Seamus Griffin, MD, Griffin Group
THE KING OF CONVENIENCE
Seamus Griffin, MD of the Griffin Group of 17 stores, calls for a realistic approach to rents and rates, emphasises the importance of world class customer service and reveals the secrets of successfully trading through a recession.
NEW store openings are not exactly what spring to mind when you think about operating a retail business in the current environment, but then Seamus Griffin isn’t just any retailer and the Griffins aren’t just any family.
The Griffin Group currently operates 17 stores in the greater Dublin area, including 16 Londis stores, 10 of which include Subway units, and one standalone Subway store. They employ upwards of 360 staff, across their store network and in group head office at St Stephen’s Green.
Seamus’ father, the late Seamus Griffin Senior, who sadly passed away in February of this year, opened his first shop in 1951 in Blackrock, and within a couple of years had the first self service supermarket on the south-side of Dublin. The intervening years saw the Griffins expand their store network into Dublin city centre, joining up with Centra around the time they opened their first shop on O’Connell Street in 1988. More stores followed in Westmoreland Street, Dame Street and throughout the suburbs. The Griffin Group switched its symbol partner to Londis in 2007, and the change of name brought with it continued growth and success, as the group continued to open new stores. Indeed, the Griffin Group is in the unique position of having opened stores in the midst of the worst recession in a generation. What’s their secret?
“We have always managed our stores to a very high level of operational standards,” says Seamus. “We have many controls in place, a lot of category management and a hands-on approach with business plans for each store. When times were good, you ran the stores as best you could, concentrating on sales and margins, but in recessionary times, it’s all about controls, like watching your wastage, your KPIs (Key Performance Indicators) on a weekly basis, your sales budgets, cost budgets, making sure that problems are addressed as quickly as possible. We’ve moved from quarterly to monthly management accounts, so there are a lot more controls in place which are critical in a business of our scale.
“No one store is the same as another. It’s about looking at the area we trade in, whether we are beside a college or a school, for example, and tweaking our model and the product range within that store, so there’s a lot of category management involved, store by store.”
The Question of Rent
Griffins, like any retailers, have not been immune to the recession. They took a decision to close three stores in the last three years, primarily due to stores underperforming due to high rents and negotiated break options on legacy leases. However, during the same period they have opened Londis at the KCR and more recently a new store on O’Connell Street and “have a number of sites earmarked to open in the near future”.
Rent, according to Seamus is the biggest factor in terms of retail survival in Dublin city centre these days. “Upward only provisions within leases are a significant issue,” he contends. “During the good times, it was quite common for rents to go up by 100 or 125% over the lifetime of a lease. Unfortunately, as you get into recessionary times, these upward only clauses have forced businesses to close down. In many cases, the rent required is not reflective of current market rents in any shape or form.”
It must be very disappointing as a business owner to see intransigence on the part of landlords leading directly to businesses closing down? Some landlords, he insists, “bury their head in the sand”, while others “take a very realistic approach to rental leases and factor in what a retailer can afford to pay”.
According to Griffin, “the more tuned-in landlords are working with retailers because they recognise that it is better to get 10% over the open market rate on a more favourable lease than to be left with a vacant unit for maybe six months before a new tenant comes in.”
However, it remains a very significant issue. He cites the example of Dublin’s Grafton Street, which he maintains now has “a two-tier rental market…As the years go by, you will probably find that 50% of the units on Grafton Street are on low rents and 50% are on high rents. It is an area where intervention and guidance is required, he contends, possibly by a government body or agency.
Justice Minister, Alan Shatter TD, had originally suggested bringing in a ‘sunset clause’, which would effectively give retailers a chance to revert back to open market rents, according to Seamus: “You would still be on an upward only rental review but you would start from the current market rent. It would mean that retailers could afford to stay in business, to survive, and it would have a much more positive effect on the economy.”
Rate Your Local Authority?
The other ‘r’ word high on the agenda is rates. Local authorities will argue that commercial rates are the only source of income which will allow them to provide vital services to both commercial and residential users, but business owners feel they are being unfairly targeted as an easy solution. What can be done?
“I think the local authorities should run their businesses the way retailers run theirs,” he avows. “We have all had to cut our cloth. We’ve had to analyse our businesses and see where we can make savings. But with local authorities, there is a lot of money wasted and the easy target is to hit retailers with rates increases, licence fees and other stealth taxes, such as the licence for grease traps with FOG (Fats, Oils & Grease) monitoring and BID (Business Improvement District) in Dublin city centre.
“You only need to look at the amount of vacant retail units around. When they’re not occupied, the local authorities are not getting rates and they subsequently need to make up the difference elsewhere. But if local authorities take a more realistic and commercial approach, driven by demand and supply, people can afford to trade and there is more demand for retail units, which will have a huge impact on the overall economy.”
