Complete Geography Project : Comparing three commercial retail outlets in Llandrindod Wells

Methods of growth,

        There are two main ways in which a firm could grow. The firm expanding on its own achieves internal growth. The firm invests and increases its production and sales, a firm can also grow by taking over or merging with other firms. This is known as growth by amalgamation. A merger occurs when two companies of similar size agree to come together to form just one company. A takeover usually refers to a situation where a firm attempts to buy another firm against the wishes of the directors of the second firm, or where a large company buys a small one. Somerfield in Llandrindod Wells is an example of a takeover as it bought out the Kwiksave stores in Llandrindod and has a monopoly of some items in their large stores, as they are the only stores that sell certain item because they are the large stores and there are only some smaller firms such as Spar and The Ridgebourne Post Office to compete with.

        When two companies do come together, integration is said to take place. There are three major types of integration or merger:

• Horizontal Integration occurs when two firms producing similar goods and services amalgamate. For instance Somerfield in Llandrindod taking over Kwiksave is an example of horizontal integration, as both companies are in the business of selling goods.
• Vertical Integration occurs when a company amalgamates either with a company it sells products to (forward integration), or with a company it buys products from (backwards integration). For instance, there is an element of forward integration in LTU buying Thomas Cook. LTU the charter airline is buying a travel agent, which could promote LTU through selling tickets to passengers.
• Conglomerate mergers occur when a firm amalgamates with another company that has little or nothing to do with its existing activities. For example, if Somerfield in Llandrindod Wells were to buy the Honey Factory (a furniture store) this would be an example of a conglomerate merger.

A merger could well lead to higher growth and higher profits for the two companies concerned. This need not be the case however:

• If the amalgamation of the two firms did not result in greater economies of scale than were enjoyed by the two firms producing on their own.
• If diseconomies of scale resulted for instance, because the two sets of management failed to work well together or as managers from one firm were appointed to positions in the other firm, despite knowing little about the other firms business.

The size of firms.

        Why are some firms small and some firms large?

Reasons for the existence of large firms.

        Large firms enjoy many advantages over small firms. They may enjoy economies of scale. Lower costs may mean lower prices and increased competitiveness. Large firms may find it not only cheaper to obtain loans (a financial economy of scale), but also easier to obtain credit and new equity capital than smaller firms. They find it much easier to expand than smaller firms. For these reasons, one would expect to see large firms growing at the expense of small firms. Large firms should be much more competitive than smaller firms and should therefore force smaller firms out of the market. This has happened to some extent.

Reasons for the existence of small firms.

        Small firms continue to exist for a number of reasons. First, there is a ready supply for entrepreneurs who want to work for themselves, who see a gap in the market and are willing to risk their money and time in a venture.

        Second, many markets are too small to accommodate large firms. Many markets are localised, perhaps as it is not possible to transport goods cheaply over long distances or because they are special tastes in the local market. Where market demand is small, small firms tend to predominate.

        Third, small firms may be more flexible than large firms. They may be willing to supply highly specialised products in small quantities to larger businesses. Large businesses like the speed, flexibility and cheapness of this and buy from small firms.

        Forth, small firms can often pay workers less than larger firms. Unions tend to be weak and there’s a history of low pay in small businesses. This helps reduce costs and allows small businesses to compete.

        Fifth, in some industries, optimum production (where the average cost of production is lowest) is achieved at very low levels of output. This is true of many personal services, such as hairdressing. Without the advantages of lower costs due to economies of scale, there is no reason for firms to grow and out compete smaller firms.

        Lastly, small firms in some industries have combined to share costs such as advertising, research and development. Examples of this are the Spar and Wavy Line chains of independent shops, which pool advertising and other services. Here small businesses can enjoy greater economies of scale than would otherwise be the case.

        So small firms will continue to exist, but if past trends are anything to go by, they will produce less a proportion of total output over time.

I also used a questionnaire in order to obtain Evidence for my coursework. The questions were as follows;

A Questionnaire For Store Manager.

