Forecourt Trader - 30 years at the heart of the fuel retailing community

Working capital

06 September, 2006
Or why some sites have bare shelves...
Page 18 
one of the very stirking features of many sites at the moment appears to be just how empty some of the shops are - not of customers, necessarily, but of stock.
Now it's an old maxim, but true nevertheless: if it's not on the shelves, your customers can't buy it. So why is it that so many otherwise busy-looking sites seem to have forgotten to re-order stock? Well, when we ask the question the answers seem to boil down to just two:== 1. "I'm out of here in a few weeks" ==This is quite common at the moment with the ownership and/or operation of so many retail networks changing. Often the existing retailer doesn't know whether he/she will still be on-site after the changeover. If they stay on as self-employed 'agents' or 'commission operators' under the incoming regime then at least they can usually keep most of their existing stock. However, if they have to leave the site, or are re-engaged as employed managers, then they run the risk of having to remove their own stock and try and get what they can for it from friends still in the trade. Hence those retailers worried about imminent departure or change of status tend to run down their stock fairly rapidly. Unfortunately this often means that they cut down on orders for their main selling lines - leaving tobacco gantries and fridges half empty - while still unable to sell their older stock. Eventually their sites look as if they're on the brink of closure. Not only does their own income suffer as they near departure, but the incoming operators sometimes arrive to find their supposed high-quality site barely ticking over when they actually assume control.== 2. "I can't afford to stock up" ==There's no doubt that keeping some shops looking fully stocked requires quite a lot of money invested (working capital), even though some clever operators have the knack of making their shops look well-stocked even when in reality they're only half-full (by going round the shop and pulling stock forward from the back of the shelves when gaps start to appear). Our Database figures show that the 'average site' currently holds some £21,000 of stock at cost, or £28,000 at retail. Now while that is actually slightly less than the peak figures we've recorded over the years (in 2003 and 2004), the market has changed somewhat in the relatively short time since those days. A couple of years ago the 'typical' retailer only ran one or two sites; today we're seeing 'clusters' of between five and 10 sites being run by one retailer, with some 'mini-groups' suddenly expanding to run 20 or more sites in a very short time. Just stop and think about it - acquiring an extra four 'typical' sites means having to find an extra £80,000. If you're looking at nine sites, that's an extra £185,000.== Why funding isn't so simple == Now it could be argued that you should be able to negotiate credit terms from suppliers that would soften the blow. Unfortunately that only tends to apply where you're buying the stock from one of the big wholesalers, or occasionally, from an oil company. It's virtually unheard of to get any credit from an outgoing retailer. As for the wholesalers, well they may give you some credit terms, but that rather depends on whether you've a good trading history with them already.The funding question is even more complicated than that. Remember that some suppliers, particularly the news wholesalers, will ask for substantial deposits up front before they give credit on deliveries. Also, lending funds against shop stock can be quite tricky for your bank manager as there's very little practical security that a bank can establish over your stock. So the bank manager will want a pretty water-tight personal gauarantee from you, secured on whatever concrete assets you have, such as the equity in your own house.There's no doubt that anyone looking to expand their business empire needs to look very carefully at how they're going to stock the shops. You can't afford to keep the site looking as if it's on its last legs with empty shelves, but funding the stock also means sensible stock management practices, and for that you need reliable information. But that, as they say, is another story.



  • Weekly
    Retail
  • Weekly
    wholesale
  • Daily
    Average
Weekly retail fuel prices: 15 January 2018
RegionDieselLPGSuper ULUL
East124.9460.90131.85122.27
East Midlands124.34132.31121.54
London125.0662.90132.42122.10
North East123.94133.63121.07
North West124.1658.50132.51121.18
Northern Ireland123.4169.90128.40120.85
Scotland124.5774.90130.88121.33
South East125.1561.40132.52122.48
South West124.73130.24121.91
Wales124.44128.57121.19
West Midlands123.7465.23132.27121.20
Yorkshire & Humber123.9161.90132.74121.12

Most read

Are you feeling positive about the opportunities for growing your business in 2018?