The World's Unsexiest Business
adding a little sizzle to the convenience store industry
A worldwide brand decides that your particular convenience store gas station is the perfect backdrop for their newest campaign of super widget 999. They've got the idea nailed down to a 'T' and are ready to begin the process of ramping up production. Having worked with XYZ production house based out of, where else but Hollywood, GINORMOUS BRAND hires XYZ to contact the location's owner to secure a date and time slot.
You, as the location/chain owner get the call and aren't surprised because you've already gone down this road before. You then also proceed to pat yourself on the back knowing that you're definitely doing something right if these locations are garnering enough interest so as to be THE backdrop for a not so tiny budget production! Historically, you might have just been offered a tidy sum of cash and not thought twice about but the landscape is changing in the face of fame seekers selling the house for nothing. Therefore, in these reformed times the cold hard cash is no longer so freely dispensed. So do you just agree to it for the exposure or counter with a precisely calculated amount?
quora question: "what are the marketing activities/programs/campaign[s] to push sales at convenience stores?"
Understand your market and who you’re trying to sell or are really great at currently selling:
Then consider something more data driven like product mix/preference. Just because you’re operating a business in a higher income neighborhood doesn’t mean the average sales transaction ticket will be higher. While the correlation between income and average ticket may be higher, it becomes confounded by a widely supported argument that higher income consumers are more highly educated and therefore more aware of the absolute versus relative valuation of goods. I’ve written a blog post about this particular phenomenon and how it applies to a convenience store.
As for something tangible that you can take away from this response:
1. Less is more. Don’t plaster windows with promotional material that your suppliers/distributors have coaxed you into displaying. Well, unless they paid you to do so. But if you’re trying to hide a dirty store interior, stick with 1 (at most) for every window. And even then be highly discretionary about the consumer base that particular product or brand attracts. Posting a gigantic Marlboro cigarette promotion on your largest window signals to me you’ve got plenty of energy drinks and sugary snacks. And then I consider how you might have succumbed to engaging in razor thin margin warfare.
2. Don’t attempt to change the world by reinventing the wheel. If you’re a health food junkie and are trying to get your customers to eat better then promote it in the form of a campaign. Not by changing your product mix. The average US based convenience store has so clumsily navigated the ‘fresh’ category that grocery retailers such as Whole Foods have been able to sell the same product in their stores at twice the price for half the convenience. Conversely, if you offer nothing that would generally be considered healthy or even fresh but the demographic you’re trying to capture only visits your store on their ‘cheat’ day, start monitoring the product attribution movement of a few test products. Specifically, have products such as Quest protein and KIND bars or even Muscle Milk seen an uptick in sales volume over the past 90 days? I’d consider them marquee products for consideration of a product mix shift.
3. Hire a category manager on a contract basis. Full time employment will encourage Parkinson’s law to kick into play: work expands so as to fill the time available for its completion. And if they’re really great, you’ll be able to justify their full time pay by the increase in gross margins and/or top line.
4. Either go all in with social media or abstain altogether. Nothing screams ‘unfollow’ more than a half attempt at after thought posts— the makings of inside joke hashtags and blurry images. Consider scanning a couple different platforms to find someone whose posts you like and has a decent following. Then reach out to said individual to run your social media program. It’s a lot cheaper than you might think.
Over the past decade, lines have been blurred between the traditional convenience store, grocer, coffee house, and quick serve restaurant. In fact, many food and beverage focused retailers have started to offer higher margin convenience store products centered around their core product. Particularly, say in the case of Starbucks, notice how the snack SKU offering has grown over time. A decade ago it would have been less than 10 but now it’s upwards of 30. It was only a matter of time before most of these type of retailers, seeking to find creative ways augment top and bottom line, started to eat away at the convenience store market.
From a cross-industry standpoint, convenience retailing innovation seems to have been mostly reactive—taking cues from other industries and then seeking to replicate or even re-invent a tried business model.
Innovative can mean so many different things so an evaluation by category will be necessary. I’ll point out some examples of pushing the convenience retailing envelope. Some are truly innovative while others just exaggerate what we’ve been used to seeing. By no means is this list exhaustive.
Architecture / unique looking storefront
The largest convenience store in the world located in New Braunfels (Texas) belongs to the convenience store chain Buc-ee's.
Terrible Hearst locations in California and Nevada
JET Brand across Austria, Germany, and Switzerland. Their new all glass design epitomizes convenience store minimalist modernism.
Check out the higher end and modern hotel convenience store. The larger footprint modern Las Vegas hotels tend to play with different models (larger kiosk, newsstand, full) all within the same property.
CIBO Express has taken many larger US airport hubs by storm jam packing each store full of thousands of well merchandised products.
The Japan based 7-Eleven and Family Mart stores get multiple deliveries throughout the day of fresh foods ranging from sushi to rice bowls to fresh fruit and vegetables. (The average US convenience store is still attempting to clumsily navigate the ‘fresh’ category)
I’d also consider UK based Pret a Manger the ultimate pairing of a QSR and convenience store. Nearly everything is made in-house and seasonal offerings tend to perform extremely well. A tremendous amount of thought has gone into branding and marketing.
The Amazon Go store needs no introduction or explanation
quora question: "would a 7-Eleven style convenience store work in India, at least in tier one & two cities?"
Although I answered this question on Quora, I have also included the response here.
