Setting Up Your First Gift Shop: A Case Study

The MMDC Gift Shop provides an instructive example of how small businesses often evolve. The MMDC giant clam hatchery was first established in the late 1970's as a conservation project designed to produce clam juveniles for restocking of depleted reef areas. By the mid-1980s, this objective had been broadened to include the development of large-scale mariculture operations for production of food and income. As soon as profitability became a serious objective of the program, it became obvious that maximizing revenues would require looking beyond food markets.

Ornamental markets seemed to hold much promise, so, beginning in the late 1980s, efforts were directed at developing aquarium markets as well as ornamental shell markets. The outcome of this diversified approach was such that by 1994, the six-person MMDC giant clam hatchery staff was successfully serving broadly diverse local and international customers. On any given day, the staff might begin by filling local restaurant orders for clam sashimi. Later in the morning, they would pack and export a 250-kilogram shipment of aquarium clams to the U.S. mainland. After lunch, a 100-kilogram shipment of chilled clam meat might be prepared for export to Okinawa or Saipan. Against this backdrop of commercial activities, the hatchery facility, ocean nursery and livestock were carefully maintained, research projects were planned, implemented and completed, thousands of tourists were served with brochures and friendly greetings, and the gift shop sold customers a wide variety of shellcraft items and apparel such as T-shirts, hats and tote bags screen-printed with the MMDC logo. Even the screen printing and design work was done on-site by the hatchery staff.

Clearly, by 1994 the MMDC clam hatchery had matured to the extent that many product types were offered simultaneously and many customers were satisfied on a daily basis. Staff had no idle time, and the various products being made found no shortage of demand. The clam hatchery facility grossed more than $175,000 in sales—not grants—in 1994; about $24,000 of that sum was derived from gift shop sales. Notably, this income was more than sufficient to cover all operating costs of the program, including utilities, wages and salaries of staff and management.

Surprisingly enough, for more than a decade after the MMDC's inception, it had no gift shop. During that time, thousands of potential customers passed through the facility without having the opportunity to buy anything. In retrospect, this was lost opportunity on a grand scale. To be fair, the prevailing view in the 1970s and early 1980s was that the facility could survive and prosper on research grants and contracts alone. No real need was felt to generate revenue internally and so no real effort was invested in earning money, apart from writing grant proposals. For a time, this approach was acceptable. Eventually, however, unmistakable signs of “donor fatigue” became evident, and the facility clearly needed to move toward self-sufficiency.

A policy breakthrough for the MMDC came in 1987, when the Palau government granted permission to begin a fee-based, export marketing program for giant clam products. This required that MMDC establish internal financial controls, produce regular financial reports, and subject all financial records to independent annual audits.

The MMDC Gift Shop itself had very humble origins, a fact that is particularly relevant to clam farmers and hatchery operators who have had no retail experience. At first, MMDC's “gift shop” was literally nothing more than a 4-by-8-foot sheet of plywood laid across two saw horses! We put clam shells with price tags on top of this makeshift table. We were fortunate in having a regular parade of tourists passing by the table. When someone wanted to buy a shell, one of the hatchery staff would stop what he or she was doing and make the sale. Note that this approach involved virtually nothing in the way of startup costs: no expensive capital investment and no shop employees.

Only after many months and about $6,000 in sales did we consider improving the gift shop. We invested about $3,000 in building a small, open-sided, 10-by-20-foot, roofed addition adjacent to the clam hatchery building. Several months and thousands of dollars in sales later, we added security screen to the walls of the shop.

Eventually, further income permitted the establishment of $3,000 worth of further improvements, including shelving, a nicely paneled interior of stained wood and a beautiful floor of quarried pink Philippine marble. We then invested about $5,000 more in four large aquarium tanks with state-of-the-art metal halide and actinic lighting. Many customers told us that our aquarium exhibits were the finest they had ever seen; their impact on customers was nothing short of extraordinary.

Even though the MMDC Gift Shop was small, it was a unique experience for customers. Most customers had never seen a giant clam before, let alone giant clam shellcraft and state-of-the-art coral reef tank displays. All customers seemed to appreciate the style and neatness of the shop.

Note that not a penny of debt was incurred in setting up the gift shop or the expansions and improvements. The construction was paid for solely by sales.

Our last improvement to the gift shop involved the addition of a $3,000 screen-printing workshop and about $4,500 worth of screen-printing equipment and supplies. This allowed us to print and sell thousands of MMDC T-shirts at $16 each, which represented a net profit of more than $10 each.