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Understanding your Convenience Store

As the convenience business continues to become more challenging and competitive, those retailers who understand and manage their business most effectively will have a distinct advantage over those who don’t.

Understanding your business implies that you know the following:

That you have identified the 15- 20 key categories that make up your store’s sales.

That you know the sales for each of these key categories on a weekly, monthly and yearly basis.

That you know whether these categories are growing or declining and what portion of your stores total merchandise sales they represent.

That you use this information to measure and monitor the sales and profit per square foot that each category contributes to the over all store performance.

Without this information how can you understand the relative contribution of each category and how can you intelligently make adjustments in assortments or space allocations to improve the performance of your store?

As I work with a great many independent retailers I am astounded at how may do not have the information to understand their business and are therefore not in the position to make informed decisions about changes they need to make. Most know what their total store sales were for the full year, but the majority do not have the category breakdown to know the make up of those sales. In addition, although some have sales by category the categories are so broad that they do not provide effective information. Some recent real world examples:

  • A retailer who knew their total store sales for last year and knew that those sales were down 9.8% from the previous year, but had no sales by category measurement to know where that decline had taken place.
  • A retailer who recorded sales by category but had one large category called “Grocery – Taxable” that represented 19% of total store sales. This category also happened to contain all confectionery and snack sales. How much was grocery, how much was candy and how much was snacks they did not know.
  • A retailer who also tracked sales by category including one large category called “Other Snacks” that represented 23.6% of their total store sales. On closer examination this category was found to also contain beverages, candy, novelty ice cream, and miscellaneous.
  • A retailer who had 30% of their merchandising space devoted to groceries but had no idea whether groceries represented 5%, 15% or 25% of their total store sales.

Without this valuable performance information, it is virtually impossible to make effective management decisions to change and improve the performance of your store. Important questions like the following are almost impossible to answer with any degree of accuracy:

  • What is my best growth category this year?
  • Does it have the space it needs relative to its importance to my business?
  • Beverages are supposed to be one of the strongest growing categories. Do my sales reflect that?
  • I have 25% of my merchandising space devoted to groceries. What proportion of my sales does that category represent?

There are many variations as to how retailers track their store’s performance, with some choosing to use a simple cash register and an increasing number of others choosing to use a more sophisticated POS with scanning. No matter what option you choose, you must be able to record and track the item sales, summarized on a weekly basis, into a logical group of categories from this list.

Cigarettes Reading / News 18 litre Water
Other Tobacco General Merchandise Fast Food
Beverages Grocery – Taxable Branded Food / Coffee
Milk & Dairy Grocery – Non taxable Phone cards
Confectionery Bread Propane
Salty Snacks Frozen Lottery
Other Snacks Seasonal  

Once you are tracking this information, you can better understand where your sales are coming from, what categories are over or under spaced, your margins and profitability, and where your opportunities for growth lie. In addition, you can compare performance to others in the industry and you can even get your staff more involved in the business.

Surviving in today’s competitive and fast changing world of convenience retailing will be much easier for retailers who have good management information and use it to make smart business decisions.

Hugh Large & Associates Inc.
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