Data provided here comes from our team of experts who have been working on business plan for a convenience store. Furthermore, an industry specialist has reviewed and approved the final article.
How profitable are convenience stores, and what is the average monthly revenue for store owners?Let's check together.
Revenue metrics of a convenience store
How does a convenience store makes money?
A convenience store makes money by selling items such as food, drinks, and other products to customers.
What do convenience storees sell?
Convenience stores, often referred to as "convenience shops" or "corner stores," are small retail outlets that offer a wide variety of everyday products for quick and easy purchase.
These stores are designed to cater to the immediate needs of customers, providing a convenient shopping experience.
They typically sell a range of items such as snacks (like chips, candies, and chocolates), beverages (such as soft drinks, juices, and bottled water), pre-packaged food items (like sandwiches, microwaveable meals, and instant noodles), basic groceries (such as bread, milk, eggs, and canned goods), personal care products (including toiletries, hygiene items, and cosmetics), household essentials (like cleaning supplies, batteries, and lightbulbs), tobacco products (such as cigarettes and vaping supplies in some regions), and often a selection of over-the-counter medications.
Additionally, convenience stores might carry newspapers, magazines, lottery tickets, and occasionally small electronics.
These stores aim to provide a quick and accessible shopping option for consumers looking for items to fulfill immediate needs, especially outside of regular grocery store hours.
What about the prices?
A convenience store typically offers a range of products at various prices to cater to different customer needs.
Common items include snacks like chips and candy, which usually range from $1 to $5 per item. Beverages like soda, bottled water, and energy drinks tend to fall in the $1 to $3 range, while alcoholic beverages like beer might be priced around $2 to $6 per bottle or can.
Ready-to-eat sandwiches and pre-packaged meals usually range from $3 to $8, while basic toiletries like toothpaste, shampoo, and soap can be found for $2 to $5 each.
Household items like batteries, phone chargers, and stationery items might range from $1 to $10, depending on the item's complexity. Snack bars, granola bars, and single-serving desserts generally fall between $1 and $3.
| Item Category | Price Range ($) |
|---|---|
| Snacks (chips, candy) | $1 - $5 |
| Beverages (soda, water, energy drinks) | $1 - $3 |
| Alcoholic Beverages (beer) | $2 - $6 |
| Ready-to-Eat Meals | $3 - $8 |
| Toiletries (toothpaste, shampoo, soap) | $2 - $5 |
| Household Items (batteries, chargers, stationery) | $1 - $10 |
| Snack Bars, Granola Bars | $1 - $3 |
What else can a convenience store sell?
In addition to offering everyday convenience items, convenience stores can also diversify their revenue streams by:
- Hosting special product demonstration or sampling events
- Allowing local vendors to use their space for showcasing their goods
- Assisting customers in finding quick and easy meal solutions
- Organizing engaging promotional challenges or contests
- Renting out space for small private gatherings or promotional activities
- Teaming up with nearby businesses for exclusive cross-promotional offers
- Offering online ordering and delivery services for added convenience
Who are the customers of a convenience store?
Convenience stores serve a variety of customers, ranging from commuters to college students to families.
Which segments?
We've prepared a lot of business plans for this type of project. Here are the common customer segments.
| Customer Segment | Description | Preferences | How to Find Them |
|---|---|---|---|
| Commute Shoppers | Busy individuals seeking quick snacks and essentials during their daily commute. | Convenient grab-and-go items, ready-made sandwiches, drinks, snacks. | Near public transportation hubs, busy streets, petrol stations. |
| Students | High school and college students looking for study snacks and easy meals. | Snacks, energy drinks, instant noodles, stationery. | Near schools, colleges, libraries, and student hangouts. |
| Local Residents | Neighborhood residents shopping for everyday groceries and household items. | Milk, bread, fresh produce, cleaning supplies. | In residential areas, local communities, and neighborhood centers. |
| Tourists | Visitors looking for souvenirs, travel essentials, and snacks. | Local souvenirs, travel-sized toiletries, packaged local foods. | Near tourist attractions, hotels, airports. |
How much they spend?
In our comprehensive analysis of a standard business model for a convenience store, we've observed that customers tend to spend between $5 to $20 per visit. This expenditure is influenced by a variety of factors, including store location, inventory selection, and individual customer needs.
Tracking customer habits reveals that the average shopper visits a convenience store around 3 to 5 times a month. Frequency is often dictated by factors such as proximity to the store, consistent product availability, and the store's ability to cater to last-minute needs.
Calculating the estimated lifetime value of an average convenience store customer, we consider the spending per visit and the frequency of those visits. This lifetime value would be, on average, from $180 (3 visits x $5 x 12 months) to $1,200 (5 visits x $20 x 12 months) annually.
Given the data, we can infer that, on average, a single customer would contribute approximately $700 in revenue per year to a convenience store, balancing out various spending patterns and visit frequencies.
(Disclaimer: the figures mentioned above are indicative averages and may not precisely reflect your specific business circumstances. Various external and internal factors can significantly impact these numbers, and they should serve as a general guide rather than definitive financial predictions.)
