The family firm aiming to transform the UK’s scrap metal recycling industry - Oldham Manchester Case Study
A scrap metal recycling SME from Oldham is expecting to see profits rise by 50% thanks to its development of a ground-breaking new payment system, with support from our specialist digital innovation team.
Avid sitcom fans may remember a shady associate of Del Boy and Rodney called Alfie Flowers, who could be relied on to buy and sell scrap metal without asking too many questions.
And while Peckham’s finest last dealt in ‘hooky’ gear 20 years ago, it’s fair to say the scrap industry’s tainted image has been a difficult one to shift, despite it being heavily regulated nowadays.
One person who knows this more than most is Dave Day, Managing Director at Oldham scrap dealer Greengate Metals, who runs the family firm set up by his grandfather in 1970.
“Only Fools and Horses has a lot to answer for!” he smiles, before adopting a more serious tone. “The scrap trade has always had a bad reputation, but we’re going to help clean it up.”
Transforming the scrap metal recycling industry
Part of the problem is that the industry has traditionally been cash-based, with customers wanting instant payment. When legislation changed in 2013 to outlaw cash payments, this led to scrapyards using cheque cashing services or prepaid cards to meet these demands.
Both these methods incur costs, however, borne by both the scrapyards and their customers. Then there’s the inconvenience of the admin required in processing payments. And, on top of this, a small minority of operators continued to deal illegally in cash, affecting trade for the compliant businesses.
Enter Greengate’s ground-breaking ‘Scrappi’ software and integrated on-site cash kiosk. Together, they enable scrapyards and metal recycling operators to legitimately pay customers in cash via a machine, which charges a small fee – kept by the scrapyards, rather than going to third party providers.
Scrap metal recycling is the process by which metals are recovered and repurposed, contributing to
the circular economy. Recycling scrap metal is thought to date back thousands of years.
Around 10 million tonnes of scrap metal is recycled in Britain every year [1].
Currently trialling at Greengate’s Middleton site and eight other scrapyards, there are plans to roll out the new system commercially later in late-2023 after a successful soft launch at a trade show in March.
“It’s a unique system – there’s nothing else like it in the UK,” says Dave. “We're aiming to get it in at every scrapyard. There’s a big demand for technology that enables dealers like us to legitimately pay for scrap in cash, cutting out the costs and paperwork of cheques and electronic transfers.”
He expects the product to generate a 50% increase in profits, and, thanks to this, is planning to employ two additional members of staff.
So how does a family business, operating in a sector that on the face of it wouldn’t appear to offer too many opportunities to be cutting-edge, get to here?
A perfect example of innovation in practice
Small and medium-sized businesses have a choice: (1) carry on like you’ve always done things, risk becoming stagnant and eventually be overtaken by competitors; or (2) adapt to changing times, collaborate with others and access new markets.
Our experience, of working with more than 3,000 SMEs in Greater Manchester, is that innovative firms – the ones not content with standing still – are overwhelmingly more likely to experience stronger turnover performance, better productivity and a higher level of competitiveness, regardless of the line of work they’re in.
Greengate Metals undoubtedly fall into that second category. Analysing their journey shows three distinct steps:
1. Identifying a solution to a common problem
Tough competition (from scrapyards illegally offering cash payments) and rising costs have made life difficult for metal recycling operators and scrapyards.
As time went by and the fees from cheque cashing services mounted, so too did Dave’s frustration: “These companies were making a lot of money out of my customers and charging us for it, and it annoyed me. I thought that if these are our customers and we’re doing all the payment admin, it should be us benefitting, not a third party.”
Having wrestled with the problem, Dave sought a solution. He and his team knew what they wanted: some sort of ATM-type kiosk that would enable customers to be paid instantly in cash, while complying with the strict legislation.
The advantages were clear. Customers could be charged lower fees than they currently paid, with these sums kept by Greengate Metals. And because there would be no third party involved in the transactions, that would mean no need for any extra paperwork. Everyone’s a winner, as Del Boy would say.
