Symbol of success

Kopi Kalanathan runs a successful string of stores and is using his smarts to battle rising prices and costs – as he explains how inflation is challenging the UK’s convenience channel

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Kopi Kalanathan

Kopi Kalanathan, who runs a Costcutter store in Doncaster was chosen as Symbol Convenience Retailer of the Year at the 2021 Asian Trader Awards, a new category, supported by Bestway Wholesale, that celebrates the fantastic offerings of the symbol groups and the way in which independent retailers can use the advantages of membership to the full extent, with flair and originality, in a dynamic and constantly evolving sector.

An enterprising young retailer who started working at his uncle’s store at the age of 18, Kopi owned his first shop by 21 and now operates multiple sites. His award-winning Doncaster store opened in June 2019, but just as he settled down in establishing it as a destination point for the local community, the coranavirus pandemic hit the country, confronting him with another set of challenges.

“I think when we opened, that was a really good time to open the store, because the things we tried on the store, mainly focusing on food to go, drinks – not many people were trying that kind of things in a convenience store. That’s just the beginning stage,” Kopi says.

The store, which is located near the Kirk Sandall railway station, has an extensive food-to-go area, with its 27 flavours of slushy and 24 flavours of ice cream being the highlights. “That attracted people around the area, even though we’ve a high level of competition around,” he adds. “So, we have been able to look different for the customers and apart from a convenience store, it’s become like a destination point for the customer.”

Kopi Kalanathan in front of his Costcutter store in Doncaster

They were sailing smoothly, achieving sales targets, when the pandemic began to spread, and as a multi-site operator he had to navigate staffing shortages and availability issues. “It was a struggling period but at the same time, turnover-wise, it was good. Like everyone else, the sales were good [during the pandemic],” he notes.

Food to go obviously took a hit, as the lockdowns decimated passing trade from the factory workers and station passengers. “Majority of our customers work at the factories, behind those shops, we’ve got loads of industrial workers out there,” he explains. “They are our main customers, so we were massively affected by that one, and stopped the food-to-go section at that time.”

While sales have now recovered to normal after the pandemic receded and restrictions were lifted, Kopi still finds it a challenging time, as a brand new Aldi opened nearby. There is also a Tesco and a Co-op in the area.

“Every day is a challenge because there’s competition still coming, but food to go is still playing major part for the store,” Kopi says. He is also planning to implement some new ideas this year to take the multiples head on. “We are looking to introduce a Beer Cave and we’re doing the PerfectDraft beer kegs,” he reveals. “There are a few different things we need to think this year because of Aldi.”

And one of them is a signature offering from his symbol group owner, Bestway Wholesale. “I am just talking to Costcutter to bring Bargain Booze into the store,” he reveals.

Unveiled in April, Bestway has opened its second dual-branded Costcutter and Bargain Booze store last month. This innovative concept brings together the strength of the Costcutter convenience offer with the leading beers, wines and spirits lines available from Bargain Booze to make a fantastic proposition for both retailers and consumers alike.

Better proposition, despite woes

With Costcutter completing a year under Bestway, Kopi feels that they are yet to see the full potential of the takeover, and the demanding retailer thinks the wholesaler needs to be bit more agile.

“In terms of Bestway for Costcutter, my honest opinion is, it’s good but I don’t receive any benefits from that, until now,” he says. “Of course Bestway is the biggest [independent] cash and carry operator and they have massive buying power, and we would be really happy if they could pass on something more towards us.”

He feels part of the problem is that the integration between the Costcutter Supermarkets Group (CSG) and Bestway Retail, which houses the group’s other retail brands such as Best-one, Bargain Booze, Wine Rack, Central Convenience and Select Convenience, is “not 100 per cent done.”

“They bought it, like, one year ago but are still treating a Costcutter retailer as a Costcutter retailer and Bestway retailer as Bestway retailer,” he claims. “Basically, it’s taking too long to do this integration.”

“I think in terms of listening to other retailers, it seems to be getting better. It should happen faster than that, in my personal opinion,” he adds. “But like I said, now we are talking to Bargain Booze option and stuff like that. It does a good job, there is no doubt about it compared to before, it’s definitely better for the retailers. But it should happen fairly quickly.”

The Co-op’s Own Brand range has been a major draw for Costcustter retailers, and Bestway has even agreed a two-and-a-half-year extension to the supply agreement with the Co-op soon after it announced the acquisition of CSG in December 2020. Yet, Kopi has a different take on this.

“It’s helping Costcutter retailers a lot, but at the same time, it’s not working at all the locations. In certain locations Co-op own label is playing a major role,” he observes. “Particularly like Kirk Sandall which is a large, nearly 3000 sq ft store. So we need that range, as a chiller range to compete with Tesco and Aldi.”

