Starting a Convenience Store

INDUSTRY NOTES

Convenience stores offer quick and friendly service, handy locations, a variety of merchandise, and extended hours of operation. This factsheet focuses on starting an independent convenience store. However, many convenience stores are franchise operations.

LOCATION

Choosing a location for your store may be your single most important decision. Do your research. In particular, consider these factors:

Population
If people have to travel more than a mile, they are more likely to go to a supermarket for a major shopping trip. Also check an area's future development plans and projected growth rates.

Competition
Although a convenience store's competition is mostly from other convenience stores, it can also come from supermarkets. Study all competitors to see if the local market can support another operation.

Traffic
Impulse purchases make up a good percentage of convenience store sales, so high volumes of pedestrian and vehicle traffic passing your store is critical. Try to: 

• Locate near schools, parks, sporting facilities and other businesses (especially in strip malls) to increase traffic.
• Monitor seasonal traffic fluctuations in resort areas. Carefully determine whether summer earnings can sustain you during slower winter months.

LAYOUT

• Before ordering or installing equipment, design your store's layout. Keep it simple to keep costs down.
• Reserve the most space for products you will sell the most.
• Place all products where customers can see and reach them.
• Position products with the highest profit margins at eye-level.
• Place high-demand products such as bread and milk at the back of the store to increase traffic. This encourages impulse purchases which can make up to 70% of your sales.

ADVERTISING

• Install a brightly-lit sign to attract drive-by traffic.
• Create eye-catching window displays and point-of-purchase displays.
• Deliver or mail flyers to neighbourhood homes and place ads in local newspapers. Stress convenience, accessibility and extended hours.
• Consider offering additional convenience services such as fast food or healthy snacks, postal services, lotteries, videos/DVD rentals, or installing a gas pump.

SELECTING INVENTORY

Your product mix depends on your location and your target market's needs.
For example, a convenience store in a resort area will likely stock a more complete line of goods. Wherever your location, you must be able to estimate product demand.

A typical convenience store product mix includes:

 

 

Category	Percentage of Overall Sales
Tobacco	40-65%
Beverages	10-15%
Milk	8-10%
Confectionary	5-8%
Magazines/newspapers	5-8%
Snacks	4-5%
Lottery	Undetermined, but acknowledged

Source: Canadian Grocer, 2000

Keep ongoing, accurate inventory records in order to continually monitor the ratio between your stock and actual sales. This helps to minimize lost sales and money tied up in inventory, as well as determine the demand for different products.

PRICING

Prices should allow for sufficient gross profit to cover overhead expenses and a reasonable net profit. Choose one of two pricing methods--markup (based on cost) or margin (based on selling price). Convenience stores simply cannot buy in large volumes like superstores, so do not attempt to offer lower prices. Instead, stress service and convenience.

HUMAN RESOURCES

The ability to hire and keep excellent employees is essential. Educate yourself in all areas of human resources--how to recruit, interview, screen, motivate, train, evaluate and develop personnel policies (wages, pension plans, benefits). Promote continuous training and upgrading through related courses and programs. See the Human Resources factsheet for more information.

SECURITY 

• Screen employees carefully. Check all references and work histories.
• Employee dishonesty can lead to cash register shortages, unauthorized discounts, pilferage, and the distribution of merchandise to friends.
• Deter shoplifting. Post warning signs, install mirrors to view all aisles and keep small items near the cashier. Train staff to watch for and apprehend shoplifters.
• Deter robbery. Make daily cash receipt deposits and keep a minimum of cash on-site during night hours. Train staff in procedures in the event of robbery.

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DISCLAIMER
Information contained in this document is of a general nature only and is not intended to constitute advice for any specific fact situation. Users concerned about the reliability of the information should consult directly with the source, or seek legal counsel.

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