And the solution wouldn’t just help Greengate Metals – given the likely demand from scrapyards for something of exactly this nature, a new system could be commercialised and rolled out across the country.
2. Research, development and validation
So, Greengate began the process of contacting “hundreds and hundreds of different places” to find the right technical help to design and build a system that would conform to UK law.
They dug deep into the legislation, going through thorough consultation and testing with engineers and solicitors to ensure that the kiosk would be fully compliant with the Scrap Metal Dealers Act and its supplementary guidance.
3. Commercialisation
Having created the product, Dave contacted Oldham Council to seek advice on how to take the new payment system to market. Thanks to the council, an initial meeting was set up with the Business Growth Hub and the next phase of Greengate’s journey – to develop and grow – began.
The business was paired with the Hub’s Digital Innovation Specialist Judith Ross, whose experience and knowhow has been integral to strengthening Greengate’s value proposition and commercial plan.
Dave says: “It’s been brilliant having Judith’s support. She’s brought in lots of ideas from other industries she’s worked, which has been really valuable, driving us forward and enabling us to find new customers.”
“Being able to get objective feedback from someone who's done it in the past and can draw on that experience is priceless.”
Areas where Judith has helped include:
- Market research, positioning and marketing
- Developing the business and generating new leads
- Advising on intellectual property (IP)
- Scoping a more user-friendly and informative website, including profit calculator
With an urgent requirement to launch the product to the market at a trade exhibition that was only a few weeks away, Judith helped with the creation of a new interim website, which was used to demonstrate the system to attendees.
The stand was one of the busiest at the show and led to over 25 very interested leads. Work is now ongoing by the business to convert the enquiries into sales.
While the outcome has been overwhelmingly positive, reaching out for such support was something of a leap into the unknown for Greengate. So, did Dave have any initial reservations about someone from outside the business coming in and getting involved?
“I’ve never done anything like this before and a tiny part of me thought: ‘I've run this business successfully for many years and don't need anyone to teach me to suck eggs – we’re doing all right on our own.
“But I thought it was worth giving it a go, as the GC Business Growth Hub had been highly recommended by Oldham Council. And the reality is that it’s been refreshing to have the honest opinion of a digital specialist.
“A lot of the time, people who work for you will agree what you're saying, whereas Judith challenges. If she didn't agree with something, she would always have something to back up where she was coming from, and it was great to bounce ideas off each other. In the end, the decisions were obviously mine, but she was always there if I needed her to offer guidance.”
Judith adds: “Greengate had a really innovative idea, which they successfully developed through thorough R&D and validation. Their willingness to embrace external support has accelerated their route to market and resulted in an even stronger value proposition.”
Summing up the success story, Paul Clifford, Director of Economy at Oldham Council, says: “Greengate Metals is just one example amongst many of the strong entrepreneurial spirt within Oldham, where enterprise is not afraid to innovate and push boundaries in order to achieve growth.
“The ambition, passion and drive from Dave to commercialise what he recognised as a gap in the market is truly inspiring. And our ability as a city-region to complement Greengate on this journey, with bespoke business support from the Business Growth Hub in association with Oldham Council, helps to illustrate why Greater Manchester is an exemplar area for enterprise.”
Paul Clifford, Director of Economy at Oldham Council
Future plans
Next for Greengate is a mobile phone friendly version of the payment system, due to be rolled out in 2024, which can be used by mobile scrap collectors.
“This is something that’s been built by the industry for the industry, and we want it to be accessible for all,” says Dave. “We’ve been here a long time and now we’re moving with the times.”
We’re looking forward to seeing Dave and his team going from strength to strength.
We worked with Greengate Metals in 2023 to support its digital innovation; the SME predicts a 50% increase in profits as a result.
Our innovation service was previously funded by ERDF. To find out more about our previous ERDF funded offer click here.
Note:
[1] Source: British Metals Recycling Association