If you’re considering becoming a convenience store owner, you’ve come to the right spot. According to a 2020 study by Statista, there were more than 150,000 convenience stores in the United States. The majority of them were independent stores and the overall convenience store sector in the United States had sales of 532.9 billion U.S. dollars that year.
In addition, at least 75% of c-stores recorded an increase in sales for the 17th consecutive year in 2019. This sales growth is an essential indicator of the profitability of convenience stores. And if you are thinking of opening one, chances are you will succeed if you follow the best practices, get the right technology, and follow the proper legal procedures. But the million-dollar question is how to start up a convenience store?
In this guide, we’ll walk you through the steps to follow and how to run your convenience store. Here are the major points we’ll cover:
What Are The Steps to Successfully Open And Manage a Convenience Store?
Before you consider opening a convenience store, you need to conduct some research to ensure you’ve made the right choice. It’s essential to use every trick to run your operation profitably. Here are seven tips to increase your chances of success in your c-store.
Step 1: Create a business plan for your convenience store
As an entrepreneur, it is essential to develop a clear business plan, which can help you pinpoint the specifics of your business’s operation, uncover the blind spots, and better guide your budget. Since running a convenience store involves paying close attention to margins, creating a business plan before you start is a good idea.
The business plan is a must if you need bank financing to open or purchase the store. This prerequisite for opening a convenience store will help you be more successful and is worth investing time into it from the beginning.
Before making this plan, you must study and understand specific business parameters such as the products you’ll sell, prices, foot traffic, and revenue projections. Another couple of critical parameters to take into account are your competitors and your ideal customer profile.
In your business plan, a part will be dedicated to establishing your start-up costs and your operating costs. You need to put all this together in the form of a financial forecast in order to convince the bank (or other less traditional financial lenders) to grant you the funds necessary to open your store.
Step 2: Pick a good location for your c-store
No matter how good your product or marketing strategy is, a bad location will not bring you enough customers, thus threatening the future of your business. This is true whether you are opening a brand new store or buying an existing convenience store. The first thing you need to do to make sure you have chosen the right location is to measure the foot traffic
Count the customers outside for several hours or hire someone to do it for you. Although this strategy is tedious, it is effective.
Get in touch with the existing store owner to get a clear idea of the number of customers per day or week.
Use the service of a company that can help you track foot traffic in a location using cell phone data.
Alongside that, there are some other good general rules of thumb to ensure more success:
Don’t be surrounded by more than two or three stores such as drugstore chains or large grocery stores.
Do not choose a location hidden at the end of an alley in an office building complex.
A good location can get regular customers, such as a neighborhood corner, a large office complex, or a school zone.
Your site should also offer ample and suitable parking and be easily accessible.
Step 3: Get the right licenses before you open your convenience store
Before opening a convenience store, you must fulfill several administrative formalities to comply with the laws of your state or county. This includes obtaining licenses and permits to ensure the legality of your operation and avoid stressful and costly issues down the road.
The typical licenses and permits you will need for your convenience store are the following:
Employer identification number (EIN)
Alcohol and tobacco license
City or county business license
However, obtaining these items can be time-consuming and tedious. For example, you must demonstrate that your building and facilities comply with your state’s regulations to get an occupancy permit. This whole process can take quite some time, especially in certain densely populated areas, so be sure to plan well in advance to avoid delays to your store’s opening.
Step 4: Focus on financial management
Be in the driver’s seat with your finances rather than waiting for problems to arise. Check each product’s sales ratio and gross profit margin to see cost-efficient products and optimize your purchasing and pricing better.
One important area to consider is retail shrinkage. When you see mismatches between sales and inventory, you need to be on your toes as this may indicate theft.
Also, keep a close eye on your cash flow. A great way to control your finances is to constantly look for ways to reduce production costs by negotiating the purchase price of your items from your suppliers and eliminating order inefficiencies that cause poor inventory management.
Remember to continuously optimize sales volumes and prices as the profitability of convenience store businesses are based on high volumes and low margins.
