Would A Tuck Shop Be A Profitable Business?

I chose to do my coursework on the idea of setting up a possible tuck shop. This was so because as I am a student at Watford Grammar School for Boys I already have a good idea of the type of business that would be successful. The tuck shop will be part of the consumer market, which will specialise to satisfy the secondary school student subpopulation.

In order to complete my coursework I will have to use a variety of methods and media to obtain and analyse evidence, which will give me a very good idea to whether my idea of opening a tuck shop would be a profitable business. I will need to find out what products my student customers would want and to find solution to any problems that I might identify. Some of these methods and media include market research and articles and statistics from places such as the Internet, television etc.

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Market research is the process of collecting, collating and interpreting information about the market for a product. Market research is important because it will help to plan how successful a possible business will be which is exactly what I require – suggestions to my possible bussiness’ future. Market research would also help to predict the popularity and possible income and expenditure. Again it helps me to know what the potential customers demand and how great demand will be.

There are two main methods of market research:

* Primary research/field research (obtains original data or information, which did not exist before, from customers and other people)

* Desk research/secondary research (uses data, or information, which already exists in printed form or computer files)

The primary data gained by field research are very significant, because it is not available to any other businesses, unless they do their own research. Though, it is much more expensive than desk research and much more time consuming. When the information has been gathered, it has to be collated, and then analysed before a report can be formed.

Secondary research is much easier and cheaper than primary research, because the data are already available and do not have to be gathered and analysed. But it is less valuable because it is often out of date and does not always cover the specific theme of study.

For my coursework I believe it would be best to use a collaboration of the two types of market research available to me. With both types of market research I would almost definitely get the best indications to whether setting up a tuck shop would be profitable.

A good way of carrying out my market research will be to use a questionnaire which would be primary research. A pilot survey will show if the questionnaire works. It is useful to me because I can see and alter which questions didn’t work. From this I can rephrase and change certain questions to make my questionnaire work usefully and efficiently. My pilot survey would be a slight mixture of qualitative research and quantative research.

Qualitative research involves interviewing people to find out their views and opinions. Quantitative research involves carrying out numerical information. Qualitative research tends to be more time consuming and the answers are usually very individualistic. This is good to find out exactly what the demand is but it is also bad in the sense it is far too time consuming and time is money. Quantitative research is good, as it is quick and easy for the customers so that they are more likely to participate in the surveys. But the answers are not very specific so I wouldn’t know exactly what the demand and opinion is.

My questionnaire had many objectives for me. These included how much if any profit (difference between the price and the cost of making a product) there would be for my business. The amount of revenue for my business. An indication to the prices my business should be operating at, incoming and outgoing. The quantity I should be buying and selling. If there is any possible market niches (gaps in the market which a firm might want to fill with a new product) which my business could fill. Also my questionnaire could tell me what market segments are and should exist.

It is wise to produce a pilot survey to experiment on an audience. This will help for final surveys and their construction.

From the pilot survey, the idea was to see which of the questions did not work effectively and reword or rephrase them into a way that will work. As from the above results it is clear to see that there are a few questions that did not work effectively in a way that would help me to draw conclusions from.

The first question, which I felt did not perform effectively, is question four. I think this was because it was in the form of an open-ended question. This gives very individual answers and also the respondent has to think a lot longer if not just given answers. As the answers were very individualistic it did not really help at all to when the shop should be open. If I used options such as “lunch” and “break” then it would be a lot more helpful.

The next question that I felt did not work effectively enough is question 6. The question, I believe, is far too generalised. Even though it clearly indicates that drinks will be sold it doesn’t help to show if there is particular drinks or types that are far more popular. If this is the case then it is vital to know, as the tuck shop would need to have more stock of the popular brands and types of drinks. So I will rephrase the questions with options of drinks.

After evaluating my pilot survey I came up with:

Survey On Successfulness of A Possible Tuck Shop

QUESTIION 1

Yes

No

Don’t Know

Do you think there should be a tuck shop at WBGS?

QUESTION 2

0-1

2-3

4-5

5+

If there were a tuck shop, how often would you visit per week?

QUESTION 3

�0-�0.50

�0.50-�1

�1-2

�2+

On average, how much would you spend per visit?

QUESTION 4

Break

Break+lunch

Break+lunch+after school

Don’t know

When do you think it should be open?

QUESTION 5

Drinks

Sweets

Crisps

Others

What type of consumables would you like to see sold?

QUESTION 6

Soft/carbonated

Energy

Fruit juices

Mineral Water

What type of drink are you most likely to purchase?

QUESTION 7

Traditional

Exotic

Don’t Know

What flavour crisps are you most likely to purchase?

QUESTION 8

Ice-lollies

Cones

Ice-cream

Other

Are you most likely to buy

EVLAUATION:

These reworded versions of my pilot survey clearly helped me to obtain more useful and appropriate results, which I can, now analysis and interpret to help me decide whether it would be beneficial to set up the business. With this information I can now easily plan ahead all the possible income, expenditure, demand, supply, profit etc.

There were 43 respondents to my survey. This is an adequate number as there isn’t an insufficient amount of respondents and also the number is great enough to represent fairly the general opinion of the school.

Clearly there is a great potential demand for the setting up and running of a tuck shop. Only a small number of 11.6% objected to the future of a tuck shop at Watford Grammar School for boys. This clearly tells me that a huge majority would like to see or would not object to the setting up of a business. This also clearly tells me that there will be customers.

