Smart savings

Supplier switches, clever investments and financial support have saved Ross Macpherson thousands.

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With costs mounting, Ross Macpherson decided to bite the bullet and refit his two Costcutter stores in Barassie and Coylton, South Ayrshire, with a view to making long-term savings.

“Both stores had older refrigeration, and we had no chiller doors, so the efficiency in the business wasn’t good enough and we knew that the Scottish government had an SME interest-free energy efficiency loan on things like refrigeration, LED lighting and solar panels.”

He had already put LED lighting into the stores and installed movement sensors so that lights automatically switched off in the storerooms if they were empty for longer than five minutes.

“The next step was for us to put fridges in and at the same time we thought we’d do a small refit as well – changing the counters, changing the backgrounds behind the counters and changing the bulkhead inside.

Barassie, which measures 1,100sq ft, was the first store to be redeveloped back in January, while the larger 1,300sq ft Coylton store was upgraded in April.

Applying for funding took longer than Ross had originally thought. “It was 12 months going back and forth to get the paperwork over the line. It was quite extensive, but we got the answer we were looking for, which was funding granted.”

He took out business energy loans for each store – £47,000 for Coylton and £34,000 for Barrassie. “Because our carbon footprint was getting reduced by over 30%, we managed to secure a £20,000 grant for each shop as well,” he adds.

“The government funded the refrigeration, but not the aesthetics of the wood counters, shelving etc – that came out of my pocket.” In total, the work at Barassie came to £80,000 plus VAT, while Coylton came in at £100,000 plus VAT.

Both stores converted all their refrigeration over to new, doored chillers with external compressors. In addition, Ross put a timer on his alcohol chiller, so that it was no longer running through the night. “Everything’s just more efficient, the energy savings are monstrous,” he says. “It essentially covers the loan.”

An issue with his meter reading means he hasn’t yet had an energy bill that reflects his cost savings at Coylton, but Ross witnessed an instant improvement at Barassie.

“Our electricity was previously £3,000 a month for Barassie, sometimes £3,500, but our bill for February was £1,200.”

He has also switched energy suppliers to make even more savings. “We’ve moved from Scottish Power to a new supplier and that’s brought both bills down by £400, so about £9,000 savings between the two shops.

“Including the electricity saved in both fridges, we’ve saved around £42,000 a year.”

The changes reduced his water usage too. “The old fridges were water fridges [using a water-cooled condenser system] so the water rates were £250-300 a month. That’s gone down to £100 a month, so that’s another £200 saving on water.”

And he hasn’t stopped there. “While I was on a roll, I also contacted my card merchants and changed from Payment Sense to World Pay and that saved us £9,000 a year, so that’s a pretty big saving as well.”

Ross also applied for funding via a Scottish Grocers’ Federation Go Local Programme grant. “I’ve been working with [Project Director] Jamie [Buchanan] and because of the amount of local produce we sell, we qualify very easily, that’s another £5,500 [per store]. So that’s £25,500 we’ve had in grants per store, which I’m happy about because it brings my monthly payment down quite a lot.”

Local sourcing

The store uses around 15 local suppliers. “We have about three bakeries, a company called Back Street Kitchen that produces gastro meals, Hosprep Chinese food, Fuel Fit and Lockerbie Butchery fitness products. We’ve seen a lot of growth in the business from these products that are cooked fresh, they’re coming to us the day they’re cooked, so you’ll get five- or six-days’ date on it.” His extra chiller space means he has room to grow this side of the business even further.

“We added 2.5m onto our Barassie chilled food range (that’s eight linear metres) to try and boost the sales, plus the Aulds fridge and an extra 1.25m of alcohol fridge. Refrigeration now totals about 23.5m and we have 4.5m of freezers.

“We doubled the chilled food in Coylton from 5m to 9m (18-20 linear metres extra), so there’s space there for us to really go to town on it, and we added two double-door freezers. Total refrigeration now stands at 23m and we’ve got 6.5m of freezers.”

A freezer at the front of the store is now dedicated to meal deals, to give them more visibility.

Ross explains that increasing turnover is crucial to making the business viable in the face of rising staff costs. “We need an extra £10,000-£15,000 at each shop a year for the wage rise, so we need to take an extra £40,000-£50,000 a year on our turnover. When you break that down weekly, that’s about £1,000 a week extra.”

He has just forked out for top-notch ice cream machines from Taylor, costing £7-8,000 each. “We had Porelli soft scoop at the front of the shop, then moved it to the back and we do a lot of ice cream sundaes, frappes, and ice cream milkshakes. But we’re going to get a whippy machine. It’s cleaner and quicker and will make a lot more profit.

“Taylor equipment is very expensive because they’re the best in the market for ice cream, but it tastes fantastic and the quality is good. It’s very small and can do 200 ice creams every 12 hours and it’s self-pasteurising, so it only needs a full clean every month.”

