To wonder how the heck small shopkeepers make any money

(25 Posts)

I'm doing my usual browsing the Internet and fantasising about a different life and looking at small gifty wifty shops.

They are going for £25 k plus £1250 rates - so that's having to make £2000 plus a month in a tiny gift shop of 450 square feet shock

How?????

There are loads of empty shops in my southeast town - new ones on nice development, still empty since it was finished building - I can only assume it's because of stupid commercial rents prices.

Why aren't they lowering them to get shopkeepers in the door?

sleepyhead Tue 18-Mar-14 09:47:46

I've noticed that round here the only small shops that stay in business are the ones where they own the building rather than rent (usually old family businesses so no mortgage either.).

I think that must be a huge help in lean times.

pluCaChange Tue 18-Mar-14 09:54:46

Maybe they hope that if they hold out long enough, the local authority will permit them to let to a betting shop! Aren't the rules on the latter being relaxed?

Thetallesttower Tue 18-Mar-14 09:59:22

That's why there are so many empty shops and so many charity shops (that don't pay market rates) in towns. Friends of ours own a chain of outlets and their council tax per month for a tiny shop in the centre of a dying small town is £800- you would think the council would incentivise people to move in and keep the town alive, but they seem intent on screwing people for as much as they can charge and making it hard to park.

Nocomet Tue 18-Mar-14 10:07:05

I have no idea.
DD did her works experience in a small gift shop, they had about 6 customers all week and one of them was me!

Ok it was the middle of winter, but it's not somewhere snowed under with visitors even in high summer.

Which is different to my student job. Yes in winter I didn't take my wages occasionally, but in summer and at weekends both locals and tourists spent a fair bit.

It was a somewhat eccentric shop as well as tourist tat, we sold nice earrings and scarves (locals and visitors for themselves and presents), post cards, nice art cards, fishing tackle and every imaginable size of battery (100's of types because we had mixed boxes of watch barriers and cheap and nasty ordinary and Duracell in loads of sizes). Oh and a few toys and other odds and ends. There were also two mad shop cats.

I don't know if the boss owned the place, or rented it, but he did live upstairs. This wasn't helpful as he changed watch batteries for people and left them randomly in the down stairs bit of the flat and I couldn't always find them.

AugustRose Tue 18-Mar-14 10:14:30

They don't - at least we didn't and I know so many others who are 'hoping it will get better' but most are in debt.

You are right sleepy, the only ones making any money around here are those who own their buildings, usually the businesses who have been going for a long time. All the other shops change hands every 1/2 years.

Eve Tue 18-Mar-14 10:15:41

thats why most towns are overrun with charity shops.

They dont pay for stock so offer higher rent and don't pay council tax

lollipoppi Tue 18-Mar-14 10:32:54

I own a business, and rent the property, we have been open for 13 years this year.
we count our lucky stars every day that we have an amazing client and customer base to still be open.

We offer something different to most of our competitors which is why our customers come back to us, and fortunately local supermarkets don't offer what we do, which in the case of our local competitors had led them to close unfortunately.

But I see where your coming from

Fwiw if your looking to open up a business, do not buy an existing business, rent the shop and start from scratch, if it doesn't work out you can close with no outstanding mortgage ect

Also, you wouldn't pay business rates for a small gift shop, we get small business rates relief which is a government inventive to get more shops to open

LaGuardia Tue 18-Mar-14 10:48:20

We have a lovely gifty wifty shop in our small town, and I love looking around it but have never bought anything because everything is massively overpriced and poncey. They do sell online too, which I think is what keeps them going.

wowfudge Tue 18-Mar-14 11:04:35

Laurie - I agree. I can't see how some people make it work. I've worked for a company managing retail property as part of a wider property portfolio. Even with relatively low rents, I cannot see how there is a viable business in a lot of cases. When you think about rent, rates, utilities, HSE-related costs, wages, etc the money you need to take just to break even, before the business owners even thinks about paying themselves in many cases, is frightening.

This experience has led me to question how many small businesses such as takeaways, nail salons and so on survive. Takeaways are a perfect example because their opening hours are limited to evenings only and if their licence only allows them to open until 10.30 most days of the week, they may only be generating income for 5 hours a day. When you weigh up their overheads with the income (looking at the prices charged) you wonder how they make any money.

There is one near us which has been operated by 3 different sets of people under three different names, with three different food offerings in a four year period - and the place was shut for 6 months at one stage. It is clear to me that it just isn't viable in the area or that someone with a hell of a lot more business savvy needs to run it.

I have also wondered whether some businesses are actually a front for something else..........

