Business plan: building supplies store
“The renovation cannot be completed, it can only be suspended” – worldly wisdom indicates one of the reasons why it is worth opening a hardware store. There will always be a demand for building materials: while some are building supplies, others are repairing and vice versa. The development of the construction market in Russia contributes to the fact that a lot is being built and repaired. Even if there is no need to carry out repair work in the house, nails, a hammer, a screwdriver, etc. will come in handy in everyday life. Therefore, opening a hardware store from scratch is a great idea for a profitable business. To figure out how to start your own business and how much it will cost, we offer a detailed guide that will answer the basic questions of a budding entrepreneur.
1. Market overview
The dynamic development of the construction industry and the real estate market in Russia has contributed to an increase in demand for building materials. This was accompanied by the emergence of new retail outlets – from small pavilions to construction hypermarkets. The building materials market grew by 20% annually.
To date, there are more than a thousand universal and specialized chains of construction stores on the market, with the top 10 largest retailers accounting for almost 25% of the market. The 2014-2015 crisis consolidated the success of large construction stores. Growing competition in the market and regional leadership of large market players led to the fact that other construction stores faced problems: reduced sales and, as a result, a deterioration in financial condition.
The difficulty of competing with construction hypermarkets lies in their aggressive pricing policy and a wide range of products covering all stages of construction and repair. When planning a purchase, a potential customer is inclined to choose a large shopping center. There are many reasons. This is the breadth of the assortment, lower prices, the ability to buy everything you need at one point of sale, service (consultations, delivery services, etc.).
However, there are situations in which the buyer would rather go to a small hardware store. This is the purchase of a small amount of building supplies materials for cosmetic repairs, the addition building supplies of materials that ended in the course of the repair, minor household issues that require urgent solutions. In this regard, since 2015, among construction stores, there has been a tendency to change the structure of the assortment with the replacement of building materials with goods for the home.
The defining moment in this area of trade is the favorable location of the store. While large retail outlets occupying vast areas are forced to be located on the outskirts of the city, small hardware stores may open in a residential building, shopping center or local market. Therefore, despite the high level of competition in the building supplies materials market, this direction can become a profitable business. The main thing is to correctly choose a place and plan all stages of opening a retail outlet.
Thus, the hardware store as a business has its advantages and disadvantages. The main advantage is the high demand for the product, which guarantees a stable income. According building supplies to statistics, the average family in Russia makes repairs every 5-7 years. This does not include purchases to maintain repairs. The profitability of a hardware store can be 30-32%, depending on the margin on goods.
Difficulties in the business of selling building supplies materials:
- Strong competition in the industry. The market will have to compete not only with small retail outlets, but also with construction hypermarkets, which can offer the consumer a wide range of products and lower prices;
- Price policy. It is necessary to set the optimal price for the goods, since inflated prices will scare off potential customers, and too low prices will not allow the business to be recouped. The best option is to analyze the pricing policy of competitors and reduce prices by 2%;
- The need to provide a wide range of products to interest the consumer. Firstly, there is an important task to correctly form the assortment, taking into account the preferences of the target audience. Secondly, it becomes necessary to establish contacts with a large number of suppliers and choose the most suitable ones;
- Seasonality of sales. Statistics show that the peak of retail sales was recorded in the spring and autumn months, summer sales are 70-80%, and winter – 50-60% of the maximum. Moreover, certain commodity items are also seasonal, which is why a wide range of hardware stores is important.
2. Store format and assortment
As mentioned above, it is more rational for a novice entrepreneur to open a store in the “near home” format. Its scale can also be different: from a small pavilion with building materials to a supermarket. It all depends on the chosen place for trading and financial capabilities. We will look building supplies how to open a hardware store using the example of a small supermarket that offers customers more than 100 items of goods.
For a store of this sales format, you should rely on consumables used in repair work (fasteners, paints and varnishes, adhesives, construction tools). Based on the format of the building supplies store, its assortment is determined, which should include the following categories of goods:
- paints and varnishes (paints for interior and exterior works, primers, impregnations, varnishes and coatings for various materials, as well as rollers, brushes);
- building supplies mixtures, cement, primer, putty, alabaster, etc .;
- polyurethane foam, sealant, liquid nails, assembly glue;
- hardware of various modifications and sizes, nails, screws,
- wallpaper. This group of goods should be represented by a wide assortment, allowing to satisfy the tastes and requirements of different consumers. Related products include adhesives, brushes, and more;
- floor coverings (laminate, linoleum, carpet, parquet and related products in the form of fasteners, underlays, baseboards, etc.);
- construction tools (rollers, spatulas, hammers, nail pullers, drills, screwdrivers, etc.).