There are new drinks to go on offer too. “We’ve got slush machines coming in from Snow Shock. They’re £10,000 between the two of them.”

Tango trouble

These have replaced Tango Ice Blast machines, which proved to be far more trouble than they were worth.

“We had Tango Ice Blasts before, and you’ll probably find anyone with a brain takes them out after their contract’s up. They’re a loss leader 100%, you need to sell eight a day to break even.

“Barassie’s was broken [on and off] for three years and they refused to replace it – they just kept coming back and fixing it, but there were months when we didn’t have it. It looks fantastic when you put it in the shop, but unless you’re doing £70-80,000 a week plus, it can’t work. We sold a lot on home delivery on a Sunday, but when it’s minus two degrees in January nobody wants it and it’s not making any money. It’s a 24-volt socket, like putting your kettle on every hour, so it’s not efficient. Even the syrups are £150, plus VAT. They used to be £67 four years ago.”

Barassie has kept its existing Costa machine, but Ross has added a shelving unit next to it now with protein bars to generate extra sales. In Coylton, he is weighing up his options between a Pret machine and a Costa.

Food to go was another area for improvement, with a branded bakery display, housing sweet and savoury lines, helping to boost profits.

“We brought in a cake counter for Barassie in partnership with Aulds the Bakers,” he explains. “It’s been very successful, every week it’s getting better and better. Our weekly bill to Aulds the Baker is £700-800.”

While sales are strong, he remains hungry for more growth. “Auld’s was looking for over £300 a week consistently, so what we’re doing now is above average, so they’re happy with that, but obviously there’s still room to perform better.

Coylton’s bakery display has also been upgraded. “We already had a cake counter at Coylton using another bakery, which did quite well, so we decided to change to a more modern counter at Coylton with a Cossiga fridge.”

‘Over the moon’

While he concedes that Barassie and Coylton aren’t showstoppers, he is nonetheless delighted with the results. “Neither store is brand new, so you’re never going to get the wow factor unless you’re ripping it down and starting again. But as far as what we’ve added to the business – especially as we don’t own the property in Barassie – we don’t mind speculating to accumulate.”

The improvements have left Ross smiling. “I’m over the moon,” he beams. “Customers love it. It seems to have made the floor space a lot cleaner. I don’t know how it’s done that, but there’s a lot of lighting coming off the fridges. We didn’t have enough fridge space before, so we had our fruit and veg in green crates running along the bottom of both Coylton and Barassie’s chillers, so about 15-20 crates sitting against the fridge. So your potatoes, carrots, onions, bananas, apples, all the way across. That’s now off the floor and in the fridge, so there aren’t trip hazards and there’s more floor space.”

Being disciplined and constantly monitoring margins is another way Ross keeps the business on track. “Our margins are really good, we’re 30% gross profit, which is where we want to be.”

He also analyses his staffing levels closely to ensure maximum efficiency. “We look at our hourly rate of sales. We don’t have four staff on when there’s a quiet gap in the day. Between half four and half six seems to be the busiest spot in Barassie, so we have three staff at that time.”

His next big focus is boosting the home delivery side of the business.

In Coylton, the store carries out 50-60 deliveries a day. These sales equate to about 35% of turnover (£11,000 a week). “There’s other shops doing a lot more volume than us, but we don’t have a school near us or a college and we’re not on a main road. We’re relying on our social media and on our Snappy Shopper platform.”

Until recently, Barassie home delivery amassed £8,500 in sales with 40-45 deliveries completed daily, accounting for about 20% of turnover. “It wasn’t as high as we would like; I’d like Barassie to be doing up to about £11,000 a week,” says Ross

 

To help with this, he adopted a new promotional strategy to increase sales. “Between 10 and half-two our sales are not very good so we’re doing a lot of offers during that time.” This has enabled average weekly home delivery sales to climb to £9,300 so far.

In September, Ross plans to invest in a new shop front and shutters for Coylton. He’s also eyeing up electronic shelf edge labelling to improve the business. “Digital labelling is in the pipeline, but I know it would cost at least £20,000,” he sighs.

However, his latest investments are already resulting in a considerable sales increase. “Both stores have seen turnover rise. We’re probably up at least £2,000 a week at Coylton,” he says. “In hot weather, we were up £5,000 because we have a bigger chilled range with salad, cold meats and strawberries.”

He says that investing in your store can be tough, but it’s the only way forward. “It’s worrying to think about the amount of money [I’ve spent], but then again, it’s a catch-22. You refit the shops, so your efficiency is better. The reduction in the electricity will then at least cover the loans. And then if you’re refitting the shop and making it better, you should be able to get your basket spend up. It’s a double hit: one with more savings, and two with sales.”