Retail and the unexpected

“Obviously, balanced against that is very weak demand but, as our lease is tied to sales, it works for us. The shops have put us in a strong position for the pick-up. We have a unit in a prime Dublin location for a fraction of what it would have cost us three years ago.”

Hughes is not alone in taking a fresh look at retailing. With retail vacancies estimated at 14% nationally, and about 20% in Dublin, rents have fallen substantially. Retail sales values have fallen by 30% since 2007, says David Fitzsimons of Retail Excellence Ireland, a trade association for retailers.

“The retail sector is bouncing along at the bottom right now,” he said. “It differs by sector, with non-discretionary sectors such as food, fuel and pharmacy faring better, but discretionary spending areas such as home improvements have been hammered.”

It has also emerged that some vastly different rents are being paid, often on the same stretch of a street.

“We have retailers stuck with high legacy rents, who are stuck in a rut, sitting side by side with opportunists who have come into the market often on the basis of free rent periods,” said Fitzsimons.

The abolition of upward-only rent reviews earlier this year doesn’t help existing leaseholders as it can’t be applied retrospectively.

“Nothing can be done for the existing leaseholder. It is however an ideal opportunity for people who have no covenant to get retail premises at an exceptional price,” said Fitzsimons.

Retailing isn’t as easy as it looks however, says Tara Buckley, the director general of RGDATA, the grocery retailers’ association.

“Just because people shop, they have a tendency to think that it is easy,” she said. “A word of warning: it’s a 24/7 job. You need a good business plan and a strong grasp of financial management to pull it off.”

It’s not all about having nice premises, she adds. “A lot of people are good at front-of-house stuff, making a shop look nice and even selling,” she said. “But it is the back office management skills that are essential, especially in a sector where margins are very tight.”

Having spent the past two years battening down the hatches by lowering costs, Buckley’s members have begun to feel that a corner is being turned in recent weeks.

“There is a small bit of optimism emerging — and it may just be the good weather — that maybe the worst is over and that we are about to come out the other end,” she said.

“Consequently there may be an opportunity to capitalise on the fact that all the research shows that people want to shop locally, want to buy Irish and want the sense of community that comes with having a variety of shops on the high street — as long as they are getting good value. It is a good time to tap into that.”

Regardless of the shop type, the most important factor is location, including unit size and its competition, says Oliver Savage of Barry Group, which supplies Costcutter.

“To get an idea of the kind of business you can expect to do, see what the competition is doing and check the internet for things like population size and demographics,” he said.

To attract customers, a shop must be inviting, says Fitzsimons. “It must have good eye-line from the street — people like to see in before they go in,” he said. “If you are going to be a ‘destination shop’, you must make it clear what it is about you that is compelling enough for people to get in their car and drive to you. Otherwise you are left trying to attract passers-by and that is hard.”

Supplier selection is also key, says James Burke, a retail consultant. “Look for suppliers who will offer something different,” he said. “One of the best ways is to go into shops in your sector in foreign cities and make a note of what they have got. You can find some gems that way. If you only go to the usual distributors here, you will end up the same as everybody else.”

Aim for suppliers who will let you move to credit terms as quickly as possible. Where possible, try to manufacture a little on-site too, he says. “If you are a bakery, make a couple of lines yourself and buy everything else in — that can really help you stand out,” said Burke.

He advises would-be retailers to have four or five “heroes”. “In a clothing store, you may carry a number of lines other people have, but go all out for hats, say, be famous for them,” he said. “They will support the rest of your stock.”

Use your suppliers to help with marketing. “If you have a shop selling make-up, get them in to do demonstrations. Better still, have information evenings for selected clients where they all get a makeover. Nothing builds customer loyalty better.”

Make the most of the launch. “Get local celebrities in, get bunting on the street outside, get a farmer to put a trailer with an advertisement for you at the approach roads — guerrilla marketing can work very well and is cheap,” said Burke.

Once people start buying, start gathering data. “Get permission to contact them four or five times a year. If I have a flower shop, for example, and a customer buys a bouquet, a year later contact them to see what you can do for them.”

Social networking is a good way of getting free exposure. “Give your shop a Facebook page and get people talking to each other about you,” he said.

One business that has more than 500 fans on its Facebook page is Murphys Ice Cream, which was set up by Kieran and Sean Murphy in Dingle in 2000. Right now, all the talk on its page is about the shops it opened last week in Temple Bar and Wicklow Street.

“We didn’t have to pay any key money and we negotiated tens of thousands off the rent and we were able to because there are just so many empty premises out there now,” said Kieran.

“We couldn’t have dreamt of locations like these a few years back What’s more, I’m hoping the downturn will encourage a diversity of shops to open their doors, after a period of homogenous global players being the only ones who could afford to.”