The good old corner shop is a British staple. It’s survived everything from the rise of supermarkets to online shopping and even a pandemic. It’s why there were almost 50,000 convenience stores nationwide in 2023, with no signs of this UK institution dying off.
It might leave you asking whether you can make a go of it and add a profitable corner shop to your portfolio. Like any shop, it’s all about location, goods, competition, and value. The good news is you’re not too late to get into the convenience store business.
Here’s what you must know about the financials of buying and running a convenience store.
Is owning a convenience store profitable in the UK?
Convenience stores are highly profitable in the UK because this is usually the first place people go for the essentials when they don’t want to go to the supermarket. It’s why the UK’s convenience store niche generates £47 billion every year and employs 437,000 people.
Retail has never been an industry with huge margins, and the corner shop is no exception. It’s unlikely that a single corner shop will turn you into a millionaire, but plenty of chains generate millions annually.
It’s also important to understand where the sales and margins come from. For example, in 2022, tobacco and e-cigarettes accounted for a fifth of convenience store sales, followed by alcohol, making up 15.9% of sales.
Certain products will net you considerable profits, so it’s vital to concentrate on what your market responds to. Remember, it’s a store people go to for a couple of items, so most people’s per-visit spending will be relatively low-value. The profitability of convenience stores typically relies on locals visiting five or six days a week.
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Upfront cost of opening a convenience store
Upfront costs of opening a convenience store vary dramatically because every shop has a different value attached to it, even if they all sell similar products.
For example, let’s say that you’ve got a leasehold making £30,000 every year. A business like this can be picked up for around £40,000 on average, depending on where you are. But attractive freeholds can buck this trend, especially if it’s in an attractive area and includes accommodation.
It’s not uncommon for shops making relatively low profits to still sell for six figures as part of bidding wars. Unlike buying a house, the convenience store market is volatile, and profitability alone doesn’t define the price.
Beyond the initial purchase price, you’ll need some spare cash to settle in. The rule of thumb is you should always have at least two weeks of working capital. That’s usually around £4,000 – £5,000 after you’ve bought the business, plus the stock you need to get started.
Licences are also necessary for your convenience store. Such licences include:
- Food hygiene certificate
- Premises licence to sell alcohol
- Environmental health registration
What these licences and registrations cost usually varies by the local authority. It also depends on what you want to sell. For example, some shops might prepare fresh sandwiches, which would necessitate going on a food hygiene course.
In most scenarios, we’d recommend having at least £50,000 as a minimum to buy the business and get yourself up and running. Naturally, if you’re opening a space that wasn’t previously a shop, your costs could easily surpass £100,000 to convert the space.
How much does it cost to buy a convenience store on average?
How much a convenience store costs depends on what part of the country you’re in. A Central London location can easily cost well into six figures. On the other hand, a small area on the outskirts of a major city might cost you more in the £30,000 region.
There are also issues like accommodation to consider. If you’re able to live upstairs or buy an entire building with the potential for expansion, this will up your costs, but it could be the better long-term move because you can combine your home and business into one.
Unfortunately, any averages for convenience store purchases aren’t particularly helpful because of the tremendous variation nationwide.
What are the start-up costs for a convenience store?
The start-up costs for your convenience store depend on so many things because opening a larger shop in a premium zone will cost significantly more than a small shop in a less desirable area. However, let’s try to give some rough figure examples to help you plan to open your corner shop.
- Purchase Costs – £35,000-£40,000
- Lease Costs – £20,000-£30,000 per year
- Refurbishment – £500-£5,000
- Fixtures & Fittings – £500-£1,000
- Initial Stock – £1,000+
- Supplies – £100-£2,000
- Legal/Licensing – £2,000
- Contingency Fund – £10,000
Note that not all of these costs will apply to you. Depending on your circumstances, you might find that some of these costs are higher or lower than the above averages.
A note on the contingency fund: your contingency fund is for emergencies and can be as low or as high as you feel comfortable. Generally, putting a few thousand pounds aside is enough for most shops to get through any emergency.
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Ongoing costs of running a convenience store
Most of your initial investment will go toward opening your convenience store. The majority of your ongoing costs go toward keeping your shop fully stocked and paying any regular expenses, such as licence renewals, utilities, or a lease if you’re renting. Additionally, you might hire staff, which will add considerable costs to your business.
Let’s look at what these ongoing costs might look like monthly:
- Staff Costs – £2,000
- Insurance – £50
- Rent/Business Rates – Up to £3,000-£4,000
- Utility – £500-£1,000
- Additional Waste Collection – £30
Of course, issues like rent might not apply to you, but you’ll have to pay business rates. How much you pay in rates depends on where you are because your local authority sets them. Plus, don’t forget that the higher London minimum wage means if you’ve got a shop there, your employee costs will be higher than anywhere else.
What matters is you’ve got a solid business plan and an idea of your costs before borrowing any money or committing to opening a corner shop. Think about how much turnover and profit you’ll need. Also, don’t be afraid to ask for numbers from shops in your area, especially if there are shops up for sale.
One final tip?
Purchasing an existing shop is always better than opening a new one because existing corner shops have a built-in customer base that’s probably been frequenting it for years. Ask about profitability and consider whether the numbers make the convenience store worth your while.
