Convenience Store Business Plan
Level of Variety
With a high level of product variety (a broad product line), your store may be sought out by more customers who may find what they need more often, on average, leading to increased revenues. However, this benefit carries with it increased storage costs for the additional inventory that isn't placed directly on shelves, especially items which sell fast. The storage costs include the rent for storage space or a storage room at the store and all of the labor associated with tracking and finding items in storage. There is also a need for more shelf space which may require more display units and even a larger store and higher rent. With more items to track and constantly restock, as well as the difficulty in projecting sales for a specific item, there is greater chance of stocking out on any specific item. In those cases, hopefully you carry similar items that a customer might buy as a substitute.
With low variety (a narrow product line), the costs associated with stock-outs, storage, and shelf space are reduced somewhat. However, you will turn away more customers who cannot find the exact item they are seeking and will not accept substitutes.
Pricing For Convenience
Convenience stores, focused on quick purchases to fill a specific customer need, whether it is to change a light bulb or solve a sugar craving, offer their convenience in the form of a smaller store by pricing at a premium to what a customer would pay in a larger store like a supermarket, chain drug store, or hardware store. Customers are willing to pay 10% more for an item (or even higher), for example, to avoid a longer wait in line and longer travel time to reach the larger store.
In choosing the products to carry, you must examine the cost of purchasing in low quantities and make sure you can price high enough to cover the higher unit cost you will incur over what a larger store might. Products that are too expensive to buy in low quantities will not be feasible for this reason, as there is a limit to the price you can charge and expect to sell the product at.
Want more tips? Here's a related article: How to Open a Store.
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