Operational excellence is a term that is thrown around quite a bit, but it is very hard to live up to, given how. complex the convenience store industry has become over the past few years. Labor challenges, surging prices, high real estate costs and abundant new competition can lead to sleepless nights. It’s completely understandable if retailers talk the talk but often fail to execute.
However, operational excellence should focus on one focus: the customer. The customer is treated as a privilege, not a right, and their patronage needs to be earned daily. Every process, every step, and every task executed in the store has to have the customer in mind.
Terry Monroe, president and founder of American Business Brokers & Advisors, has more than 30 years of experience in the convenience store industry. He believes that taking care of the customers is paramount, but also that the value of a strong foundation cannot be overstated.
According to Monroe, a successful convenience store generates positive cash flow annually and grows its profitability annually. Top-quartile stores continue to invest in the product mix they sell, make capital improvements to enhance the interior and exterior of the building and invest in their employees.
These are universal truths in retail, regardless of the format. Monroe outlined five keys to convenience store success.
Location is the primary reason a convenience store is successful. It doesn’t have to be in a large metropolitan area. Monroe said he has seen and sold stores in towns with a population of 3,000 that generated over $500,000 a year in EBITDA (earnings before interest, taxes, depreciation and amortization). He has also seen convenience stores that are successful only because of their location, and the operator is mediocre at best.
They fall into the trap of thinking that the store is making money because they are a good operator. No, they just have a good location. Avoid this trap.
Employees are the heart of any store and will make or break your success. This means having a company culture that treats everyone like a valued member of the team, recognizes hard work, rewards problem-solvers and makes an effort to retain and recruit good people. Employees with a positive attitude and a service-focused mentality will drive success. Find them, and do not let them get away if you have them on your team.
Capital investment is crucial, Monroe emphasized. If the owner of the store is not reinvesting in the store, the parking lot is full of holes, the signage is worn and faded and the interior fixtures are worn out, it sends a negative signal to customers.
Furthermore, Monroe said, maintaining capital investments mitigates the risk that a competitor is going to open a shiny new store down the street and take a large portion of your business because they have nicer assets and a brighter parking lot.
Product mix is something that must be congruent with the customer base the store is trying to serve. If you have multiple stores, expect the product mix to vary by site. Do not lose sight of the fact that convenience stores must be prepared to stock the items customers are looking for when they come into a particular store.
For example, if you are on an interstate location, you should be carrying a different product mix than if you were a store in a rural community. It sounds simple, Monroe said, but he routinely encounters convenience store owners who have forgotten this and instead listened to their managers who were listening to their suppliers, and ended up with a store full of endcaps and novelties that don’t sell.
Remember who you are and what your purpose is each day — to provide outstanding service in a quick and convenient format. If the customer is looking for the cheapest price, they will need to go to Walmart and trudge through a 200,000-square-foot building, which is not convenient.
Cleanliness is a quality that customers strive to see and appreciate, and it will make your store a destination. If the fuel pumps are dirty, which is the first impression a customer sees, then chances are it isn’t going to get any better when you go inside, Monroe stressed. A dirty store is a turn-off, and dirty bathrooms all but ensure you will
lose customers.
Monroe, who tours stores around the country, said he has been in national chain stores that brag about their layout and product mix, but their bathrooms are atrocious. There is no excuse for a store being dirty. Make cleaning schedules and stick to them. Your customers expect nothing less.
Create an overachieving mindset among your staff, and the energy that permeates to your customers will be contagious. This attention to detail and putting the customer first will enable the retailer to ride out even the worst economic storms. Execution is precision and an attention to detail that is second to none.
Elie Y. Katz is the CEO and president of National Retail Solutions (NRS).