Before forming the assortment, a thorough analysis of the market, suppliers and assortment of competing stores should be carried out. This will allow you to determine consumer demand and select products in such a way as to create a unique offer in the market. Important! You will be of the greatest interest to the buyer in two cases: if you can offer a unique product that is not on the market, or the same one, but at a more attractive price. The fact of proximity to the house is also significant, however, since building supplies materials do not belong to spontaneous purchases, so you should not hope only for this.
Basic recommendations for the formation of the assortment of a hardware store:
- it is desirable that each product group be represented by several manufacturers in different price categories. At the same time, goods of the middle price segment must make up at least 60% of the entire range;
- choose reliable, high-quality suppliers, since the reputation of the store depends on it;
- when choosing suppliers, also pay attention to whether they are presented in other stores. Unique offers on the market will attract buyers;
- if some product is not in demand, its stocks should be reduced, but not excluded from the range completely.
It is also proposed that the store operate in a self-service format. As practice shows, such a system contributes to the growth of sales. For this format, products should be divided into categories for convenience. A consultant is provided for each department (or related departments).
Advantages of a hardware store operating in the mini-market format:
- great location for clients. Construction stores located within walking distance, in certain cases, are the most attractive option than hypermarkets remote from the city;
- variability of the assortment. The area and format of the store allow us to offer a wider assortment range than in construction pavilions. Not only products of popular manufacturers can be presented here, but also less common brands. Construction hypermarkets usually work with certain brands and are not inclined to change suppliers. Smaller stores are more flexible and can work with a wider range of suppliers.
- customer loyalty system. At the moment, not many home improvement stores are paying attention to customer acquisition policies. You can correct this mistake and provide, for example, a system of discounts for regular customers.
3. Choice of location and premises
As with any retail establishment, the location of a home improvement store plays an important role. The location favorable determines 70% of the success of the outlet. Evaluation of the location of a store takes into account such parameters as the characteristics of the area, ease of parking, the intensity of pedestrian flow, visibility and noteworthy, proximity to similar enterprises. A good option would be the area of new building supplies, as well as sleeping areas away from large construction stores.
When choosing a space for a store, the question arises, rent a retail space or acquire it as a property? Entrepreneurs recommend not to rush to buy retail space and work in a rented space for the first two years. In case you make a mistake with the choice of a retail outlet or it does not work out, it will be much easier to simply vacate the rented area.
Requirements for the premises of a hardware store:
- The required store area is at least 100 sq. m. Otherwise, there is a risk that the store will be unprofitable.
- The sales area should be square or rectangular, without unnecessary bends – this will make it more convenient to place display cases and make the most of the available space.
- The ceiling height must be at least 2.7 m.
- There should be two entrances from the sales area – for visitors and for loading goods. With a trading floor area of 100-150 sq. m. for a warehouse you will need 50-70 sq.m.
- The presence of heating, ventilation, air conditioning, water supply, sewerage, ventilation and electricity in the room.
Special investments in the repair of premises for a hardware store will not be required. It is sufficient that the premises meet sanitary requirements, be dry, clean and well lit. Lease of commercial building supplies premises with a total area of 150 sq.m. on average it costs about 100,000 rubles a month. Dividing the rented area into premises for various purposes, 100 sq.m. to the trading floor, 40 sq.m. for a warehouse and 10 sq.m. to technical rooms.
4.Sales area equipment
The retail space should be well lit. The interior for a hardware store is quite simple and does not require large investments. However, when planning the budget for a project, you should include the cost of repairs. One way or another, some minimal alteration of the rented premises will be required. Plan at least 20,000 rubles for this type of expenses.
When preparing a retail and warehouse area, there is no need for expensive finishing materials. The building supplies finished room must be bright, clean and dry. Get some inexpensive redecoration and good ventilation. This is all that is required from the premises for the successful sale of your business. The technical equipment of the home improvement store should help to increase sales, ensure the productivity and return on trade, and meet safety standards. In this regard, the sales area must be equipped with reliable lighting and ventilation equipment.
In addition, you should purchase commercial building supplies – racks, showcases, cash counter, cash register. Since the store operates in a self-service format, several racks will be required on which the goods will be placed. For the initial stage, the store is equipped with two cash desks. However, the retail space should be zoned so that, if necessary, one more cash desk can be placed.