Rent a shelf - How to do it, why to do it and what NOT to do.
Considering a 'rent a shelf' space in your store but unsure how to implement this?
Unsure whether your business can benefit from this, or not sure if people will want to rent space from you? Want to generate extra income from your shop and help others in the process? Or are you yourself looking to 'rent a shelf' off somebody else and want to know the pros and cons of this? Read on to find out more as we try to answer any questions you may have about 'rent a shelf' spaces.
Firstly, what is 'rent a shelf'?
Well simply put it is what it says on the tin. The most common 'rent a shelf' spaces you'll find, which you might not even know you are looking at, are in antique shops and shops offering local crafters products. Sometimes you might also find this concept at craft fayres where people share tables or rather sell products on somebody elses behalf and share the table cost plus take a commission on sales. Ofcourse you are not actually renting a shelf, but rather space on a shelf to display and sell your products from. The shop, stall holder or person whom you rent from will do the selling on your behalf, and most likely take a small commission to cover cash handling.
How much does rent a shelf cost?
Well, how long is a piece of string? This will all depend firstly on the trade of the shop, I've seen spaces as low as £10 a month up to £40 a week advertised, although I'm sure there is most likely a much higher range still in other areas. Craft fairs which span 1-4 days might even cost £10+ a day for space on a table. Ofcourse the benefit of selling homemade products at a craft fair are that customers are specifically going there for the purpose of buying homemade products. Rental in stores will most likely also correlate to the rent of the shop as a whole (i.e. a shop with a high rent in a high footfall area will charge more than a little back street café with a small shelf space for goods to be displayed). Don't expect the shelf rental to be the only cost though, there will almost deffinately also be a commission charge to. I'll explain later why you WANT to be charged commission on top of rent. As will all business ventures, rent a shelf is a risk and there's no guarantee that you will make back the cost of the shelf, let alone make a profit from the items.
What should I ask myself when considering to 'rent a shelf'?
Firstly, the main question you will have is the contract length, the rent cost and what the commission charges are. Once you've asked this and calculated whether you think you can make a profit, ask yourself what sort of customers come into this premises. Remember that backstreet café I just mentioned? Do they get busy? Who frequents there and why? Is it groups of mums going in during the day to catch up on baby related things. Is the café aimed more at OAP's or a younger crowd? Once you've established the customer base of the premises ask yourself, do you offer a product that is aimed at these people. If no, it's likely you won't make many sales. Simply renting a space does not always equal sales.
Another factor to consider is, what is the primary goal of the customer going in to this space? Where as a low rental and commission price might attract you to rent a shelf in the backstreet café or local hairdressers, the primary reason customers are going in is not to purchase handmade goods. This is where boutique shops or gift shops have the benefit, a space where customers are going in with the purpose of buying something for themselves or as a gift. If the item you are selling relates to the business, for example shampoo bars sold in a hairdressers, then ofcourse this could be seen as a good business move. However, if there's no correlation between the two at all, for example baby clothes in a hairdressers, you'll likely reach little to no sales without a lot of advertising and effort on your behalf (which lets be honest you could have done in the first place without paying for the shelf rental).
This links on nicely to my third point - why rent a shelf space at all? If you are already selling to people in an area and making good sales, do you actually need to rent a shelf space at all? Most likely no. However, if you don't have the time or want to take less time chasing payments, advertising your products and keeping track of sales a shelf rental is a great idea. You don't however, want to be competing with yourself - continuing to sell in an area where you rent a shelf is a bad business move, you're simply competing with yourself.
I have a small business and want to implement a shelf rental scheme, how do I do this?
STOP!!!! Before you look into doing this, ask yourself if it will add value to your business? Is it filling a gap that you cannot fill yourself? Going back to the hairdresser example from before, most hairdressers buy in and sell shampoo from whole sellers. Why? Because they can make a profit on them and it ties into their business as an item to 'upsell'. The reason most hairdressers don't have a 'shelf rental' scheme for these products is because they can very easily buy items in bulk and sell on for a much higher profit margin that a shelf-rental space will bring them.
Cafe's are prime examples of an area where rent a space could work realy well and generate an extra income. Whilst most cafes try to boost sales with food and drink offering, sometimes selling coffee beans or greetings cards too, a local crafters area can also bring a homely community feel to the business. On the same scope having local artists displayed can be another way to boost sales via commission (that's for another blog post though).
