From the blog How to Increase Your Convenience Store Profit Margins
Finding ways to improve profit margins should be a priority for all business owners. But that is the question how to increase your convenience store profit margins. Because of the many challenges inherent to the industry, this is particularly true for convenience store owners. With rising hourly-worker wages since 2010, stagnation in gas consumption, and a drop-off in grocery prices, keeping up in an evolving market means you must be proactive.
There are three ways to improve profit margins: lower costs and expenses, raise the price of goods, or increase sales. Unfortunately, miscalculating or taking the wrong strategy can backfire. If you raise prices too high on the wrong items, it can hurt sales. Promotions or discounts are a good way to increase the number of sales, but they must be well-coordinated to have an impact on the bottom line. Cutting back on staff or merchandise can negatively affect customer perception of your establishment.
There are less risky measures you can take to improve convenience store profit margins. Following these simple tips will improve sales or limit inefficiency and waste, which will positively impact your bottom line.
Due to the typical customer’s purchasing habits, convenience stores must offer a diverse mix of merchandise. Providing all these products makes it necessary to work with many vendors. Unfortunately working with a high number of vendors presents some issues for convenience store owners.
Sometimes the costs of working with multiple vendors are unseen. Organizational overhead is incorporated into their pricing structure, with many of these costs passed along to you. The more vendors you buy from, the more of these hidden costs you’ll have to pay. Consolidating vendors as is a good way to cut down on costs.
Additionally, vendors usually have a minimum order requirement. To meet the minimum order, you may need to make wasteful or inefficient purchases. Limiting the number of vendors you use makes it easier meet minimums without purchasing unnecessary or slow-moving products.
A third advantage of vendor consolidation is reduced labor costs. More vendors means more deliveries throughout the week. Checking in deliveries and processing invoices are time-consuming tasks that can require an employee to leave the register to complete. By limiting the number of deliveries from vendors, you can use those employees more productively.
Consider New Products
Some inventory offers a greater return-on-investment. Keep your eye on market trends because the popularity of certain items can change dramatically over time. Identifying low-cost, high-selling products and adding them to your merchandise mix is an easy way to improve profit margins.
For instance, cold dispensed beverage fountains have proven to be a valuable addition to convenience stores. Soda fountains offer a better value to both the consumer and the retailer than prepackaged beverages. Innovations like the Coca-Cola Freestyle soda dispenser are changing the market and driving retail sales by offering more choice for consumers.
Another trend in the industry is offering fresh and prepared foods in addition to traditional convenience store fare. Consumers are increasingly choosing fresh products purchased close to the point of consumption. Prepared food that make healthy-eating more convenient, like pre-sliced fruits and vegetables, have seen their popularity grow significantly.
Change Payment Processors
The payment processing vendor is one of a convenience store owner’s most important service partners. With more transactions than the average retail business, speed, ease-of-use, and reliability are all important qualities to look for in a payment processor.
Not all payment processors are the same. Some common payment processing problems faced by convenience store owners are inefficiency, technological stagnation, and poor customer service. If you are unsatisfied with the level of service you receive from your payment processor, it may be time to look for a new vendor.
If your payment processor is providing subpar service, your customers may be subjected to delays at the register. This can hurt sales because when a customer has a negative experience at the register it decreases the likelihood of repeat visits.
Making the switch to an innovative and more efficient payment processor is one way to improve your convenience store profit margins. Not only will you need to process a high volume of payments, your customers are usually in a hurry and expect to complete their transactions quickly and easily.
Convenience store owners must consistently work to improve profit margins. With the industry continually changing, staying proactive is the best way to maintain a profitable business.
While finding ways to improve profits at your convenience store can feel daunting, it doesn’t need to be a monumental task. Taking small steps to improve the efficiency, consumer appeal, and convenience of your business will lead to noticeable gains in sales and waste-cutting.