A huge cow pointing at the entrance of an Ale-Hop is another traditional icon of today’s Spain, especially its tourist areas or areas with a lot of traffic, such as airports and train stations. They are stores that sell many different products, at low prices, and of a “fun, original and affordable” nature, as defined by their own owners.
In just two decades, This Alicante chain has gone from being a local unknown to having more than 300 stores in five countries. What is the formula for your profitability? How have you managed to have a presence in all Spanish cities and begin expanding abroad?
That’s what we want to analyze.
From street sales to the first store
It all started in 1991. Vicent Grimalt, an entrepreneur from Gata de Gorgos (Alicante), who had experience as a street vendor, founded Clave Dénia, a company dedicated to the import and wholesale of gift items. At the same time, he opened his first large store called Clave, according to a report from The Commerce.
Ten years later, in 2001, Grimalt opened its first store in Valencia focused on small, original and economical products. That was the true embryo of Ale-Hop.
Its business model was based on three legs:
- A location in an area with high traffic of people, especially tourists.
- A large assortment of self-designed, eye-catching items at low prices.
- The famous life-size cow always located at the door.
That cow has ended up becoming the hallmark of the brand and a claim in itself. “It is the most photographed cow in the world,” Grimalt once said.
With this seemingly simple formula, Ale-Hop began to spread throughout the country, following the trail of the most touristic towns. Ale-Hop does not do large advertising campaigns, but that strong presence in key points acts as its own marketing channel. A kind of implicit marketing.
Although they initially opted for the franchise model, since 2013 they backed off to focus exclusively on their own stores. This gave them greater control of the brand and operations. Something similar to the phenomenon of The House of Carcasas.
In 2023 they surpassed the barrier of 300 stores, including the international openings that began in 2021. Today they have a presence in Portugal, Italy, Croatia and Mexico.
Soared gross margin and a lot of turnover
How does Ale-Hop manage to be so profitable selling products low-cost? One of the keys is the enormous turnover of its inventory. They have a catalog of 6,000 references that are continually renewed. In this way they get the customer used to returning frequently to the store to discover what’s new.
Its products are divided into seven categories:
- Home
- Sports
- Stationery
- Toys
- Moda
- Electronics
- Original gifts
In the ‘Electronics’ category we will stop a little later.
All products in all these categories share a design that seeks to be original, fun, cheerful and with a certain practical approach. They are also usually very seasonal products.which are aimed at specific times of the year: Christmas, Valentine’s Day, Halloween, Mother’s Day, summer, etc.
An example of Ale-Hop’s seasonal catalog: its current Christmas offer. Image: Ale-Hop.
Those designs come from its own R&D teamwhich draws inspiration from international trends to create products that work well in stores. They then Buy them directly from the factories in large volumes, and that allows them to achieve comfortable margins despite the low prices.
To this we must add two factors:
- The greater the number of stores, the greater the volume of orders, so the lower the unit Price at which they obtain each product. Virtuous circle.
- Their centralized logistics network allows them to distribute merchandise to their stores seeking maximum efficiency in their favor, without this logistics depending on the decisions of third parties.
Company members. Image: Ale-Hop.
Behind this expansion there is a healthy and debt-free company, faithful to an atypical business mantra that Vicent Grimalt learned in his beginnings, according to a report by The Spanish: not get into debtnot even to finance the expansion of the company.
It was during his time as a traveling salesman, in his youth, during the end of the sixties, when the ambition to increase turnover played a trick on him in the form of lean times with a loan that was impossible to pay without the help of his father. . Lesson learned whose consequences are still valid today.
The recognizable interior of an Ale-Hop store. Image: Ale-Hop.
Based on the data from the Commercial Registry, 96.3% of its assets are backed by equity, which demonstrates its very low level of debt.
Throughout Ale-Hop’s growth process, the company decides its future investments based on the profits generated. It is a conservative strategy that has been giving good results for twenty years. In fact, it is what allowed them to weather the pandemic crisis, when confinements, the absence of tourists and the drop in internal mobility threatened their business model.
In 2023, the last full year with published data, they invoiced 224 million euros. It is not common to see a business grow like this after twenty years of activity and without external financing. The post-pandemic triggered its success.
In these years, not only has turnover and profit skyrocketed: the latter has done so at a much higher rate. From a poor 2.4% in 2020 due to the complications of the pandemic (in logistics, paralysis of tourism, etc.), it has gone to almost 20% profitability on operating income. This figure speaks of the efficient and optimized structure to maximize profits in low-margin stores.
Something that also explains a good part of this financial solidity is its gross margin of 61.7%, much higher than the average for its sector (38%), thanks to a supply system that minimizes costs and maximizes the offer of new products. Rotation.
By 2024, it projects almost 2,000 employees. Each one has an average annual cost of 29,000 euros and a turnover of around 155,000.
cheap electronics
The technology that Ale-Hop sells focuses on Quite affordable products, for everyday use, without great aspirations. From accessories to small entertainment devices: portable fans, speakers with various designs, small portable printers, wireless headphones, mobile phone holders…
There are also constant products: USB chargers, mobile cables and other types of accessories for smartphones or computers. They cover basic functionalities with a lot of weight in the aesthetics of the entire store at an affordable price. Another thing is that someone expects an equivalent to AirPods for 19 euros.
A small sample of the enormous catalog of cheap electronics that Ale-Hop offers. Image: Ale-Hop.
They are products that represent a clear market penetration strategy gadgets through economies of scale and a focus on fast-moving products. They do not have advanced specifications or high quality, they simply attract attention in price and appearance.
This commitment to the visually striking is transferred to consumer electronics, which positions Ale-Hop as a brand lifestyle cheap, not like a technology provider even if it sells gadgets.
And by the way, allows them to gain virality: it is easier to upload photos with lavender accessories or floral motifs to Instagram than others with a bland appearance. Ale-Hop handles the language well of what is published and what is not.
The next step
Now they are preparing to make the leap with a macro logistics complex of 120 million euros between the municipalities of Gandía and Bellreguard (Valencia). Gandía is a very touristy city but with very little recent history of industrial development. Ale-Hop has broken that trend. Even the mayors of both municipalities and Carlos Mazón, president of the Generalitat, attended the announcement.
The idea with this logistics center is to boost its international expansion and take its cow to more and more countries. Taking into account its opening model, countries with a large tourist component such as Italy sound very feasible for expansion. In Italy they opened two of their own stores last year, in Ravenna and Cesenatico, small cities on the east coast but with a lot of internal tourism. Then two more arrived, further north.
Vicent Grimalt, the founder, is 73 years old today, and his succession plans go through his children: Darío, Sergi and Raúl are part of the management team and have been in the company since its inception, occupying positions throughout the chain.
In that giant of retail Spanish, that DNA of a family business persists, with enormous deployment but maintaining an austere approach: no growing based on credits. That is perhaps one of the keys to its success: the philosophy based on self-financing, cost control and an expansion that is as ambitious as it is prudent. Time will tell how many cows remain to be deployed in Spain and outside of it.
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Featured image | Ale-Hop, WorldOfSoftware