Chattymummyhere Tue 18-Mar-14 11:32:30

Our local centre got a refurb 4 years ago only 5 of the over 20 units are let because the owners want £25,000 per year plus you have to finish kitting it out. It looks horrible and actually stops other shops wanting to come over because at the end of the day who wants a shop in the middle of a boarded up centre? Apparently the reason the units are not fully ready is because until they are the owner pays no council tax on them as they are unfinished on the inside.

pluCaChange Tue 18-Mar-14 14:05:19

Interesting about their paying no council tax if unfinished, chattymummy. I know that councils were given discretion over exemptions (entered force circa March/April 2013), since we just missed the deadline last year, to apply for an exemption from residentisl council tax on an unoccupied property (renovation). I wonder why your council hasn't done the same? Or whether there are now only exemptions for commercial property

Chattymummyhere Tue 18-Mar-14 14:30:11

Don't know I know a few warehouses do the same when a unit become empty they rip out the toilet and sink and say to the council man "unfinished not usable".

The local people keep pushing at meetings that something needs doing with the shop units but nothing as yet although we have managed to get the work completed on the flats above and people moving in (4 years of over 30 1 and 2 bedroom flats sat empty)

MsMarvel Tue 18-Mar-14 14:36:17

That's probably why there's been a rise in etsy and not on the high street online sellers, if they can't afford to actually rent a shop front, they have to resort to selling online?

wowfudge Tue 18-Mar-14 14:47:33

Chatty - I don't think Councils are so gullible. It's a major source of income for them and they teams of inspectors who comb through everything. Industrial property gets a 12 month exemption, other commercial property 6 months, before business rates are payable.

There are lots of schemes out there which exploit legal loopholes, etc to help landlords avoid having to pay business rates once the exemption periods are up. A lot of those schemes have been closed down by councils and BIS gets involved to stop it.

wowfudge Tue 18-Mar-14 14:48:17

they have teams of inspectors

wowfudge Tue 18-Mar-14 14:53:35

Sorry - I haven't explained that well at all. When a property becomes empty, i.e. when the tenant moves out at the end of their lease or goes bust, etc then there are business rates exemptions for the landlord. To be classed as unusable they have to have no roof and things of that extreme.

On the unfinished properties - they have to have no services connected to qualify, i.e. no mains water or electricity connected, etc.

Shallishanti Tue 18-Mar-14 14:54:51

I often wonder this. It leads me to 2 theories
1. They are fronts for money laundering
2. Profit margins must be massive (mind you I think that about supermarkets too- if they can suddenly sell something at half price and not make a massive loss, what are they paying for it?)

expatinscotland Tue 18-Mar-14 14:55:04

I think a lot of them sell online.

Nocomet Tue 18-Mar-14 15:35:07

Our niche gift shops, interesting shoe and posh cooks shop do sell on line as well as having shops in a Naice country town, but that doesn't help ordinary card, book and gift shops who don't sell much that Tesco or Amazon don't.

Chattymummyhere Tue 18-Mar-14 16:53:32

Wowfudge I know the warehouse one is 100% true as I have a very trusted insider in that one, they also shift their own company's between units so they keep being empty then "re-let" in the ones they don't take apart.

Shallishanti, the supermarkets' half price and buy one get one free offers are paid for by the manufacturers, not the supermarket generally.

Well it is tough having a shop and very expensive.

Personally, we do well out of it. We only have a very small rented unit though. (Although we have had it for 26 years!)

We are proud to pay our own, and a couple of staff member's, wages. It is not a huge money making exercise but it allows us all to live our lives and for that we are thankful.

Each year we are fearful though that the rent/rates will increase.

Most of our competitors have closed down and we are known for being good value and good service, so we weathered the storm.

DP recently went self employed and we looked at a unit as a new start up and it was preposterous.

How the landowners can be happy making nothing rather than something is beyond me.

wowfudge Tue 18-Mar-14 19:01:47

Chatty - I don't doubt there are instances, depends on the area and councils. Some councils and Valuation Office inspectors just don't permit certain practices, genuine as they may be in some cases, because it's a major issue and there's lots of avoidance going on. The more something happens in an area, the more likely it is to be found out.

phonebox Tue 18-Mar-14 19:03:17

My Dad ran a small business for years, and we solely relied on the income from this. We were extremely poor for years!

The only way he ever seemed to get a profit - and I'm talking a tiny one - was to use a mark-up of about 200% on every item, and very aggressive marketing. He never ran sales, because he just would not have earned much from them, and instead relied on very specific USPs to entice customers into his shop.

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