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How Small, Independent Retail Works

Posted by Sue Serre on

As this month's issue will be my last Expert Article contribution to Neighbours of Paris on the Grand magazine, rather than educate our local Paris community on aspects of physical health I wanted to focus on the health of our local, small business community. Throughout the last two years of covid we heard a lot of 'shop local' and 'support small businesses' and many of you did just that and on behalf of all local business owners I thank you! We would like you to continue to do so all year round. Sometimes it helps to understand how things work and the why behind the ask. The following is an illustration of how small, independent retail works...

Using his or her own money, the owner buys product (inventory) directly from a manufacturer or a distributer (middleman). The owner then "marks up" the wholesale price to create the retail price that you, the customer pays. (Large retailers work similarly but rather than an individual's own money doing the purchasing, it may be a publicly traded company belonging to shareholders that has a team of individuals doing the buying in huge volume at greatly reduced costs and therefore selling it at a lower retail price.)

It is the difference between what the owner paid for the product (wholesale) and what they sell the product for (retail) - called "margin" that the following expenses are extracted: rent, heat, hydro, internet/phone, website, entryway carpets, advertising, insurance, alarm system monitoring, staff wages etc. What then remains is deemed profit and the owner can pay themselves.
It is the movement of the product off of the shelf and out the door that generates this process. If for example a product sits on the shelf for 6 months and doesn't move - it is just being 'warehoused' and the money that was spent by the owner to bring it in is in essence just sitting there on the shelf. When you factor in products with expiration dates or that are seasonally sensitive, this situation becomes more precarious.

An item approaching expiry is often marked down in price (reducing the margin) to encourage a sale before it becomes garbage. After expiration it not only does not generate cash flow, but is now unsaleabe (this is referred to as shrink) and the owner has lost the money he or she paid for it. During covid due to business closure restrictions, many people flocked to purchasing from large online platforms, leaving the small retailer with product left on the shelf to expire.
Theft and damage is another area that hurts the small business owner. The owner has paid for that product that is on the shelf, someone steals it or damages it, now that product can not generate cash flow (to pay the expenses) and the owner has to pay to bring it in again - now paying for it twice.

Many small retailers now have online ordering, free same-day delivery and messaging through social media and email options to place orders and to communicate and provide convenience for customers. Often there is the perception that products are cheaper online, but that is not necessarily the case, especially once you factor in the hidden costs and the value of shopping small and local.

When you make the decision to shop at a small local retail store rather than big box or large online platforms you help to: keep that store in business (along with the vendors of locally made goods carried by that store), that business owner can then spend their money at other local businesses, a unique retail and service landscape emerges with greater choice, money stays in the community, lasting relationships are formed and expertise in niche areas are retained.

I want to thank my customers for their loyalty and for keeping me in business throughout these past four years. I look forward to continuing to serve my community's natural health and wellness needs for many years to come. Come on in and confide in The Hollow Willow!