If you find any of the following questions irrelevant or too intrusive, please don’t hesitate to leave them blank.

1. What year was your store opened?

2. What store do you manage?

3. Where is your store situated?

4. What sort of items does your store stock? (Please tick)

 Electrical goodsCardsMusicAlcoholGifts

             HouseholdMeatConfectionariesNewspapers/Magazines

       GroceriesDairy ProductsPost OfficeFast Food

       Sports equipmentBreadTobaccoStationaryToiletries

             Pet Care            (If any others please state below)

        

        

      5.        Do you buy in bulk? Yes                No

6. If you buy in bulk do you get a discount on the original price for one item?

                                              Yes                No

7. How many staff do you employ? (Please tick)

1-10 11-25 26-50 51-75 76-100 101 or above.

8. How is your store owned?

Private company  Limited company  Public Limited company

9. What percentage of your employees workforce work under 25 hours per week?

10. How do you attract customers to your store? (E.g., sales, buy 1 get 1 free, low prices)

        

        

                

        

        

11. What is the best selling item in your store?

12. What is the least bought item in your store?

13. If you do not sell much of an item do you tend to stop stocking it?

Yes                No

14. What sort of person is the most frequent customer in your store?

Families Children Single adults Teenagers

15. Where is the nearest competition for your store?

        

16. Do these stores provide much competition for you? If so does this affect your income?

17. If there’s more competition do you lower your prices?

Yes                No

18. How do you check that your prices are competitive with your competitions prices?

19. Does your company have a group computerised stock replenishment system?

Yes                No

20. What is the annual turnover for your store? (Please tick)

        £10,000 - £30,000 £31,000 - £40,000 £41,000 - £50,000

        £51,000 - £100,000 £101,000 - £200,000 201,000 - £300,000

£301,000 - £400,000 £401,000 - £500,000 Over £500,000

21. Do you have in store staff training?

Yes                No

22. What qualifications can you gain from your training?

       

23. How do you advertise your business? (Please tick)

                On television on the radio Newspapers Leaflets

24. Where do you buy your goods?

        Local/Regional cash and carry

        Supplied by your own companies distribution centres

Imported from foreign countries

25. What item have you stocked for the longest period of time in your store?

26. Was your store purpose built? (I.e. has it had a change of use E.g. Was it ever a restaurant or another type of store?)          

27. Has your company taken over any companies or merged with any companies?

(If so please state which companies)

28. Does your store use… (Please tick)

Coal Gas Electric Oil

29. Do you have any deals such as… (Please tick)

Free Home Deliveries Paper Deliveries Milk Deliveries

      30.        Do you have car-parking facilities?

        Yes                No

31.        If so around how many spaces?    

1. What disabled facilities do you have? (Please State Below: -)

2. What facilities do you provide for shoppers to carry goods? (Please tick)

                 Trolleys Plastic bags Paper Bags Baskets

3. What payments do you accept? (Please tick)

                Master cards Debit Cards Solo cards Cash Chequebooks

                Visa              Delta             Store cards.

4. Do you insist on a cheque guarantee card?

                Yes                No

5. What cash withdrawal facilities do you have? (Please Tick)

        Cash Point Cash Back

6. Do you sponsor? (Please tick)

        Football teams charities (If any others please state)

7. Do you keep (please Tick)

        Weekly tabs Monthly Tabs No Tabs

8. What are your opening hours?

9. Do you offer saving stamp schemes?

                 Yes                No

10. Do you have club cards?

                Yes                No

11. Do you have (Please tick)

        A web page An Email address

12. Do you have an in store? (Please Tick)

                Café Restaurant

13. Which of these seasonal items do you stock? (Please tick)

                Christmas gifts Easter gifts  (If any others please state below)

        

                

14. Do you have an advertising board?

                Yes                No

15. Do you have payphones?

                Yes                No

16. Do you have a post box?

                Yes                No

17. Do you have in store toilets?

                Yes                No

18. Approximately how many m2 does your store cover?

                                        

19. Is your business on a bus or train route?

                Yes                No

20. Do you think this affects your sales?

                Yes                No

21. Does your store have taxi facilities?

                Yes                No

22. Are there any plans to improve or upgrade facilities in your store? If so what are they? (Please state in fair detail)

        

                

                

                

                

THANK YOU FOR YOUR TIME AND PATIENCE IN ANSWERING THIS BRIEF QUESTIONNAIRE.

