It’s tough opening a new business at the best of times, but it takes a very brave soul indeed to launch a new venture in the midst of the most severe economic crisis for a generation.
With businesses failing and banks less willing to lend, you could be forgiven for thinking it would make sense to bunker down and wait for the tide to turn before considering opening a new company. And yet some hardy characters have refused to be put off, starting out on a new road in exactly this period. But is it really possible to get a new business off the ground in the current environment, and what does it take to defy the odds and succeed?
The UK retail market has never been tougher, and with the big five supermarkets having about 80 per cent of the market sown up, breaking their stronghold is a tough ask. And yet a number of new businesses have taken up the challenge by opening stores in the last year, suggesting we could be on the cusp of an anti-big five revolution.
One such pretender is Haldanes, an independently-owned family business that launched this year with the aim of “putting the local back into the shopping experience”. The company, the brainchild of entrepreneur and chairman Arthur Harris, sought to take advantage of stores the Office of Fair Trading required The Co-operative to offload following its takeover of Somerfield. In an ambitious series of store openings over the past year, the Haldanes fascia now appears on 23 stores from the south east of England to the north of Scotland, with further acquisitions in the pipeline.
“Since our first outlet started trading last November, the focus has been on opening stores the length and breadth of Britain,” says Harris. “We said back then that we planned to source at least a third of our products from local suppliers at each of our stores. That has taken some time, and there is still work in progress, but we can say that we are bringing this vision to life.
“Once fully implemented, our plans will potentially benefit hundreds of small producers and community groups across the country as well as satisfying the demands of our customers, which of course is the Haldanes goal.”
The Haldanes aim of differentiating itself with the freshest, local produce is proving a popular path for upstart retailers. The Naked Grocer celebrated its first full year in business in September, having achieved a strong following of local customers in the preceding months.
But it’s not been an easy path. Founder Chris Bavin recalls that when he first started up he felt that everything was going against him. “The shop fit overran, we went 15 per cent over budget, all these problems come and you feel like you are getting hit and hit,” he explains. “It’s the big companies - the people like the banks, the council, BT - that really let you down.” The banks offered Bavin an eye-watering 22 per cent interest on a start-up loan, leading him instead to ask his parents to re-mortgage their house and “beg, steal and borrow” to raise the capital needed to get his business off the ground.
Obstacles presented themselves at every turn, but ultimately the sweat and 16-hour days started to reap their reward. “If it was easy, everybody would be doing it,” Bavin says. “When it’s going badly, it’s the loneliest place in the world. But when it’s good, it’s brilliant.”
Publicity is key to growth for The Naked Grocer. As well as putting the message out repeatedly on social media, Bavin hosts visits from schoolchildren in an attempt to enthuse the consumers of tomorrow in fresh, healthy food. It is a message that he feels smaller, more personal shops have more chance of getting across than the major multiples. “People are hungry for knowledge, information and feedback,” he says. “I don’t think big supermarkets can do a good job on information. They have so many messages to get across - it’s too big for them. They just can’t have the interaction that the independent retailer has. The biggest tool we have is our passion and understanding for the industry.”
Just over one year down the line from the September 2009 launch, The Naked Grocer is looking for its second store, a local satellite outlet that is not too close to cannibalise sales from the original shop. Bavin says he will look to diversify the product offer - he is already selling milk, butter and jam - but will be careful to retain the store’s identity and not just turn into another c-store.
One new venture trying to turn the whole business of retailing on its head is the People’s Supermarket, a unique format opened in May that sees volunteer members contributing a few hours of their time a month to work in the store and profits put back into the business. Unemployed people are given an opportunity to work there with government support, and the layout is an eclectic mix of whatever they can get hold of (the bread display, for example, is an old boardroom table), making it a sight unlike anything else in the retail sphere.
The company got off the ground with £150,000 in cash raised from private donors, with most of that spent on securing the 2,000 sq ft building. Like The Naked Grocer, founders then used their initiative to secure the fixtures and fittings. “We are the best scavengers you can find,” says co-founder Kate Bull proudly. “We got old counters that were going to be thrown away, and all the fruit and veg is placed on recycled school equipment.”
The business got going with no advertising, but has been heavily involved in social media and local press to get its message across. Importantly, Bull claims the produce is of excellent quality and prices are not way beyond the mainstream retailers. And she dreams of opening further stores in future if the current goodwill and support for the supermarket continues.
So what is Bull’s advice for other would-be retailers? “I’ve learnt it’s vitally important to have a good relationship with suppliers and you shouldn’t patronise your customers in any way,” he says. “Never assume customers won’t like something and never underestimate the people that work for you.” It might sound like a line from the Terry Leahy playbook, but it’s a sound approach that has paid dividends in the People’s Supermarket’s fledgling existence.
Away from the retail side, a number of well-known industry figures have established their own consultancies this year. In April, ex-Bidwells man Richard Walters set up Azurance, a management consultancy business focusing on the agri-food and food industries. He admits the economic environment was not ideal to get the business off the ground, and says you have to take a leap of faith when taking such a decision. “It’s quite a challenge coming out of that safety net [of a full-time job]. The major challenge was to get the bank to back us.”
Because Azurance wasn’t a business with much in the way of assets, the banks were reluctant to lend, Walters explains. “It’s difficult in a consultancy business because our assets are brains. We don’t have any buildings that the banks can use as collateral.”
So far Azurance has picked up a few clients in the farming sector and Walters says that “generally speaking it’s gone well”. He is also consulting on farm diversification projects and some public sector work. His key tips for start-up businesses include having a solid business plan and spreading the risk with a number of customers. “In difficult times you often get a lot of opportunity,” he adds. “Businesses are failing and public sector contracts are being outsourced to the private sector, so there’s lots of opportunity out there.”
Flexibility is also vital, says Carol Ford, who started up Growing Direct in June. “You start out with one idea of what you think you are going to do but I’ve learnt flexibility and keeping all your options open is a good thing.”
The direct supply specialist is working with businesses and helping them with their supply chain relationships, with knowledge and know-how proving prized commodities in the Britain of 2010. But even in the short time she has been trading, Ford has been surprised by how much her business has had to evolve to meet the changing desires of her customers.
Overall, the recipe for success seems to be hard work, perseverance and a sympathetic bank manager - or the creativity to raise cash in other ways. Clearly, the economic environment makes it a tougher time than ever to start up, but for those that can find a true point of difference, there is still reason to pursue that pot of gold at the end of the rainbow.
WHEN NEW BUSINESSES GO BAD
Everybody laughed when a new supermarket was formed whose name sounded like a combination of Asda and Tesco. But nobody’s laughing now.
Asco set out with the bold objective of providing a real alternative to the major multiples, but less than five months into its fledgling existence its only store had been closed and the company was put out of business.
Opening in August 2009, the company faced a succession of problems in its early days, from delayed store openings to the departure of its managing director. It was wound up early this summer when a supplier petitioned for £25,000 of unpaid debts, and the fascia disappeared for good in September when its store in Warrington was replaced by a Poundland.
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