UK trade deluded about independents20th March, 2013 by Patrick Schmitt
Specialist independent wine merchants in the UK are struggling to make a profit and are increasingly threatened by the encroachment of supermarket express stores onto the British high street.
In an interview with the drinks business this week, Bill Rolfe, part owner of The Market Square retail shop in East Grinstead, as well as wine importing company 10 International, highlighted the difficulty of running an independent in the UK, and the expense of servicing this retail sector.
“I think that a lot of the trade are deluding themselves about the independent sector,” he told db.
Considering the cost of rates, rents, wages as well as other expenses such as lighting and heating, Rolfe said the typical high street shop required £150,000 to run over the course of a year.
Reckoning that the average turnover for wine specialists [in the UK] is £10,000 per week, or £500,000 per year, he said they were lucky to break even.
He explained that the average margin taken by independent wine specialists is 30% on each bottle sold – including losses, returns and breakages – meaning that the average independent is making £150,000 profit on annual sales.
As this is the same sum it costs to run the average outlet, Rolfe concluded, “So they [independent wine merchants] are not making any money… it is a lifestyle choice for many people.”
Hence, he said, “I suppose I’m saying, if you are an aspiring independent, do your homework before leasing a shop.”
Furthermore, he stressed that importers and distributors should be aware of the significant outlay when it comes to supplying this part of the UK off-trade.
“For the wine producer, there is a high cost to service the independents, because you need reps and regular deliveries, although there are some wholesalers making a profit serving them.”
Speaking of his own operation, a former Threshers Wine shop on East Grinstead high street, he admitted that the outlet – called The Market Square – had had to broaden its offer beyond wine to survive.
“Without the food – we have a deli, bakery and we sell local cheeses – we wouldn’t be profitable.”
Rolfe explained that just 50% of his shop’s turnover was from a range of 300 wines along with bottled beers, which is the same income the former Thresher’s shop was making, despite’s Rolfe’s investment in improving the look and nature of the drinks range.
“We’re making around £8,000 per week on drinks, which is the same as the old Threshers, because the potential spend on drinks is finite.
“People are now buying some of their wine at supermarkets, some online and some at wine warehouses like Majestic – gone are the days when people source all their wine just from their favourite place, they shop around.”
Rolfe added that he had failed to increase the spend on drinks despite employing knowledgeable staff and expanding the range compared to the old Threshers.
“People assume that they will take over a Thresher and improve turnover by making the wine range better because they know more. But for the majority of customers, they just see a wall of wine.”
Hence, he advised, “You need to reinvent yourself to improve turnover, because what people want are wine and other associated products.”
He also warned, “But if you don’t deliver these in a different way you are just another convenience store.”
Having identified around 1,000 true wine specialist shops in the UK of the 24,000 licensed cornershops, he said, “If the 1000 independents understand this and sold milk alongside Gevry Chambertin, we could create a real competitive alternative to supermarkets who are moving back onto the high street.”
Rolfe lamented the fact that the towns of Britain are now dominated by the supermarkets, with superstores on the edge of urban areas, and express stores on the high street.
“I think the government should look at this,” he said.
He then admitted, “If a Little Waitrose were to open on our high street we wouldn’t exist because we would be sharing the spend and our overheads would remain the same.”
Indeed, earlier this week, supermarket Morrisons acquired 49 former Blockbuster Video shops to create a convenience store franchise in the south east called “Morrisons M”, with the retailer openly declaring its intention to open 70 small format stores by the end of this year.
Finally, Rolfe expressed sympathy for those suppliers to the UK who intend to divert resources away from the market.
Recalling the impact of the major high street wine retailer bankruptcies from Threshers to Wine Rack and Oddbins, he said, “If you were to add up the trail of debt from the last five years you would see that millions have been lost.”