Analysis on all three stores surveyed.

Analysis on Spar;

        Spar was opened in 1945; the store is a privately owned company, situated on the corner of Station Crescent in Middleton Street, which is central in Llandrindod Wells.

        The store is also on a train and bus route, opening from 7am – 9pm Mondays to Saturdays.

        The store, covering approximately 120 square metres was purpose built and has always been a food store.

        Spar have not taken over any companies, or merged with any companies. The stores heating system is coal based.

        The items that Spar has stocked for the longest are commodities such as; flour, sugar and butter. The stores best selling item is semi skimmed milk.

1. Personnel,

• Spar employ between one and ten staff
• 50% of Spars employees work under 25 hours per week.

 

• Spar has in store staff training, which can gain staff an NVQ level 1. The store is also making it possible to achieve an NVQ level 2 next year.

2. Annual turnover,

• Spar did not disclose this information.

3. Customer Profile,

• The most frequent people that purchase goods from Spar are; schoolchildren going two and from school in their lunch hour and single adults.

4. Where stocks come from,

• Spar buys in bulk sometimes, when they do, they get a discount on the original price for one item.
• Spar does not have a group computerised stock replenishment system and obtain their stock, mainly from their own company’s distribution centres.
• Spar also purchases some goods from local cash and carries.
• Spar stocks certain seasonal items such as Christmas and Easter gifts.
• The items that Spar stocks are;

5. Promotional,

• Spar offer Christmas card stamp schemes in order to save money.
• Spar sponsor a range of groups in Llandrindod Wells such as; Rugby, MIND – local mental home and school fetes and raffles.
• Spar provides plastic bags, paper bags and baskets in order for shoppers to carry goods.
• Spar has a friendly customer service and helpful staff.
• Spar advertises their business in newspapers and by handing flyers out.
• Spar attracts customers using in store promotions such as buy one get one free.
• Spar also uses a free home delivery scheme.
• Spar also offers customers the use of a phone to call a taxi.

6. Accepted methods of payment.

• Spar accepts a range of payments. These consist of;

• Spar does not have cash withdrawal facilities.

7. Competition

• If Spar does not sell much of an item, then that item is discontinued.
• The nearest competition for Spar is Kwiksave and Somerfield, although the manager of Spar quotes, “We are not in direct competition with the larger supermarkets, on price anyway, but we all share the same customer frame”.
• These stores do provide a lot of competition for Spar, but the market this store aims for is different from theirs, as Spar cannot cater for large families so they try for different markets. If Spar notices more competition for its store, then they tend to lower their prices on certain products. Spar do not try to stay in competition with the larger stores as the manager said “ We don’t have the same purchasing power, so we try to stay within a reasonable range and not be too expensive in the customers eyes.”

8. Ideas for improving the store,

• Spar does not as yet have any disabled facilities but is planning to create ramped access to the store in the near future.
• Upgrading fruit and vegetable fixture to incorporate chiller facility.
• Scanning at the checkout rather than the use of manual tills.

Analysis on Somerfield.

                        Somerfield is a Public Limited Company, situated in the centre of Llandrindod Wells, on a train and bus route. Opening from 8am – 10pm Mondays to Saturdays and 10am – 4pm on Sundays.

        The store, covering around 3000 square metres is a purpose built store. Somerfield has taken over many other companies nationally such as; Gateway, International, Carefour and Macfuheries.

        The stores heating system is gas based and the store also uses electricity. Somerfields best selling item is fresh milk.

        1.        Personnel,

• Somerfield employ over 100 staff
• 80% of Summerfield’s staff work under 25 hours per week.

• Somerfield have in store staff training but this training does not gain employees any qualifications.

