As a convenience store owner, you know profitability is key to a successful business. But how do you make a convenience store more profitable?
People see convenience stores as one-stop shops. You’re usually open late, if not 24 hours a day, and you provide people with what they need when they need it. But to be profitable, you need to be more than the store passers-by pop into; you need to be the convenience store of choice in your area.
That might sound daunting, but if you tune in to the needs of your local community and your customers, you can implement initiatives that keep them coming back and provide your local community with a unique convenience store catered to their needs.
This blog post will guide you through the simple steps to making your convenience store profitable – and how our convenience store point of sale (POS) system can help manage your store, from promotional campaigns to inventory management.
7 Simple Steps: How to Make a Convenience Store Profitable
Before making your convenience store profitable, you need to understand your numbers. Perhaps you already do, but it’s always good to remind yourself of what the financial terms mean.
We won’t go into it here, but check out The Guide to Grocery Store Profit Margins (and How to Improve Them) for a detailed breakdown of profit margins. (Yes, it’s for grocery stores, but it’s relevant to you, too.)
The most critical number to know is your net profit margin. It indicates that your business generates enough profit and can manage operating costs well. To generate that much profit, you have to make intelligent decisions about the location of your store, the inventory you decide to stock, and how you manage vendors.
Although online grocery shopping and home delivery are growing in popularity, the pull of convenience stores is in the name. Customers want to be able to pop into a store and grab essentials or a late-night snack.
Let’s look at ways you can entice those customers and turn a profit.
Step 1: Location, Location, Location
The first step to a profitable convenience store is securing a favorable location. You want to choose somewhere with high foot traffic, low competition, and favorable traffic patterns. All three might not be possible, but even if one is, optimize your store to take advantage of your location.
You can still attract customers even if you have none of these perks in your location — bright signage and advertising boards direct attention to your store. Advertise things like local produce, deals, and offers.
Do you have a coffee machine? Do you serve hot food? If you’re in an area with a busy train station and many commuters, you might provide fresh juices and pastries your customers can grab and go. Whatever you do, try to see your location as an advantage.
Step 2: Put Your Best Face On
There are over 150,000 convenience stores in the United States, most of which are independent stores. That’s a lot of competition, and you might have competitors in your area.
One way to stand out is to design your store to look sleek, bright, and inviting. We spoke about providing juices and coffee for commuters, but if your store doesn’t look welcoming, they might not come in. However, if people feel welcome in your store, they’re more likely to be repeat customers, and repeat customers spend more than new customers.
Your store should be well-organized. For convenience, have a plan for your customers. Where should they go first? What should they see on the way in and as they get closer to checkout?
You should optimize your store layout for consumer speed, and display as many of your products as possible. For example, high-traffic items and drink coolers should be on the back walls. End caps are perfect for seasonal items, and everyday items should be closer to the front wall and checkout counter.
You can use your POS system to generate reports on what’s selling well and what isn’t. Identify trends and patterns and stock and display more of what your customers want. In one scenario, you might focus more on selling hot coffee in the winter and refreshing juices in the summer. It sounds simple, but it could affect your annual profit margin.
Step 3: Optimize Operating Costs
Like most businesses, operating costs take up the bulk of your spending.
Fortunately, many operating costs are consistent from month to month – but if you don’t budget appropriately, it could eat into your profits. Costs include inventory, wages, and payroll taxes for your workforce – and remember not to overlook other costs like utilities, insurance, and unexpected repairs and maintenance fees.
Where can you increase or decrease spending? What can you sacrifice? What do you need to do more of? For example, you might save some money cleaning your store twice a week, but a store that’s cleaned four times a week will be more inviting for customers.
If you’ve heard the saying, “Buy cheap, buy twice,” you know that, in the long run, cutting corners costs more than investing in the things you need to run your store well.
You might also evaluate your hours of operation. Yes, convenience stores are known for being open most of the day – but is that profitable? Examine your point of sale reports down to the hour, and consider shutting down if there are hours when your store is empty or has low traffic. Also, look at staff schedules and align them with busy or quiet times.
Step 4: Spend Wisely on Equipment
Depending on your location, your local community’s needs, and the size of your store, you might not need all of the equipment you typically see in convenience stores. You’ll probably need the basics like refrigerated display cases and open-air coolers.
Think about location again, and be smart with what you sell. Do you need a frozen drink machine? Does it get super hot where you are? Perhaps people in your area prefer refrigerated drinks? Does it get cold a lot? Maybe a hot drinks machine and food warmers would be better.
Research and explore the demographics of your location and make informed decisions. You’ll save money and increase profits by not spending your budget on things you don’t need and providing your customers with what they want.
Step 5. Be Smart With Inventory
A granular approach to inventory management is better all-around for tracking sales and accurate stock levels. When you automatically track inventory at the item level (track the number of items sold instead of cases or pallets), inventory levels adjust to reflect the number of each product left.
With the right POS system and data, you can set low-stock alerts, reorder thresholds, and automate purchase orders, so you never run out of popular items.
It’s time to stop using pen and paper or spreadsheets, which are prone to errors. Convenience store profit margins are thin, so every mistake is costly. Automated inventory management takes over tasks you’d typically do manually, saving time and resources. If you’re not worrying about missed errors and low stock, you can focus your attention on pushing your store forward.
6. Other Ways to Cut Costs
Some less obvious ways to cut costs:
- Consolidate food and beverage vendors. It costs you more to work with multiple vendors. With fewer vendors, you’ll spend less on purchasing products you don’t need just to hit minimum order thresholds.
- Change payment processors. With more transactions and customers expecting a quick checkout process, who you partner with for payment processing is crucial. With a subpar payment processor, you and your customers bear the brunt.
- Offer discounts for cash payments. Customers will receive a discount if they pay in cash rather than using a credit card for their transactions, and you won’t have to pay processing fees.
7. Invest in a Powerful Point of Sale System
Your convenience store needs streamlined operations and robust inventory management to increase profits. A modern POS system handles payment processing, loyalty programs, sales data and reporting, inventory management, promotions, coupons, and employee management. Sound too good to be true? It’s not.
Our convenience store POS system unites your operations in one piece of equipment. We’ve covered a number of features to this point, but there are additional POS features that help streamline your store’s operations.
From theft and inventory loss prevention to carton and case break inventory, and even lottery sales, we’ve got you covered. And the best part is that our POS system is customizable. Only pay for what you need.
The benefits are plentiful. Increased accuracy reduces small mistakes that amount to lost dollars over time. A better customer experience helps you live up to your customer’s expectations of a convenience store. Finally, you can better understand your inventory and drive profits with robust inventory and reporting features.
How To Make a Convenience Store Profitable: Implement These 7 Steps Today
Follow these seven steps to make your convenience store profitable, but don’t do it alone. POS Nation has helped hundreds of convenience store owners with a complete point of sale solution built with your business in mind.
If you want to see the benefits of a modern POS system, schedule a demo with one of our industry experts.
Or, check out our Convenience Store POS System Buyers’ Guide to see:
- The 10 must-have convenience store point of sale features.
- The typical c-store setup, plus the POS hardware most other convenience store owners purchase.
- And six need-to-ask questions when talking to retail point of sale providers.