Convenience store operators are always looking for that high margin product to help offset lower margins in cigarettes and beer. The latest fad has been food service. Consumable, low cost of goods and relatively low cost of entry. Buy a freezer to store product, thaw or heat, put on display and rake in the money. As we discussed in our last blog, there is an ancillary risk; the liability. Just as with Wall Street investments, the greater the risk, the greater the chance of return. If we create something from scratch, we have a better chance to control the cost of the product. But we introduce multiple levels of risk in the process. I had been thinking this over and I began to wonder what happened to services? Low cost of capital, indefinite hold time, instantly ready for the customer. Years ago money orders and check cashing were hot. Lately there was a lot of discussion about postal service opportunities. But really, convenience stores have not done a very good job on being innovative in developing services. Video rental came and went and then came back when it could be an automated third party application. Check cashing seems to have gone the same way. A few operators use third party services in a piggy back format. But then I started looking at Walmart. When they had issues with customers not having an acceptable means of payment or could not cash their payroll checks to shop at a Walmart store, presto, Walmart develops their Money Store concept. Need a haircut? Need glasses? Need just about anything? Walmart has it. And for a good reason. As we all know, the name of the game is convenience. If I can go to one location and accomplish multiple tasks without having to drive in traffic, find another parking space etc., the customer will likely spend more than planned at that location. That is why we first starting selling gasoline. Customer needed fuel, had to pay inside and maybe even come back in for change so we had two opportunities for impulse sales. Then we evolved to CRIND. Now we know that up to seventy percent of all people that purchase fuel do not come in the store. Ouch. So we run loops on pump displays trying to get customers into the store. Enticing them with our monthly promotions or a TPO. IRC. What ever we can come up with.
With more and more people becoming electronically mobile, I think the internet and mobile technology will present new opportunities for services. Face it. We love having mobile applications but how many times do you either sit and wait while it loads or when it does, you cannot see the data on the screen. One of the biggest perks with an IPhone is the magnification feature. What if we could offer the same services at a dispenser for a nominal fee? You are waiting for the tank to fill anyways. One of the rules of retail is penny profit. Watch your pennies and the dollars will take care of themselves. An extra few cents spent while the customer is fueling times the number of cars on and off the lot? You already have the infrastructure in place. Now you can track what services they use. Just one example.
Now lets look at in the store. Electronic kiosks are already being used for recruiting and ordering in food service. What is to prevent us for providing other services for the customer? I know we have done similar things in the past but did we look at what the sweet spot was for price elasticity? What new offers could we have? How about streaming content that is burned to a CD? Secure access to check your bank account, buy from Amazon, purchase a preloaded debit card, etc. We need to start thinking out of the box. Don’t wait until somebody sells you the program at NACS. By that time, everyone else will have it. Look around at your life, the life of your customers and customers at other retailers and look to see what they are using that is either consumable or have a high enough penny profit on a sale to incorporate in your business. Cost of goods is still the biggest line on a financial. Services can help your bottom line.
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