2. Annual turnover,

• Somerfield have an annual turnover of above £500,000.

3. Customer Profile,

• The most frequent shopper at Somerfield is from the family base.

4. Where stock comes from,

• Somerfield buy in bulk, although when they do they do not get a discount on the original price for one item.
• Somerfield have a group computerised stock replenishment system and obtain their stocks from their own company’s distribution centres.
• Somerfield also buy some goods from foreign countries.
• Somerfield stocks numerous seasonal items, such as; Christmas, Easter, Halloween, Mothers day and Fathers day gifts.
• The items that Somerfield stock are;

        5.        Promotional,        

• Somerfield offers saving stamp schemes.
• Somerfield provide trolleys, plastic bags and baskets for customers to carry goods.
• Somerfield have free home deliveries.
• Somerfield have disabled facilities such as wheelchairs and disabled shopping trolleys.
• Somerfield advertise their business on television, in newspapers and by distributing leaflets.
• Somerfield attract customers using in store promotions.

6.        Accepted methods of payment,

• Somerfield accepts a range of payments, these consist of;

• Somerfield has cash withdrawal facilities, these are; cash points and cash back.
• The store also has credit facilities.

7. Competition,

• If Somerfield do not sell much of an item then it is discontinued.
• The nearest competition for Somerfield is Kwiksave although the manager of Somerfield quotes “Kwiksave cater for a more price conscious customer, but they have little fresh foods”.
• This store does provide competition for Somerfield.
• Somerfield do not lower their prices in order to stay competitive, they check that their prices are competitive nationally, not just locally.

8. Ideas for improving the store,

• Somerfield put forward no ideas for improvement.

 

Analysis on the Ridgebourne Post Office.

        The Ridgebourne Post Office is a private company situated near the Ridgebourne in Llandrindod Wells, which is on the outskirts of Llandrindod Wells on a bus route, away from trains.

        1.        Personnel,

• The Ridgebourne Post Office employs between 1 and 10 staff.
• 70% of the stores staff work less than 25 hours per week.

• The Ridgebourne Post Office does not have in store staff training.

2. Annual Turnover,

• The manager did not disclose this information.

3. Customer Profile,

• The manager did not disclose this information.

4. Where stocks come from,

• The Ridgebourne Post Office does not have a group computerised stock replenishment system.
• The store gets its stock from the local cash and carry.
• The items that The Ridgebourne Post Office stocks are;

5. Promotional,

• The store provides plastic bags for shoppers to carry goods.
• The store offers paper deliveries.
• The Ridgebourne Post Office advertises in newspapers.

6. Accepted method of payment,

• The store does not have credit facilities,
• The store accepts few payments, these are;

7. Competition.

• The nearest competition for the Ridgebourne Post Office is Knills Service Station and Grosvenor Stores although these stores do not seem to cause too much competition for the Ridgebourne Post Office.

8. Ideas for improving the store,

• The Ridgebourne Post Office put forward no ides for improvement.

Analysing My Data.

Types of stock in Spar

The Ridgebourne Post Office has a smaller amount of items that it stocks as does Spar in comparison with Somerfield.

        The Ridgebourne Post Office and Spar would carry much less stock than it’s larger rival Somerfield Food Store, many of the reasons for this are fairly obvious, the most obvious being the different available floor space within the two shops also available storage space other than the actual shelves in the shop for the two smaller stores would be limited, therefore Spar and the Ridgebourne have to be much more specific about the range of items that they sell as they would not want or could not afford to use up precious shelve space with items that would not sell in a reasonable amount of quantities and time.

The shear quantity of customers that Somerfield has through its doors compared to the smaller outlets enables it to carry a greater range of goods. Expecting Spar and the Ridgebourne to directly compete with Somerfield food stores would be rather naïve as it would be very much a David and Goliath scenario. This is not to say that the two smaller stores cannot survive quite happily along side their much larger rival, they can achieve this by not getting into a direct competition environment against the supermarket, for example;

• Avoiding trying to be cheaper
• Not trying to compete on range of goods
• Not hoping to attract as many customers

These points seem to be in the negative but there are many positives where the smaller shops can quite easily outdo the larger stores.

• Offering a much more personal and helpful service
• They can allow their customers much more time for their questions, queries and comments.
• They can for their regular customers perhaps provide them with a regular source of one specific item, for example; a particular tobacco, a particular wine or beverage etc.
• Many customers do not like the cattle market approach of the bigger stores where they find their selves rushes and even herded towards the checkout, this type of customer is perfect for our two smaller stores.
• Older customers sometimes find the supermarket environment rather frightening and off-putting, these people again, would be happy to pay a slightly higher premium on their goods if it meant they had a more relaxing shopping experience.
• The smaller shops, especially the Post Office can provide a focal point for people in the community. Shopping at the outlets usually involves a chat and a chance to socialise in the more relaxed environment.

These areas that I have pointed out would probably ensure the survival in Llandrindod Wells of the two shops I have mentioned and many like them, as the personal service is something I have found in my research the vast majority of people still appreciate.  

        

Good economic management is very important in each of the three stores that I have highlighted. The economic points would be similar for all the outlets, for example;

• Wages and running costs
• Stock
• Profit margins
• Fixed and variable costs in general.

Spar and The Ridgebourne Post Office have less room for error on the above points than perhaps the larger store therefore their economic strategy has to be very specific.

Employment and wage structure;

All the shops I have researched seem to use part time labour to a greater or lesser degree, this is more cost effective as the employment laws for part time allow the stores to not get involved with the package that comes with full time employees, for example, holiday pay, sickness benefits, and national insurance contributions are usually less for part time employees. Another reason why part time workers are used is that although their hourly rate is at least the minimum wage it is not as high as a full time worker would expect. Sometimes the shops have little choice in employing part time workers as a great deal of the available workforce are women with children who cannot commit their selves to forty hours a week due to their home commitments. School children above the age of sixteen but still in full time education also seek part time jobs during the holidays and their spare time.

        I found it surprising that the Somerfield % was so high as the reliability of some but not all part time workers is sometimes questionable, it seems that having such a high % of part timers drastically reduces their fixed costs of employment. Again I would have liked to see the information regarding the hidden costs of employing non full time workers, for example,

• Loyalty to employer is regarded not as high in part timers as in a full time contracted employee.
• Short notice of unavailability to complete ones shift I would think could cause disruption and a certain cost thereafter.
• Part time employees rarely have a long-term outlook to their particular employment; for instance, they don’t see many possibilities of promotion and therefore perhaps do not regard the job as serious long-term employment.

Methods of payment,

        Obviously in this day and age if you expected cash payment for all transactions, your business would certainly suffer, as the vast majority of the public prefer the convenience of Switch cards, Direct Debit cards, Chequebooks. This is something that the three stores have all had to address to a greater or lesser degree, even if they have found it a certain inconvenience.

        The smaller stores have incurred some costs in providing a swipe machine in their shop and attaching themselves to the relevant banking system to accept these. These cards have not been all bad news as information contained on the card tells the store whether or not the customer can afford the goods they are purchasing and if the card goes through the machine, the store is safe in the knowledge that the transaction will be completed. Somerfield as you would expect accept the most varying methods of payment, but do not usually allow credit to customers.

        Unchecked credit facilities have been the downfall of many small shops. The introduction of the cards over the last 15 years have greatly reduced this unwanted part of the small convenience stores business, as many of these cards have credit facilities built into them, for example, credit cards and cards with overdraft facilities etc.

 

Conclusion.

After analysing the survey results and making numerous visits to the three outlets at different times and days during the week in an attempt to categorise for myself the types, and number of customers that regularly use each shop and above all to try and establish the reason for people choosing a particular location as opposed to the other two stores.

        My findings in respect of each store were as follows;

1.        The Ridgebourne Post Office.

                        The Ridgebourne relies heavily on attracting its custom on three main features;

• Post office franchise – this in itself provides a solid income base with a large number of people in the local area drawn in to collect their pensions and other various allowances, as well as using the numerous facilities offered by the post office service, people collecting these allowances and using these facilities provide a captive customer base for the shop, with people picking up the odd basic or special items such as; bread, milk, tobacco, birthday cards and newspapers.