Step 5: Invest in sound technology and security systems
For better financial and inventory management of your convenience store, it is essential to have an up-to-date cloud-basedretail point of sales (POS) system. A cloud-based POS system helps you access all data and reports remotely as long as you have an internet-connected device adding much-needed convenience and flexibility.
As a convenience store owner, you don’t constantly need to be on your premises. You can therefore track everything related to operations and other business activities remotely. An elitepoint of sale system helps you manage, track sales, vendors, store profits, inventory management, revamp your marketing strategies with your retail store analytics. Also, a POS system protects you from fraudulent transactions.
In addition, you should also invest in other tools more suitable for security, such as surveillance cameras, alarms, and cashier monitors. All of these devices will help prevent loss and maintain a healthy business.
Step 6: Get to know the customers of your convenience store
It’s a big mistake to think that everyone is your customer, given the shared nature of convenience stores. There are things to consider about your customers. Here are a few of them:
Are your customers’ regulars in your convenience store, and are they one-time buyers of the products you sell? For example, a woman who stops every morning to buy cookies for her daughter before taking her to school can be considered a more valuable customer as opposed to one who is just stopping by once for an item they need.
Are the customers who come to your store from the area where your store is located? If so, you’ll want to make the interior of your store more inviting. You may also want to offer a standing lunch counter, hire great employees, train them to be very welcoming, and make the customer experience more pleasant.
Do your customers spend enough time in your store or are they in a hurry to get out? If so, make the most popular last-minute products such as bread and milk visible and accessible. You must have a staff willing to serve your customers, efficient line management, and a fast checkout system.
Step 7: Decide which products you want to sell in your c-store
In convenience stores, you will find most of the following items:
Fresh fruit and vegetables
Alcohol and soft drinks
Dairy products such as butter, yogurt, cheese
Desserts and cakes
Freshly baked goods
Fast food to go
Takeaway coffee and other hot drinks
Newspapers and magazines
Cigarettes and tobacco
Many household and grocery items such as toilet paper, tea, coffee, and pet food
Determining your c-store product inventory is no easy task. After all, convenience stores are typically small spaces but their customers expect a wide variety of products. It’s important to maximize your product catalog without overwhelming your stockroom or shelves. Listen to your shoppers and don’t be afraid to improvise as you go.
Is Owning a Convenience Store Profitable?
No entrepreneur wants to start a business that is not profitable, and there are plenty of profitable convenience stores out there. But can you make $1 or $2 million annually running just a convenience store? Well, the short answer is yes, but it depends on how well-run your business is.
As a convenience store owner, you constantly face high fixed costs of your products and other expenses such as your inventory, rent, and your payroll. You also have to deal with operating expenses such as utilities while optimizing your product catalog and pricing and attracting foot and car traffic. Convenience store margins are 10-20% higher than a regular grocery store and can be even higher for high-demand products.
To improve your profit margins, it is advisable to calculate and know the best-selling products’ margins to better strengthen your inventory and marketing strategy around these products. Make sure that these products are available and well-presented in your store.
Tobacco products, beer, wine, gas, and automotive supplies are considered one of the products that should be prioritized to maximize profit margins. You should also think about those products around your point of sale. Don’t waste an opportunity to promote impulse purchases and pad your average sale value.
So, are convenience stores profitable? The answer is yes, but only if you’re very strategic in your financial management, i.e., reduce unnecessary costs and expenses and maximize your efforts on the items your customers most desire.
How to Open a Convenience Store: Bottom Line?
Opening a convenience store is a process that requires money, time, and planning. With a good business plan, choice of location, products on the shelves, and affordable prices, you can make your convenience store profitable.
Running a successful convenience store also means using a point-of-sale system that can facilitate your transactions, manage your inventory, provide payroll tracking for your employees, and much more. And that’s where KORONA POS comes in. Our convenience store pos system can provide you with the following features:
Real-time data & analytics
Automatic reorder levels
Product evaluations and metrics
Theft prevention features
Cashier action tracking and reports
C-store POS cashier evaluations
Quickbooks accounting integration
Time-sensitive sales reports
Stock inventory transfers
Scanned inventory capabilities
Click on the button below now to try KORONA POS for free, and check out our other How to Open… guides if you’re curious: