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Never before have so many things been changing so rapidly. The convenience store industry is a good example. Technology is changing at light-speed, and new competitors are entering the competitive landscape like never before.
The most important question for any company is this: Are we changing as fast as the world around us?
The only thing that can be safely predicted is that sometime soon your business will be challenged to change in ways for which it has no precedent. Your company will either adapt or falter. Capacity to adapt and adapt quickly is extremely important these days, and therein lays the problem: Most companies were never built to be adaptable.
Adaptability requires a willingness to occasionally abandon established routines and norms, and in most companies there are precious few incentives to do so. That’s why change tends to come in only two varieties: the trivial and the traumatic. If you find yourself behind the change curve, chances are you’re already dead in the water; your obituary just hasn’t been written yet!
Declining Fuel & Tobacco Dollars
The biggest issue facing convenience store operators today is the decline in fuel and tobacco sales and margin.
What’s your plan to replace this decline in gross profit dollars? If you’re waiting for a miraculous turnaround, you’re going to have a long wait. Welcome to your new reality.
If you believe foodservice is the answer, but you’ve yet to jump into foodservice with both feet and establish yourself, then the process will take too long before you can turn the tide and replace current lost gross profit dollars. That’s not to suggest you should ignore foodservice -- certainly not. Foodservice not only offers great margins (upward of 50 percent), but more importantly, it’s become a price of entry; the ante to get into the game. If you’re not into foodservice, then you’re at a competitive disadvantage.
To help offset declining fuel and tobacco gross profit dollars, here’s a quick four-point strategy that you can immediately implement:
- OTP: Other tobacco products (OTP), such as electronic cigarettes and vapors, are rapidly growing both in consumer acceptance and sales. These products have solid gross profit margins (GPM). If you don’t have an OTP strategy in terms of pricing, merchandising and promotion, now is the time to develop one.
- Foodservice margins: If you currently have a foodservice program (including fountain and coffee programs), make sure you’re getting a good GPM. The best companies can generate a solid 50 percent to 55 percent GPM. Keep in mind, though, the companies that can generate the best GPMs in foodservice offer a great program. Trying to grab higher GPMs on a weak foodservice offering is foolish. If you feel you do have a solid foodservice program, then don’t give it away -- get your margin. After all, you have to get margin somewhere and foodservice is the best place to get it.
- Buy right: Sit down with your suppliers and make sure you’re buying right: product, cups, lids, straws, napkins -- everything. This is step No. 1 to ensuring higher GPMs.
- Expense analysis: Without looking at your P&L, I’m confident there’s fat that can be trimmed. Review on a line-by-line basis every operating cost you’re incurring. Each expense should be justified. The first place to look is your operating supplies. Buying in bulk to obtain a quantity discount is fine, provided of course these supplies aren’t sitting in inventory for months on end.
Change can be friend or foe; you decide. The market isn’t going to hand you anything. You’re going to have to roll up your sleeves, make the required changes, maintain a laser-like focus on the end game and excel at execution. Do that and you’ll be just fine.