Imagine going into the COVID crisis buying frenzy with a 'Nothing Over $5' business model.

The crisis period has brought many losers and a few winners across the retail landscape.

The grocery channel was the obvious big performer to even the casual observer, as it was clearly the key habit amongst people's daily lives and activities. The rush of grocery buying and the unsightly hoarding, was a feature across March to May.

All of us saw it, and being in anything that resembled a grocery store was crazy at times!

Our attention was piqued on the Silly Solly’s business after seeing a spike in traffic on our website compared to most other brands. Not being a grocery store per se, but carrying a number of the types of household items (in a limited range) that a Coles or Woolworths does, how did they get stock? 

We also wondered, if the ‘Nothing Over $5’ position create any problems in such a destabilised marketplace.

How did a business model with ‘Nothing Over $5’ perform?

“It was a hectic time, but thankfully all stores stayed open and trading throughout.” according to Managing Director, Steve Watchman.

Although the issue of stock supply has been an issue at times across the period, it was not an issue in that most valuable of commodities - toilet paper.

“We had a good supply of toilet paper all the way through. Some of the bigger boys (grocery chains) tried to put the squeeze on it, but we got what we needed.”

Steve narrowed the main issues to two that the company had to adapt and work with in order to keep trading;

“Social distancing. Most stores are quite big so it makes it easier to cope with it in a space to numbers equation.

Stock. Getting hold of everything we wanted, but we were successful much more than we weren't.”

"Unfortunately, price gouging was happening in the market. Yet our ‘Nothing Over $5’ stance meant we were well positioned for it. In the $5 model, people always get value for money, and as an example, hand sanitizer I’d be pretty sure we were consistently the best priced out there. For a very much in demand product”.

Feeling a bit of a pinch on toilet paper

“Toilet paper, we had the 10 pack, and they stopped doing it. It was the 12 pack, 4 ply or nothing for us, that’s all we could get. It was costing us $5, then we had to freight it, so we were selling it at a loss.”

According to Steve, this is not uncommon at times in the model, acting in concert with the concept of the loss leader product.

“We put limits on it, initially two (2) per family, then one (1) per family for toilet paper. We had no problems with it. It was pretty much just business as usual apart from social distancing and so on.”

Any unavailable items were for the most part, barely noticed said Steve.

“We carry over 10,000 products, and some wholesalers may have occasionally been out of some. But, we’re talking maybe 150-200 items out of that many, so nobody really notices any shortage.”

“As an example, for a time we didn't have hand sanitizer, but it was basically not even in the country it seems. And we always had cleaning and personal care products.”

Trading performance

While Steve did not want to go into too much detail, he was able to say that across the board, “Every licensee of ours has paid the rent in full all the way through, and our trade is up between 20-30% depending on the location.”

The business is not a franchise, but under a license model, and has 19 stores right now, all located within Queensland. The next state for expansion is into Victoria with leases signed and in place, with stores expected to be opening in the second half of this year. 

“We have NSW locations in negotiation that we need to look at, but we can’t get to see them at this time due to the travel restrictions. 

“Everything got put on ice with COVID, and we estimate that we’d have an additional six (6) stores open by now, but are just in somewhat of a holding pattern at the moment.”

Investor interest has spiked

“What we have noticed is a big spike in enquiries about investing in our business. They don't want to feel like they have no control. They want to control their future, and work for themselves in a small business.”

Steve is confident where the business is sitting right now, and pleased with their unique business model performance through the crisis and beyond. “With Jobkeeper payments for example, there is decent cash around and there have not been many places to spend it. 

But, they are certainly spending it through businesses like ours.”