Which type(s) of customer(s) to target?
It's something to have in mind when you're writing the business plan for your convenience store.
The most profitable customers for a convenience store are often those in the local community who frequent the store regularly for their daily needs.
These customers value convenience and are likely to make frequent, smaller purchases, contributing to consistent revenue.
Targeting and attracting them involves understanding their preferences and habits, offering a well-curated selection of everyday items, and ensuring a quick and efficient shopping experience. Convenience is key, so optimizing store layout, ensuring ample parking, and implementing fast checkout processes can enhance their overall satisfaction.
To retain these customers, loyalty programs, personalized discounts, and engaging customer service play crucial roles. Building a sense of community through events or partnerships with local businesses can also foster a connection that goes beyond transactional, encouraging long-term loyalty and sustained profitability.
What is the average revenue of a convenience store?
The average monthly revenue for a convenience store can range significantly from about $5,000 to $50,000. We will explore these variations through different business models.
You can also project your own revenue by applying different assumptions, using our financial plan for a convenience store.
Case 1: a small convenience store in a rural area
Average monthly revenue: $5,000
This type of store typically serves a small community, offering essential items like snacks, beverages, and a limited selection of grocery and household items.
Given its location away from urban centers, it might not experience high foot traffic. The revenue depends heavily on the local population and the season, with possibly better sales during local events or tourist seasons.
Assuming an average customer spends about $5 per visit and the store sees approximately 30-40 transactions per day, the monthly revenue for this convenience store would be around $5,000.
Case 2: a medium-sized convenience store in a suburban neighborhood
Average monthly revenue: $20,000
This store is situated in a suburban residential area, possibly near schools or commercial establishments. It offers a wider range of products, including prepared food, lottery tickets, and maybe a small deli.
Its strategic location attracts more foot traffic, especially during morning and evening hours when people are commuting. The store might also provide essential services like an ATM or faxing, which can add to its revenue.
With a broader customer base, let's consider each customer spends an average of $7 and the store averages 100 transactions per day. In this scenario, the store could make about $20,000 monthly.
Case 3: a large, well-positioned convenience store in a busy urban area
Average monthly revenue: $50,000
This type of store is in the heart of a bustling city area, surrounded by offices, tourist attractions, or transport hubs. It offers a vast array of products and services - from food items, magazines, and over-the-counter drugs to financial services or mobile recharges.
The store enjoys continuous high foot traffic and is likely open 24/7. It serves hundreds of customers daily, from professionals grabbing lunch to tourists picking up supplies.
Given the high operating costs and intense competition, these stores need to maintain a high standard of service. Assuming an average transaction of $10 and around 200 transactions daily, this convenience store stands to generate $50,000 in revenue each month.
The profitability metrics of a convenience store
What are the expenses of a convenience store?
A convenience store's expenses usually consist of purchasing inventory, covering rent or lease payments for the store, staff wages, and utilities.
| Category | Examples of Expenses | Average Monthly Cost (Range in $) | Tips to Reduce Expenses |
|---|---|---|---|
| Rent and Lease | Store rent, utilities, property taxes | $2,000 - $8,000 | Negotiate lease terms, consider a smaller location |
| Employee Wages | Cashiers, stock clerks, manager | $3,000 - $10,000 | Optimize staffing levels, cross-train employees |
| Inventory | Cost of goods, restocking | $5,000 - $20,000 | Implement inventory management systems, reduce shrinkage |
| Utilities | Electricity, water, gas | $500 - $1,500 | Invest in energy-efficient appliances, monitor usage |
| Marketing and Advertising | Local ads, promotions, signage | $200 - $1,000 | Focus on local marketing, use social media |
| Insurance | Business liability insurance | $100 - $300 | Shop around for competitive insurance rates |
| Maintenance and Repairs | Store upkeep, equipment repair | $200 - $500 | Regular maintenance can prevent costly repairs |
| Point of Sale (POS) System | Hardware, software, maintenance | $50 - $200 | Choose cost-effective POS solutions, maintain equipment |
| Licenses and Permits | Business licenses, health permits | $50 - $200 | Stay compliant with local regulations |
| Security | Security cameras, alarm systems | $100 - $300 | Invest in security to deter theft and vandalism |
| Office Supplies | Registers, paper, pens | $50 - $150 | Buy in bulk for office supplies |
When is a a convenience store profitable?
The breakevenpoint
A convenience store becomes profitable when its total revenue exceeds its total fixed and variable costs.
In simpler terms, it starts making a profit when the money it earns from selling goods exceeds the expenses it incurs for rent, utilities, inventory, salaries, and other operating costs.
This means that the convenience store has reached a point where it covers all its expenses and begins generating income; this is known as the breakeven point.
Consider an example of a convenience store where the monthly fixed costs are approximately $10,000, and variable costs are around $5,000, depending largely on the inventory purchased for resale.
A rough estimate for the breakeven point of a convenience store, would then be around $15,000 (since it's the total of fixed and variable costs to cover). This total could be met by selling a combination of goods that might range from groceries, snacks, and drinks to miscellaneous items, each contributing differently to the store's margins.
It's important to understand that this indicator can vary widely depending on factors such as location, size, product prices, operational costs, and competition. A larger convenience store in a prime location would obviously have a higher breakeven point than a smaller one in a less trafficked area that doesn't require as much revenue to cover their expenses.
Curious about the profitability of your convenience store? Try out our user-friendly financial plan crafted for convenience stores. Simply input your own assumptions, and it will help you calculate the amount you need to earn in order to run a profitable business.
Biggest threats to profitability
The biggest threats to profitability for a convenience store can include rising operating costs, such as rent, utilities, and employee wages, which can eat into profits if not carefully managed.
Competition from nearby stores and larger retailers can also lead to price wars and reduced profit margins.
Seasonal fluctuations in customer traffic and sales can affect revenue, as can shifts in consumer preferences and trends.
Theft and shrinkage of inventory, both from customers and employees, can result in significant financial losses.
Additionally, changes in government regulations, such as health and safety requirements or increases in tobacco and alcohol taxes, can impact a store's profitability by increasing compliance costs and reducing sales of certain products.
Finally, unforeseen events like natural disasters or economic downturns can disrupt operations and hurt profitability by reducing customer traffic and increasing expenses for repairs or security measures.
These threats are often included in the SWOT analysis for a convenience store.
What are the margins of a convenience store?
Gross margins and net margins are financial metrics used to assess the profitability of a convenience store business.
The gross margin represents the difference between the revenue earned from selling goods and the cost of goods sold (COGS). It reflects the profit remaining after deducting the costs directly related to acquiring the products sold in the store, such as purchasing inventory.
Net margin, however, accounts for all expenses the business incurs, including indirect costs like operational expenses, staff salaries, rent, utilities, marketing, and taxes. It provides a more comprehensive view of the store's profitability, factoring in both direct and indirect costs.
Gross margins
Convenience stores generally have an average gross margin ranging from 20% to 30%.
For instance, if your convenience store earns $20,000 per month, your gross profit might be roughly 25% x $20,000 = $5,000.
Here's an example to illustrate this:
Consider a convenience store that sells various items amounting to total sales of $5,000. However, the cost of goods sold, which includes the purchasing cost of the products, is $3,750.
Therefore, the store's gross profit equates to $5,000 - $3,750 = $1,250.
The gross margin in this scenario would then be $1,250 / $5,000 = 25%.
Net margins
Convenience stores typically maintain an average net margin ranging from 1% to 3%.
Continuing with simplicity, if your convenience store generates $20,000 in a month, the net profit might be around $400, which is 2% of the total revenue.
Using the same example as before:
The convenience store makes $5,000 from sales, with direct costs (COGS) of $3,750. After accounting for these costs, you are left with a gross profit of $1,250.
However, the store also has indirect costs, such as rent, utilities, employee wages, and miscellaneous operating expenses. Assuming these additional expenses amount to $800, the store's net profit would be $1,250 - $800 = $450.
In this scenario, the net margin for the store is calculated as $450 divided by $5,000, resulting in a net margin of 9%.
It is crucial for business owners to recognize that the net margin offers a more accurate insight into how much money your convenience store is genuinely earning, as it encompasses all operational costs and expenses.
At the end, how much can you make as a convenience store owner?
Understanding that the net margin is a critical indicator for the profitability of your convenience store is vital. It essentially shows what percentage of your sales is profit after all expenses have been paid.
The amount you earn will largely depend on your business acumen and operational efficiency.
Struggling convenience store owner
Makes $500 per month
If you set up a small store, stock a limited range of products, lack variety in services like ready-to-go meals or coffee, and don't maintain consistent store hours, your total revenue might not exceed $10,000 a month.
Furthermore, if expenses are not kept in check, your net margin could be as low as 5%.
This translates to meager monthly earnings, possibly only around $500 (5% of $10,000). This scenario represents the lower end of the earning spectrum in this business.
Average convenience store owner
Makes $3,000 per month
If you're operating a standard convenience store with decent foot traffic, keeping well-stocked shelves with a variety of goods, and providing a few essential services, you might generate up to $50,000 in sales.
Effective cost management and a good selection of high-margin items can help you maintain a net margin of around 10%.
This would mean your monthly profit could be approximately $5,000 (10% of $50,000). As an average store owner, this is a reasonable expectation for your take-home earnings.
Exceptional convenience store owner
Makes $20,000 per month
An exceptional owner operates a store that becomes an essential part of the local community. You offer a broad range of products, including fresh produce, on-the-go meals, a coffee counter, or even postal services. You understand customer needs, engage with the community, and possibly operate multiple locations.
With your attention to detail and business savvy, your total revenue could soar to $200,000 a month or more.
By negotiating with suppliers, minimizing waste, and optimizing staffing, you could achieve a net margin of up to 20%.
For a top-tier convenience store owner, monthly earnings could be around $40,000 (20% of $200,000), reflecting the success of your operational excellence.
May this serve as your benchmark and motivation! Achieving the status of an exceptional convenience store owner starts with a strategic and well-thought-out business plan, dedication to customer service, and continuous learning.