Making corner shop economics work through civic engagement

Corner shops have a curious relationship to internet shopping. They provide people with the things they forgot to buy, have run out of early or have immediate cravings for. They complement rather than compete with the convenience of the internet by providing proximity and immediacy. No matter how advanced our delivery mechanisms get, getting a pint of milk from the corner shop will always be quicker than ordering it online.

As the retail landscape evolves, and more and more convenience retail moves towards the internet, the potential symbiosis between corner shops and online shopping will grow. Services such as CollectPlus have capitalised on corner shops’ comprehensive network of distribution points, which are denser than the Post Office, and use them as delivery points for internet sales. This is what corner shops have going for them, there is always one just around the corner.

But maintaining and growing a business out of selling people things they forgot to buy from the internet will be a challenge. An independent corner shop usually takes between 5-10% of what people are paying. From the 50p for a pint of milk, the shop owner will take 2.5p, 1.75p of which will go to the running of the shop, leaving 0.75p profit – that is 1.5% of the retail price.

With these margins, getting people through the door is critical. With outgoings of approximately £50,000 per year, a corner shop in a high street in London needs at the very least 400 people to come through the door every day, each spending around £5. That’s over 30 people per hour for 12 hours every day of the week; this isn’t easy.

To survive, independent corner shops need to cut corners and find savings elsewhere. Many collect stock themselves, from over 20 different wholesalers, hire other family members to reduce the burden of employment taxes, or even sell products at a loss in the hope of bringing more customers through the door.

Of course, there is an alternative model for running corner shops: the Tesco Metro model.  This requires owning a network of shops, buying products in larger quantities, bypassing wholesalers, having stronger bargaining powers directly with the producers, as well as saving on distribution by coordinating deliveries. This allows for higher profit margins, and the potential to undercutting competitors by providing cheaper goods.

But retail is only part of the role of corner shops. They also play an important, but often underappreciated, social role. This is often only noticed when they close down, taking with them a range of subtle but important services they have unknowingly been providing.

This social role varies from community to community and comes in many forms. They provide a place where you bump into neighbours, find out what’s been happening in the local area, get parcels delivered to, leave keys to your house, and provide surveillance over our streets making them feel safer and more vibrant. Much of this social role focuses on the shopkeeper themselves. As the shopkeeper nurtures a trustworthy relationship with the community, they themselves become the shop’s strongest asset. This is less so with larger chains whose staff are less permanent and have a weaker, if any, relationship with the community.

Having a reliable and trustworthy person who is at a fixed location near people’s home at the same times every day is a huge opportunity for a range of local service provisions. Shopkeepers need to capitalise on this and formalise their contribution to the community.

In doing so, they not only provide all services they already do, but expand their roles as local service providers, offering everything from neighbourhood watch to pet sitting.
The challenge will be to develop these services so that people value them enough to monetise them. To do this shopkeepers will need to innovate, turning their corner shops into local social enterprises, centred around their personality, with the added benefit of being a place where people can pop-in to buy milk.

• Read our feature on the reinvention of the corner shop here and the first column in the series, by Julian Dobson, here. The second column, by Tim Ahrensbach on the rise of the civic corner shop, can be read here and the third article by Jane Harrison, on how councils can help reinvent corner shops can be viewed here.