner shops fail, so that you can tackle them before they happen.
What is the average convenience store failure rate in the UK?
Truthfully, we don’t know. No numbers exist targeting convenience stores specifically. In fact, it’s one of the few retail niches that has succeeded throughout the pandemic and in the aftermath of it. According to one study, the market has been growing by 1.5% each year from 2020 to 2035, with positive signs in the years ahead.
Still, don’t make the mistake of assuming you’re onto a guaranteed winner by opening a corner shop. Most new businesses still struggle to survive. One analysis found that 20% of businesses fail within the first year and 60% fail within the first three years.
The main reasons convenience stores fail
We all know that every business story is unique, and each failure rarely follows the same plot. British corner shops are constantly under strain in the face of competition, rising costs and poor management.
Here are the main reasons convenience stores might fail in your area:
- More Competition – It’s no secret that more corner shops are opening nationwide. One of the big problems is supermarkets expanding into convenience-style stores, competing with your area’s independent stores. Not to mention that online retail, including said supermarkets’ rapid delivery services, is posing a challenge.
- Rising Costs – Rampant inflation and politicians seeking cash to balance the books have put further pressure on small businesses. Whether it’s general inflation, minimum wage hikes, rising energy prices or increasing business rates, it’s all impacting the bottom line.
- Lower Consumer Spending – Businesses aren’t the only ones being squeezed. Individuals are also feeling the pain. A study found that 70% of consumers said they expected to reduce spending in the last three months, a two-year high.
- Changing Consumer Behaviour – People are changing as well. They’re more price-conscious than ever in the face of the cost-of-living crisis. Likewise, people are prioritising convenience, with more shopping online.
- Poor Management – Then, there’s the matter of poor management. Whether it’s not integrating technology to take advantage of opportunities or bad cash flow management, some stores put themselves out of business due to a failure to run a business properly.
These are all daunting challenges, and there have been casualties, even though the sector has grown as a whole. Still, it’s vital to be aware of these pitfalls, so you can take evasive action and adapt better to your target market.
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What to consider before investing in a convenience store to ensure success
Running a successful corner shop means answering a number of key questions:
- What does my target market want?
- Who is serving their needs right now?
- What investment will it take to create a profitable business?
Essentially, it’s about making the process as straightforward as possible. An audience has a need, and you’re looking to fulfil that need. However, it must make financial sense to fulfil that need. For example, if you’ve found a neighbourhood that’s already saturated with corner shops, it’s probably not worth it financially to try to break into that market.
It’s all about choosing the right location, finding the products that get people through the doors, and developing a robust financial operation that enables you to come out the other side with a profit.
Granted, it’s much more complex than that, but it all goes back to conducting in-depth research before you do anything.
Challenges to overcome to avoid a convenience store business failure
We identified five of the biggest reasons why these types of businesses fail. Each of these obstacles must be overcome in turn to increase your odds of success. And it all goes back to proper planning.
So, how can you overcome the main reasons for convenience store failure in the UK?
More competition
Competition is a given, but you don’t want too much competition. You may find an area with high footfall, but if there are three shops within 200 feet all offering the same products and services, it’s probably not a great place to get started.
Think about your key demographics, shortlist different neighbourhoods and analyse the available competition. Ask yourself not whether you can compete effectively but also whether it’s worth attempting it in the first place.
Rising costs
Dealing with rising costs is less straightforward because issues like inflation and tax rises are out of your control. Instead, you’re going to have to get creative.
For example, if you’ve got soaring energy bills, consider whether you can negotiate with your supplier to get a better deal. Alternatively, think about adopting energy-saving technologies that can optimise consumption and cut your costs.
Another option would be to examine your workforce. Are you hiring two people when one would do?
What about your products? Are your shelves filled with products nobody is buying? Consider optimising your product mix, so that you’re increasing your average consumer spend as an antidote to rising costs.
Lower consumer spending and changing behaviours
People are spending less because they have less to spend, but that doesn’t mean that has to remain a fact. Consider the services others offer that you don’t to encourage your customers to spend their money under one roof.
For example:
- Daily newspapers
- Lottery tickets
- Alcohol/tobacco
- Freshly baked goods
- Local delivery services
And this simultaneously tackles the problem of changing consumer behaviour. By adapting to local preferences, you’re increasing the chances that they’ll increase their spending when paying you a visit.
Poor management
Poor management is another kettle of fish entirely because there are so many reasons why your management can be poor. This is less about specific issues and more about adopting the correct mindset. It means being willing to reflect on everything from your finances to your operations, and committing to constant improvement.
But management is less critical if you haven’t yet opened your doors. At Cogogo, we help you set the stage for your next venture. Search our database for convenience stores for sale and find the businesses available for purchase right now. Alternatively, to learn more, contact us now.