• The Ridgebourne store offers the facilities of a newsagent with the important feature of a daily newspaper delivery service, this service has a large take up rate with a significant proportion of pensioners living in close proximity and again, people normally visit the shop to pay their newspaper bill, again an opportunity to sell the odd item.

• Location – The Ridgebourne Store is well positioned on the main road through Llandrindod Wells to attract passing trade; this aspect of the business comes into play during the spring, summer and autumn. The shop, stocking ice creams, confectionary products as well as a range of relatively cheaply priced Welsh theme ideas.

In conclusion, overall I was most impressed with the Ridgebourne business, it’s diverse and well balanced overheads as a family concern, (living over the shop) are minimal, and due to it’s location which is infact half a mile from its main competition. I believe that the store should enjoy a secure future trading in its present form. Generating a comfortable income for a couple employing two or three part timers to help cover the long hours. The Ridgebourne does not compete with the other two shops surveyed and neither could it. It fills a specialised niche market requirement and should continue to do so.

2. The Spar Shop,

A long established family run business and up until fifteen years ago enjoyed a virtual monopoly on grocery sales in Llandrindod Wells. In its central position with virtually no competition the shop thrived not having to worry to any great extent with price sensitivity due to the lack of competition.

However with the arrival of Somerfield Stores, which gave people the option to bulk shop for all of their grocery needs at lower prices, Spar was forced, literally overnight to look closely at its marketing strategy if it was to survive. Gone were the easy days where customers had no other local options. It should be noted that progressively over the years and ever increasing number of families had been looking further a field for their bulk groceries, travelling to larger towns such as Brecon and Hereford to stock up on their non perishable items bye weekly or even monthly visits.

        The impact of Somerfield opening in Llandrindod Wells forced Spar to take drastic steps in order to survive.

• A 60% reduction in staff – this include the loss of staff that had been employed to serve on the cheese and bacon counter, these were replaced by bought in, pre packed items.
• Extension of opening hours – the shop is now open almost double the number of hours each week, for only 30% of its original turnover.
• A much greater emphasis on special offers to try and attract customers where previously this was not so important.

In conclusion, I believe that out of the three stores surveyed, Spar is the most at risk business, it can continue as it is but with no real scope for expansion, it’s lack of parking facilities and so on, I can see no real future for the store, it’s only kept afloat by several factors; Due to its location Spar picks up on casual passing trade whereas Somerfield is off the main street. The most significant finding made by talking to customers was that there is a noticeable element of customer loyalty, which motivates a small proportion of the more mature local population to continue shopping at Spar. However from my business prospective I don’t feel that Spar is continuing to trade on any kind of sound base and it’s more than likely that in not so many years, the Spar store will be forced to diversify radically away from groceries or face closure.

3. Somerfield,

Somerfield supermarkets is a very large national company, and like the other big players such as; Tesco, Sainsburys and Safeway, command enormous buying power which means that they in turn can offer their customers the most competitive prices. Since the store opened in Llandrindod Wells not only have they taken the majority of the custom away from the local stores (Spar) but they have stemmed the flow of people who had started travelling to larger towns such as Brecon and Hereford for their groceries.

        The advantages of the Somerfield store are both numerous and obvious. When you arrive to do your weekly shop, the first thing you note is a large and free car park, modern push trolleys, a large, well lit store with good displays and a wide range of products available. Somerfield is proven buy the public to be a modern way to shop.

 

APPENDIX.

THE FOLLOWING PAGES CONTAIN AN ACCOUNT OF EVERYTHING SENT TO THE RATAIL OUTLETS, INCLUDING A COPY OF THE LETTER SENT TO THE MANAGER OF EACH STORE AND THEIR RETURNED QUESTIONNAIRES. IT ALSO HAS A MAP OF LLANDRINDOD WELLS.