But margins from Nisa, which supplies the range to Costcutter, have been “terrible” but he says this is the only problem they face at the moment.

“We are still getting some sorts of products with a single-digit margin. So that’s the only downside for us. Especially with this electricity price and wage increases, we can’t really survive with the single-digit margin. I think, Bestway group definitely can do something for that one,” he hopes.

Kopi stresses that the electricity prices have become a real pain point. “Whenever I see my electric bill, I was down a bit,” he says. He used to get around £3,000 on average a month, but his contract has ended recently, and with the new tariffs, last month he received a bill for £8,000!

Staying ahead of trends

Home delivery is one trend that has taken root during the pandemic, but Kopi has been preparing for this new service and sales avenue even before, developing their own app and website – www.clickfordrop.co.uk –  just as they launched the store in 2019.

“I started creating this app in the beginning of 2019, well before the pandemic started,” he says. “That was my ‘next idea’ then. I didn’t focus that much at first, but it was on my mind – customer loyalty cards and home delivery.”

With the pandemic forcing almost all convenience retailers to offer the service, having already started the work, they were well positioned to capitalise on it. “They are going really good and we are still improving what we can do better,” he says.

Kopi hasn’t implemented the service in all his stores, but the Kirk Sandall site has the offering and he says the customers are really happy with it. He also links the issue of a “nominated supplier” here, noting that it helps with the live stock update for the app. “When we order all from Costcutter only, that will be downloaded and the customer can see. Otherwise we have to do everything manually,” he explains.

He also tries to ensure that his stores are active on social media, even though he agrees that it’s hard to follow up. “The promotions and stuff like that – I always give a big push to the managers to keep active on social media. Even if they don’t do it, I do it myself as well,” he says. “Because everything is social media now. The leaflets and stuff like that, it’s still working. But social media is playing a major part in retail, not only retail, for everything, so I think every retailer need to be active on that.”

He says the channel is definitely working for them, with products posted on Facebook always selling more. He also makes it a point to use the posts to keep reminding shoppers about the home delivery offer.

“Even though they used our Click for Drop home delivery website, they forget it the second day. So we have to keep remind them, ‘There is a Click for Drop app, you can order from your homes!’ At the end of the day that’s our job,” he says.

Spiralling prices

Alongside Co-op Own Brand products and Freshgos Deli, their own range of baguettes, sandwiches and salads made fresh in store daily, their chilled food-to go-range includes a “made in Yorkshire” range of local produce, but Kopi reports that their local suppliers are struggling as well, forcing them to discontinue certain products.

“When we started, we were trying to do as much as possible with local suppliers. But in the current situation, local suppliers are struggling because of this inflation,” he says. “And they couldn’t compete with the big boys. At the end of the day, as a retailer, we are struggling as well. So my main focus is the margin. And when the local supplier come and said, ‘Oh, sorry, we can’t do it for that kind of price’, we have to move back to bigger suppliers.”

He cites the example of his local milkman who put up the price more than what he is getting from his main supplier. “So in the bid, I have to go back to Co-op milk rather than using the local supplier because I’m not getting the right price from the local supplier. So this is one thing probably you never heard, but it’s just starting  happening now.”

He agrees that the times are tough for everybody, adding that they have never ever seen this kind of price increase.

“This is a good example I can give you. Let’s say I have a Costcutter delivery coming today, and normally we change the labels of about four or five or maximum 10-20 products before. It could be a barcode change, the supplier price increase. Now, we have to change minimum 50-60 labels out of, like 200 products. So, that’s many more products increasing in price every single day,” he says.

“So that’s again, one of the biggest jobs for the retailers, every single delivery comes and they have to check the whole shop to change the label, because today it’s £1, tomorrow £1.10. Every day, we’ve seen the price increase on the products.”

Market data from various agencies have pointed out a shift in shopper behaviour as Britons switch to value ranges to fight inflation, and Kopi confirms that this is something they witness on the ground.

“We can see already people are coming for the promotion. And they are really looking into the bargain deals only,” he explains, reiterating the need for better margins from suppliers.

“So, like I said, we are not making much margin on the promotions, and we are running promotions all around the shop. And when it’s become like a multi-site operator, we have no time to go around and shop around different places and increase our margin because we are relying on managers and we need to do the stock control. We have to order through the nominated suppliers. But when we’re going on there, and when you see the Nisa, Costcutter prices, this is really hard, you know. That’s why I said before, definitely, Bestway needs to do something for that one,” he rests his case.