Once you've decided that rent a shelf will benefit your business you need to start thinking of the terms for the shelf rental. Although there is no 'right or wrong' way to set this up, I'd recommend a minimum contract of atleast 3 months, if not longer. Most customers like to browse, and then come back to buy. Simply having crafters rotate every month or two might mean you loose out on sales when customers return to buy something from somebody who you no longer showcase. Personally I run my crafters shelves on 3 month contracts with crafters deciding to 'reapply' and stay for another 3 months, or end the contract after 3 months.
Secondly, determine whether you'll charge rent, commission or both and how much these will be. I personally recommend charging a lower rent AND commission of 10%-20%, we'll go into why in the next section.
Thirdly, know what sort of things you want in the shop and advertise accordingly. What items would benefit the shop and keeps with the image that you have for the space? Only you know what you want in your business, but here you can choose to be picky! This is why you'll most deffinately want to have renters apply for the space, and you handpick who fills your shelves. Once you've established what sort of items you'll want to be promoting instore - start advertising your shelf rental.
Why do I want to charge or be charged commission aswell as rent?
Ok, so this is a question I've received time and again, why do you recommend renting in places that charge BOTH commission and rent. Well, it's simple... you want the business to sell your product right? Ofcourse they're way more interested when there's financial gain for them. Trust me, they could fill that shelf easily and keep raking in the same amount of 'rent' on the space regardless of any sales. However, if there's a motive for your items to be sold, that business will work alot harder promoting and pushing sales on your items. You might find that you can sweet talk your way into a business that only charges commission on items (most likely at a higher price point than being charged rent too), and only you'll know if this is a good business move (work out your Gross Profit and see whether this will be more effective than paying rental too). However, DO NOT go for an option of only paying rent, most likely the cost will be high and although you may get sales from this anyway from passing trade, it's guaranteed that you could get more sales if there's a benefit to the business for sales too.
From a business point of view, why do you want to charge commission aswell as rent (or maybe just commission)? Well firstly, card charges mean you'd be at a loss for any sales if processed by card anyway, so unless you trade only in cash, it's financially a no-brainer that you'll need to charge a commission just to cover any card charges. However, the main reason isn't necessarily a financial gain, it's to assure you get the BEST products instore for your business. When you're going through applications for the shelf rental space I guarantee you'll take better care picking the ones that will sell well if there is a benefit to you from it too. Simply renting the shelf space means nothing, you could happily leave items on a shelf for 3 months and consider that 'dead space' which you're getting a monthly payment on through rent. If you're charging a slightly lower rent to anticipate a commission on sales too, then you'll find that you're picking items that you know will sell, and most likely improve customer satisfaction too. So although at the core, it does stem from financial gain - it also means a better customer experience which, ofcourse, will breed return business and hopefully important customer links.
Benefits of renting a shelf in a business:
* A place to sell your crafts or passion
* Normally very little effort on your behalf after dropping off items
* Seeing your items in a respected company gives them credibility
* Bragging rights with friends...(?)
Benefits of renting space to local crafters:
* A huge range of things in the store, that you might not have had instore otherwise
* Not having to buy stock yourself, perfect for newly established businesses (no cost to you at all to implement this scheme)
* Customer satisfaction, if done right
* Appeal to a wider customer base
* Free local advertising and word of mouth from crafters
What to include, or what to look for, in the contract:
Let's just cut straight to the point here - you will NEED to have a lawyer look over this to check that everything is covered, but I'll just bullet point a few of the main things that should be in a contract between business and renters
- Contract Length
- Rental price per month
- Commission charges on sales
- How and when sales money is transferred (i.e. monthly, weekly etc.)
- Who is responsible for items left (most insurance companies will not cover items that are not owned by the business, therefore it's important to specify that items are left at their own risk - crafters may want to take out their own insurance to cover these items).
- What happens at the end of the contract (does the contract simply end after a set period, does the contract continue on a monthly rolling contract, how does does either party end the contract i.e. 2 weeks notice etc.)
- When and how to restock shelves or collect goods (can crafters come any time, only strictly out of normal opening hours with 48hrs notice, once a month etc.)