The Quest for Value
Anecdotally, the convenience sector has struggled since the start of the recession. The Griffin Group, however, operates a convenience model and has thrived in the same period. How?
“The city centre might be slightly different,” he says. “Certainly, consumer shopping trends tend to suggest that there are more shopping occasions. Consumers are moving away from the big shop once a week. There are a lot of consumers moving back to their local butcher, their local fruit and veg shop. So, while spend is down, frequency of shop is higher.
“In the city centre, we’ve had to reduce our prices,” he admits. “Some of our stores in the city centre are selling coffee for a euro; we’re selling a chicken fillet baguette at Ä1.99. People want value: they are shopping for value. In confectionery and soft drinks, everything is being sold on promotion: that’s where the volume is.”
The Griffin Group have worked hand-in-hand with Londis to ensure they offer consumers real value in-store.
“Londis have been great,” he enthuses. “Their new chilled distribution model has saved us money on a lot of deliveries. Their prices are very competitive and they are offering retailers good margins. Londis are much more aggressive on their promotional calendar than in the past and we enjoy good double digit margins on our monthly promotions, thanks to the work of the Londis buying team.”
He also feels the fact that ADM Londis is owned by retailers is a huge advantage: “while there is a board structure in place, the company’s primary objective isn’t necessarily profit for shareholders at group level, but profit for the benefit of shareholders at a local level, as the shareholders are in fact the retailers. While Londis does need to make money to run the business operations, the company is relatively debt free and can pass back more profits to the retailer than other companies who may have debt or shareholder requirements.
“We’re very happy with Londis and we get great support from the group, from Stephen O’Riordan, Londis Group CEO, to our regional manager, Terry O’Brien,” he continues. “We are working very well, hand-in-hand with Londis.”
Willingness to Change
Seamus also feels that the Londis group are very open to change. He cites the example of Griffins’ introduction of a Subway franchise into a number of Londis stores. “That has proved very successful both from our point of view and Londis’ point of view in that it drives extra footfall, particularly to our city centre stores. When you combine both offers in the market we compete in, our model contributes increased revenues to the bottom line and it makes the model work better than a standalone store, when one considers our rent and rates overhead in city locations,” he reveals.
The traditionally brand loyal Irish shopper has changed in recent years, with big growth coming in own brand products. However, being essentially c-store operators, the Griffin Group’s product range is primarily branded. “There is a shift towards own brands, but really, the shift is towards value and towards what’s on promotion. The Irish consumer likes to support Irish products and Irish brands, where possible, but it comes back to price. People are shopping the promotional ends before the main floor itself and they will switch brands based on price. They are not going to compromise on quality, so while own brands are growing, they will only grow if the quality and price is right.”
So are Irish brand owners doing enough to ensure their brands are relevant and performing in today’s value-conscious market?
“I think they are,” he says. “They have to be realistic. If Irish brand owners are not going to put money behind their brands, in terms of promotions, then they are in danger from a market share perspective because companies from the UK or Europe will come in and take market share as a result .”
Crowning the Customer
Investing in your brand is no different for a store owner. “You need to make sure that the customer is treated as you would want them to be treated and spoken to as if you were interacting with each one yourself! It’s very easy for customers to vote with their feet and go somewhere else,” he muses. To this end, Griffins have employed a full-time trainer at their head office, and Seamus ensures customer service is at the core of his organisation’s ethos and values.
“We work very closely with Londis on customer service, but we can’t expect them to be in here every week training our staff, so we’ve put a resource in place for that, so that our staff can be trained here in head office and in our stores to ensure the customer gets a top class experience in our stores,” he explains.
Up-selling is another key area when it comes to staff training, as it can be hugely beneficial to your bottom line: “Some employees don’t want to ask customers if, for example, they want the Lotto, because they feel they’re pushing the customer, but any research we have done reveals that the customer is very happy to be reminded that there’s a big jackpot. It’s about training our staff and monitoring store performance to make sure our staff are going the extra mile for customers.”
So what else can be done, perhaps at a national level, to get consumers spending again?
“It’s all about confidence,” Seamus stresses. “Consumer confidence, I think, is coming back slowly. We’re ahead of the targets that have been set for the country in terms of the austerity programme that undoubtedly has had a negative effect on essential and discretionary spending. Hopefully the next Budget isn’t going to be as harsh as previous ones and will reinstate some degree of confidence in the market. The big question is have we bottomed out? I think that this recession is passing slowly. I can see growth coming through, not in all stores, but in some and I think that we will remain focused on opportunities and on our cost base in order to maintain profitability,” he smiles. “It’s not all gloom and doom!”
