XL-ing in tough times
XL Stop and Shop has emerged as one of the winners this year, which is no surprise to Richard Norris in Carrick-on-Suir who opened his store this February
Print11 September 2009
It’s heartening to see businesses still doing well this year despite all the doom and gloom, and even better to see new ones opening. For a start, it shows confidence which is encouraging, but it also points up the reality that life is still going on; people still need their services and that means there is business to be done.
So when builder Richard Norris saw the property bubble in Ireland burst, he was very happy to open a shop on his Ballinrichard site. He turned a negative into a positive, even though it meant getting into a business with which he was relatively unfamiliar.
Heartening for Norris was finding a group he could work with, and better again, one whose costs were low and hence very attractive for a new start-up. "To be straight and honest about it, it was the fit-out. XL are after opening about 30 shops this year; the fit-out of the shop with XL is €65 a square foot," says Norris, compared to €125 per square foot with Spar, or €300 per square for Centra. "I don’t know if they’re pushing that as one of their good points but I guarantee you that’s a big factor for any shop setting up," he notes.
Subsequent to visiting Norris’ XL Stop and Shop in Ballinrichard, Carrick-on-Suir, area manager Val O’Meara confirmed that the very attractive fit-out price is a key factor in XL’s success, especially in present economic conditions. The group has already opened 25 stores this year, with a further eight preparing to open, and there are plans to add more in the last quarter of 2009.
"It’s expanding at a rapid rate, we’re one of the few groups that’s experiencing growth," O’Meara remarked. "In the current climate, our fit-out costs are very economical and very attractive. That’s what has attracted a lot of people into the group, among other things, including the image, the service and the people."
At our interview Norris affirms this last sentiment, that the attraction is not all in the price. Although costs are keen, he says: "You couldn’t say a bad word about the XL fit-out. Visually, it’s vibrant, it looks well. They were very efficient when it came to the fit-out too. They came on the day they said they were going to come, they finished when they said they would, and if there was any problem afterwards they were out straight away to fix it. So you can’t beat that really."
Easy company
In addition to these attractions, Norris liked the more relaxed approach of the XL group when it came to the business partnership. Firstly, the buying requirement stands at only 70% as opposed to 95%, as in some cases. "And they don’t police it to a great extent. I’d often say to Val ‘I got this here or I got that there,’ and quite often I think they might even use that as market research. They’re very open," says Norris.
He and the area manager have an easygoing, cordial relationship whereby quick queries can be dealt with via text messages, and meetings are conducted over informal chats away from the shop in Norris’ own office. "That’s the way it is, they’re not on your back, there’s no looking in over your shoulder." Especially important for a man well used to running his own affairs.
Annette Norris, sister of Richard, has been managing the new store since it’s opening in February, and she too has been very happy with the group’s service. "We haven’t had to call on them for much but anything we’ve ever called them for, there was never a problem and it was always done on the day," she says. Furthermore, there has been no difficulties sending back stock if there was a problem, or if they felt a certain promotion wasn’t working. "I don’t know what the percentage is but we’ve had very little waste and that’s thanks to them taking stuff back, and suppliers being a little bit flexible. We’ve basically had no waste since we opened, I’m sure some of the other groups wouldn’t be as flexible as that," says Richard Norris.
Equally, it is "a game of give and take," he says, "like the Family Value, for instance." Norris admits he wasn’t sure about the group’s value range when it was initially installed but he was prepared to take the area manager’s advice. "It’s not in anybody’s interests to stock anything that isn’t going to sell, and I think his instincts are probably better than ours. He’s in these shops every day of the week."
However, Norris adds: "He takes things we say on board as well. If say I don’t think something’s going to work, that’s no problem, there’s no push, push, push."
Value every day
As it turns out, the Family Value range has been far more successful than Norris had imagined it would be. Although his sister and manager admits "it took a while" for the locals to get familiar with the offering, it wasn’t long before they saw a return on investment. "Just in the last two weeks, the peas and the beans are flying out the door, because they’re only 49c a tin. People are starting think ‘sure it’s the same stuff that’s in it, only a different label,’ and they buy two of them," she says. Likewise, the bulk items such as the large pack Family Value cooking oil (two litre) and large bag of Family Value flour are popular with customers.
The shop has also benefited from a range of branded promotions in addition to the Family Value lines, which have been an important draw for local trade from day one. Annette Norris notes that the special offers on staple household goods go down well with local housewives especially: "They see the likes of the Parazone and it’s useful so they get two. The shampoo flies out. Everything that’s there is something that is used on a daily basis."
Richard Norris adds that the store’s special price toilet roll (from Family Value), also on offer since day one, was another big success. "We were cheaper than everyone in town on toilet roll, including Aldi," he says.
According to Val O’Meara, the Family Value range was repackaged and relaunched across the XL network this year, drawing attention to the range and creating a "sense of value" to which shoppers these days are acutely sensitive. "This is in addition to other offers we make available to our customers, our ‘wow’ offers, again displaying excellent value to the consumer out there and an excellent offering for the customer," he commented.
The ‘wow’ offers in XL’s monthly promotional cycles include the likes of ‘Coke and a Snack’ for 99c, Lucozade for just 99c, and Ballygowan 1L for 99c. These, in addition to Family Value, are designed to communicate a value message, so that consumers will see "real value within the convenience store, akin to what is expected in the multiples."
Price conscious strategy
In general, Norris believes that for his store and LTA, the best strategy is keeping prices low every day; this ensures that his local customers feel they can get value for money on their daily groceries from his shop. "It’s because of the deals we do but it’s also because we haven’t fleeced the margin. The deli is very reasonable and things like the minerals; a can of coke is a euro, not €1.05 or €1.10, and for a long time we had a bottle of Lucozade at €1.20 when it was €1.50 and €1.60 elsewhere. We made that decision, we weren’t going to throw margin on it. Everything was priced consciously."
Premium sandwiches at the deli are priced at a keen €3.95, and tea and coffee are equally remarkably good value, at €1 and €1.50 a cup respectively, compared to €2 and €2.50 in many other stores.
"It was those three areas: the drinks, which is about 10% of our sales, the deli counter, and the tea and coffee. And we get regular customers on them. Did it work? I suppose it did. How much margin can you look for on a cup of tea anyway?" says Norris.
And price will remain the central focus of the business into the future: "I’d say were going to have to personalise the deli somewhat, give it its own personality, but for the moment it’s just about getting the price right. We might start fiddling with it, making homemade breads and doorstep sandwiches, and maybe soups, but going forward, I think there’s only so much you can really do. Just keep focusing on customer service and price."
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