Secrets to our ReStore Success – Supply, Demand, Demographics, and Competition

This next article is a continuation of a series of articles where I will outline the details of our successful ReStore business system.  For a frame of reference, our 4000sf ReStore has grossed about $190,000.00 over the past two years in a county population of about 23,000 people (this is our service area).  If you have a ReStore and are reading this, simply ask yourself if your store is grossing about $200,000.00 for every 4000sf of floor space, or per 25,000 people in your service area.  My intention with this series of articles is to hit on all the major areas which contribute to the business system we’ve built to include: 

The Business Philosophy

 Supply/Demand and Demographics

 Location and the Building

 Quality Staff and Continuing Education

 Management Style

 Advertising, Product Acquisition and Sales

My take on why many ReStores fail to maximize their potential

 

Supply, Demand, Demographics, and Competition

Like any other business, you have to understand the supply and demand elements of your industry.  For smaller communities, you must have a solid handle on this with regard to your ReStore.  Further, you must understand simple demographics of your community.  You need to know if the town in which you’re looking at opening a ReStore can support the store.  None of this is complex, but I do know of ReStores that have suffered by operating in communities which can’t support the store.  Finally, like any other business, you have to know who your competition is and determine if your venture offers a better product and/or service than the competition.

The basic premise of ReStores is to take donated items and resell them to the public.  The questions you must ask are:

Does the community have a sufficient population to support the supply and demand equation?

Is the community, in which you intend to open a ReStore, a primary shopping center of your service area? 

What about competition?

With regard to supply and demand in a rural community, our store is primarily supplied with donations made by middle class folks.  Upper class folks and businesses are secondary contributors, although the quality of these donations tends to much higher.  What we’ve seen here in Otsego County Michigan over the last year is the middle class dwindle as the result of a poor economy.  As a result, our donations have gone down and our sales leveled off.  So, the question is does your community have a relatively vibrant middle class to supply your ReStore?

Now, we look at the demand part of the equation.  Lower income people make up the bulk of our shoppers.  Unfortunately, this class of people can be found in just about every community, so demand is a given.  Whether times are good or bad, demand for ReStores will be in demand. 

Perhaps one of the most important elements you need to look at is the type of town you’re looking at opening a ReStore.  In our case, Gaylord is the shopping center of Otego County.  While there are very small towns scattered around the county, Gaylord is the hub.  While there are only two major roads, Gaylord has businesses such as a Super Walmart, Lowes, Home Depot, Tractor Supply, etc.  I’ve seen other ReStores open in non-shopping hub towns and suffer as a result.  In fact, some affiliates servicing rural counties don’t even have a major shopping hub.  I would be very wary of opening a fully operating ReStore in town which is not a major shopping center.  Does that mean you can’t open a relatively successful ReStore in a very, very small town?  I don’t know, but my ReStore model is not designed for that demographic.

Finally, you have to know what your competition is and whether you can wiggle onto the scene.  When our ReStore opened, we were accused of running a local resale shop out of business.  I didn’t lose any sleep over the matter because I offered a better product/service than they did.  Further, I get paid to look after my business, not theirs.  Anyway, most resale stores specialize in clothing and household items, such as dishes, and knickknacks.  80% of our sales come from furniture and appliances, and we don’t deal with clothing at all.  As a response to those resale shops who did/do take furniture, we offered a service which they don’t – free pickup service. 

The product our truck picks up constitutes about 70% of the all the items sold in our store.  That’s about $133,000.00 last year!  So, when I hear people say that they can’t afford a truck, I say that you can’t afford not to have a truck.  I spent $2500.00 on our first box truck (a 1986 rusted out box truck with a hydraulic lift gate), which was 50% of the total money I had to open the ReStore.  We used that truck for two years, then we bought (financed) a brand new box truck and had a new lift put on it.  That truck cost us about $25,000.00 (about $600/month).  Of course, we have it all nicely lettered too, making it quite the billboard.  Ask yourself, if Mike’s ReStore truck brought in $133,000.00 last year, how much did the truck actually cost?  The answer is nothing.   Get a truck.

Just because there’s competition, that doesn’t mean that you are out of luck.  Simply make sure your product/service is better than the competition.  Our prices also tend to be lower than everyone else’s, including most of the surrounding ReStores (which I’ll get into another article).  Also, don’t forget who you are.  You are Habitat for Humanity, one of the most respected and well known organizations in the world.  Habitat ReStores are also building a brand of their own, which has become quite valuable on its own.  There are about 600 ReStores in the U.S. and Canada, so that’s a lot of brand building going on.  That name recognition is worth a fortune, so take it for a spin!

 

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Tags: Business, Gaylord, Habitat for Humanity, Habitat ReStores, Michigan, nonprofit, Otsego, Recycling

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