My second question helps me to known what to expect in the number of visits to my shop. For this question 15 respondents answered that they would visit 2-3 times a week and a further 15 said they would visit 4-5 times a week. This makes 30 people who would visit regularly. As the question was generalised it is hard to determine the exact number of visits. A fair way of trying to work out the number of visits would be to use the midpoints. Therefore the number of visits a week would be = (0.5×8 + 2.5×16 + 4.5×15 + 5×5) = 136.5. Therefore out of 43 people I can expect 137 visits, which is 3.18 visits a person per week. If I reflect this to the whole school then 1200×3.18 = 3816 visits a week my tuck shop would get. This is clearly good evidence that a possible tuck-shop would be successful.

Now I need to know the possible income. As the possible answers in question three are grouped I will use the same method as I did before to determine the possible income. (0.25×14 + 0.75×15 + 1.5×9 + 5×2) = 38.25. On average per visit I would expect to receive 89p. If this is reflected on the whole school then in a week, the sales revenue I should expect to receive �3396.24. Again good evidence that it would be successful.

Question four helped me to decide when it is best to run the shop. The most popular answers suggested to me to have the shop open at break and lunch if not at all times.

The responses to question five clearly help me to which of the stock available to me should be best supplied as demand for different types of products varies. The most popular answers were sweets and crisps. This is good for me to know as I can concentrate on buying more supplies of these products compared to drinks for example.

Question six helped me identify what drinks I would need to supply. Soft drinks are clearly more popular than the other options available so it would be wise to supply more of these types o drinks compared to those, which are not popular

Question seven helped to identify what type of crisps I should invest in. Although traditional flavours had the majority a great number of people chose to mark their “vote” under exotic flavours so I would probably stock equal numbers between flavours.

The final question helped me to identify, which typed of frozen desserts the consumer would like to buy. This is important information as there is really only selected times of the year where there will be sales of a noticeable amount of frozen desserts. As this is the case it is very important to know exactly what the consumers want as if I supply the wrong type of product then there will hardly be any sales of frozen desserts and I there would not be sufficient time to rectify the problem. For this question ice cream and ice-lollies was the most popular response.

All the above information has helped me identify the right marketing mix of products for my tuck shop.

By looking at what the canteen has to offer as in terms of goods I found it hard to locate a unique selling point, which by business could offer. So I might have to look at the prices.

Now with all this relevant information it is important to know exactly how much profit my business would be receiving. After a visit to Costco who supply large quantity of products at low prices to retailers I worked out it would be acceptable to sell at 100% added value from the buying price which is competitive pricing compared with the canteen and still hold a good level of competitiveness with the canteen and other competitors such as the met shop.

There are many variables of different types and styles of pricing which I need to consider. Complementary pricing, where one product may be sold at a cheaper price but the product that goes with it may have a relatively high price. For example, a ballpoint pen might be cheap and the refill dear. This type of pricing does not apply to my tuck shop, as no two products are ‘essential’.

Critical point price where instead of charging say 10 pounds, 9.99 pounds is charged but although there is only one penny cheaper so many more customers will now buy the product as it has not reached the critical price point of 10 pounds. This could work on a variety of products where instead of charging a pound or 50p I could charge 99p and 49p respectively.

Differential price, where some stores charge higher prices in small towns than they do in cities, where there is more competition. Again this would not apply to my pricing policy as I only hold one shop.

A good way to increase the popularity of my tuck shop is use a penetration price, a very low price, when I open my shop.

When there is a great lack of demand for a certain product I’d either have to price-cut the item or put it on sale. Similarly when a new product is out I can use a skimming price method, where a high price can be charged for a new product.

A lot of this money would go in to expenditures such as covering costs of rent and wages etc That means out of the weekly-expected income of �3396.24 around �1698.12 would be the gross profit made. But now I need to calculate the variable and fixed costs. If one person is employed to carry out the total running of the shop which includes locking up and moving of goods etc then their working hours should be from 8 in the morning to 4 in the evening. That is eight working hours with paid breaks to make the job more attractive. A competitive rate of �5 per hour would account to �40 a day for 5 days a week, which would total �200. This would leave around �1500 without out covering the fixed costs such as rent. The area I would propose to use as the site for the tuck shop is small but quite adequate to carry out its purposes.

As I would need to rent this space 24 hours a day for seven days a week as it also has space to hold goods then I would expect the overheads to be �150 a week which would also include insurance. The costs of hiring a van one day a week to pick up supply would account to �30. This would leave me with �1320 a week in profit. Advertising would cost no more than �10 a month on leaflets and there could also be promotional ideas such as donating a certain amount of sales to charity, which could cost a further �100. This would now leave me with �1210 a week in profits. I think with this figure I believe it would be a very successful project to set up a tuck shop at Watford Grammar School for Boys.

But this would not be constant throughout the year. 13 weeks are lost through school holidays and possible a further tow in total due to training days, bank holidays etc. That is 15 weeks where there would be no sales. During these weeks I would not need to buy any goods or hire staff. But I reckon I would still need to hire out the space in the school in order to be sure of its ownership as another business could hire it if I do not. This means I would run at a loss of �150 a week for 15 weeks, which would account to �2250 in total losses.

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