High throughput and high SKU retail is what India is known for and excels in. In fact, the number of retailers in tier 1 and tier 2 cities is mind boggling! But what’s even more impressive is that most of these do it without using any technology or formal pricing scheme. Much of it is driven by entrepreneurs who simply have a heightened ‘finger on the pulse’ of their business sensibility.
The convenience ‘corner’ store model is ubiquitous in India. So the formality of a traditional convenience retailer wouldn’t entirely make sense because it’s already a low(er) margin business. While I’ve seen many gas stations in the larger cities use their brick and mortar space to sell traditional convenience store goods, research suggests revenue on a per square footage basis is low. With a significant number of de facto competitors in the marketplace and margins already being well below industry norms (sub 30%), survival comes down to leveraging market share by geographic placement, a unique business model, or even just the appearance of something different than the street vendors— wide aisles and air conditioning.
After all, if Wal-Mart, a big box retailer traditionally known for selling goods at low prices has just about completed its exit from the Indian market, the traditional convenience model outlook doesn’t look entirely promising. (Yes, there’s a strong correlation between the two.) But I could be entirely wrong and the brand equity of a convenience retailer like 7–11 might be strong enough to merit entry. Either way, it’s the land of the ‘hustler’—the entrant better have a unique business model that’s not vulnerable to hustler undercutting.
Some people say that starting a business is daunting, perhaps even downright scary — so much to the point that the fear of failure may actually be more of a deterrent than the failure itself. But that’s only because you’ve either gotten used to coasting on cruise control sailing through life with someone else behind the wheel of the luxury yacht. The one that you so want your name emblazoned on. Berthed in Cannes for the summer.
You’re merely leasing the experience while someone else owns you.
But you’re definitely not someone else’s b$&$*.
So you’ve resigned yourself to the reality of capping your potential so much that you’ll never be able to do something meaningful. Then that existential moment arrives and you’re rather poignantly faced with the a crisis of conscience. I’d be hard pressed to say that everyone doesn’t feel it. It’s that moment where you so badly want to add a ton of value to this world before you eventually leave it. In fact, I wouldn’t even consider for a moment that anyone is too old to head down this (rewarding) road.
There are many reasons why businesses fail but an observation of the downfall of entrepreneurs I’ve surrounded myself with will lead me to one conclusion — they failed themselves. They lacked heart. They lacked courage. Perhaps even conviction as to why they so aggressively pursued their first step to releasing themselves of the 9 to 5 shackles.
Then came the blinders — starting a business shouldn’t ever be considered by the sane and financially troubled.
Insanity is necessary along with seeking out a financial savvy partner (conservative money manager CFO-type but not a SPECULATOR) who can complement your operational and marketing expertise. Or maybe a crash course in cash management and conservation.
As an insurance policy maybe commit the principles to heart, mind, body, spirit, and soul outlined in Daymond John’s hustler heavy perspective book, The Power of Broke.
Otherwise, you might not ever be able to plug the gaping hole in the hull of that sinking ship with borrowed $100 bills, hopes, wishes, and dreams.
I grew up watching my dad persist at formulating a model which hinges upon identifying then transforming under-performing and distressed real estate assets and businesses. Once he had perfected that model alongside building the trust and ability to gain greater access to leverage with various financial institutions, he could then replicate that very model. All while continuously seeking to perfect it in order to grow his various existing businesses. Nothing was ever too broken to be fixed and there was always some sort of upside to be realized even with the most seemingly perfect business model. With that kind of optimism and testament to the infectious nature of entrepreneurial spirit, I began to realize it was only a matter of time before there may be no other more fulfilling path for me to follow.
But first, a very methodical approach needed to be taken before we committed our first dollar. Since we (myself, my sister, and her husband) are in the process of starting an Indian quick serve restaurant (The Bombay Frankie Company, Instagram: bombayfrankiecompany) in West Los Angeles, the analysis had to run deep and mitigate any fear of failure.
Because failure is and should never be an option.
We needed to reverse engineer every detail, every subtle nuance, and every angle for which any gain (even pseudo arbitrage) could be realized. And that wouldn’t be limited to the financial realm. Many current quick serve restaurant problems came to mind:
Altogether, it’s nothing short of a huge task coupling management consulting alongside operations and efficiency engineering — literally everything was up for grabs.
Only after that point would price considerations come into play which wouldn’t just blindly set gross margins to be dictated by the 200–250% conventional formula, it would be permissive of a more dynamic pricing scheme which would be reactive in nature to change in trends and other varied margin revenue streams (catering, timed promotions, seasonal offerings, limited plate model).
Our business model isn’t far off from Chipotle’s (minus the massive scale!) and is predicated upon providing the highest level of value for the lowest possible price point. It’s a mid-cost sustainable model for which we could theoretically replicate day-in and day-out.
The Building Blocks
Even after the most meticulous analysis and business model hacking involved with operating three other quick serve restaurants, there are really just four pillars of running a successful operation:
I have deliberately omitted location, location, location from this list because I’ve seen massive followings flock to some of the most off-the-beaten-path eateries just for something unique and inventive (or just a well executed take on a tried and trusted). And that’s largely due to the power of digital marketing and the influence of food bloggers. And by no means should the highly influential role of food bloggers be downplayed!
Point of Sale System
We’ve experimented with running many iPad based Point of Sale software solutions and found that the Square app has, by far, the easiest learning curve.
Since we already operate three existing quick serve restaurants, we’ve learned a few hard lessons about the pitfalls associated with completely disregarding our digital presence.
Stay tuned for part 2 with pre-opening momentum, opening day, and most of all the food!!!