Many people usually pass by hardware stores on the street or in front of communities, and they will have the same doubts: the stores are deserted all year round, not a single customer has come in for a long time, the shelves are full, and the decoration is simple and inconspicuous. However, no matter whether it is the impact of the epidemic, the crushing of e-commerce, or the replacement of surrounding shops, these hardware stores have always stood firm. Even the bosses live a very comfortable life and quietly earn hundreds of thousands a year.
It stands to reason that brick-and-mortar businesses make money by foot traffic. If no one comes into the store, it means no income, and it will have to close sooner or later. But the hardware store breaks this rule.
In fact, hardware stores have never made money by relying on the traffic of passers-by, but by relying on precise rigid demand, hidden orders, low-cost operations and high-margin products to make a fortune.
First of all, we must correct a misunderstanding of most people: the desertedness of the hardware store is determined by the business format itself and has nothing to do with the quality of the business.
Supermarkets, clothing stores, etc. are leisure consumption and need to be supported by a large number of people, while hardware stores are emergency and rigid-need businesses. Customers enter the store with a clear purpose, and the transaction process does not exceed 3 minutes.
According to authoritative research data, street hardware stores have an average daily customer flow of only 15-30 people, but the transaction conversion rate is as high as 85%-90%, making them the “conversion king” in the physical business.
In the income structure of street hardware stores, the consumption of scattered customers only accounts for 20% – 30%, and the remaining 70% – 80% of the income comes from hidden B-side orders.
Decoration projects in surrounding communities and shops are the core source of income. The construction team will establish long-term cooperative relationships with hardware stores, purchase in batches, and have a high repurchase rate.
Community property management companies, housekeeping companies, and local maintenance teams are also stable customers. Most of them have signed long-term cooperation agreements, receive goods on demand, and make unified settlements at the end of the month.
In addition, the hardware store will also undertake orders for the supply of various small engineering accessories and daily replenishment of surrounding shops.
The key to a hardware store achieving high profitability lies in the extremely high gross profit margin of its products.
Basic small accessories are purchased by kilograms and wholesaled by packages, the cost is extremely low, and the profit can be doubled several times; the purchase price of commonly used consumables is mostly 30% – 50% of the selling price, and the gross profit margin is stable at more than 50%; the gross profit margin of tool products is 40% – 60%, and there are subsequent repurchases.
Moreover, hardware store products have no shelf life and there is no inventory loss.
The operating costs of street hardware stores are extremely low.
The rent cost is low, and most of them are located in areas with cheap rent. They only need a small storefront and require little initial investment in decoration.
The labor cost is zero, and most of them are mom-and-pop shops with clear division of labor.
The marketing cost is zero and survival depends on word of mouth and repeat purchases.
There is little financial pressure, the initial investment is only 50,000 to 80,000 yuan, the revenue is cash transactions, and the cash flow is healthy.
E-commerce has developed rapidly in recent years, but hardware stores are not affected because e-commerce cannot solve the core needs of the hardware business: immediacy, professionalism, and convenience.
If a water pipe bursts at home, the street hardware store can solve the problem in a few minutes; the hardware accessories have various models, and the hardware store owner can accurately recommend them; small purchases are more cost-effective in physical hardware stores.
For those who want to start a hardware store, there are a few practical suggestions: give priority to old communities and areas where renovations are concentrated when selecting a location; don’t ask for too many goods but seek complete products; maintain B-end customers well; operate with integrity and do not rip off customers.
Is the hardware store near your home deserted all year round?
Have you ever made an emergency trip to the hardware store?
Do you think this small business is suitable for ordinary people to start?
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