The convenience store industry is worth $663.5 billion in the United States alone. However, it’s not an easy cash-in: Your store is competing with over 150,000 stores nationwide, so you need to take the right steps to make your store stand out.
Whether you’re planning to open a store or are already managing one (or a few!) locations, understanding the average profit margin of convenience stores, other associated costs with running a store, and some innovative ways to increase your profit margins can help you stand out from the masses and run a more profitable business.
This article outlines the average margins of convenience stores and key products, other factors that affect profitability, and five strategies to help optimize the average profit margin of your convenience store.
Let’s kick off this article by answering this post's central question: What is a convenience store's average profit margin?
Profit margins for convenience stores tend to sit between five and 10 percent. Single-location convenience stores often sit near the lower end of that range, while larger chains might edge toward the higher end.
What else impacts your profit margins beyond the number of locations you have? First, factor in expenses like store space rental or leasing costs. Staffing, cleaning, marketing, accounting, insurance, and other operational costs add up, too.
Related Read: How To Make a Convenience Store Profitable in 7 Simple Steps
Your cost of goods and inventory management are other key areas you can leverage to impact your margins. Optimize operations by tracking what sells best and adjusting stock levels, avoiding costly mistakes like running out of stock or tying up resources in overstock. Careful inventory management ensures you have your fastest-selling goods in stock without overbuying. A cloud-based point of sale (POS) system can help by tracking real-time product sales and stock levels across all your stores.
With the baseline information about profit margins for convenience stores in hand, we’re ready to explore our top five tips for increasing convenience store profit margins.
In convenience store management, signs are good for more than just helping customers find what they need. You can also use your signs to drive more traffic toward higher-margin impulse-buy items like snacks, drinks, and cigarettes.
Position signage promoting these quick-stop purchases around your checkout area and at the ends of aisles, encouraging customers to pick up these items — which can have profit margins as high as 30 to 50 percent.
You can refresh signage weekly to keep customers engaged with the latest deals on key categories. Try a "Snack of the Week" promotion with a new discounted item each week. Couple a bright sign highlighting the deal with a shelf display of the snacks in question for the best results.
Related Read: Are Convenience Stores a Good Investment? 5 Ways To Increase Profitability
To build on the “Snack of the Week” idea, you should leverage targeted promotions to drive sales and revenue in your store. Discounts may seem like a poor way to improve margins, but when you offer a discount on the right product, it may inspire customers to grab complementary items with higher margins, boosting your overall profits.
Think through natural pairings when you plan your convenience store promotions. Or, better yet, use your point of sale data to determine products frequently purchased together. For example, a 20 percent off deal on men’s razors may work well if those same razors often sell with high-margin shaving creams or aftershaves.
Promotions require some margin sacrifice upfront on specific products, but lifting total basket values makes up for it in expanded volume. And don't neglect your highest margin items in promotions — discounting sodas, cigarettes, and snacks still allows solid profitability while encouraging larger overall purchases.
Another way to boost your profit margins is to expand the variety of products you carry in your convenience store. Expanding your product variety in key segments can help you capture different consumer tastes and maximize your sales on higher-profit items.
Bring limited-edition and seasonal flavors and trendy emerging brands for snacks and candy. Cater to different audiences with your drink varieties, too. Appeal to energy drink lovers, sparkling water fans, and be sure you can satisfy both die-hard Coca-Cola and Pepsi drinkers.
More variety in quick-grab items also means more opportunities for customers to grab impulse items while paying. Dedicate a portion of upfront shelf space to accessories and necessities people commonly need to pick up — like phone chargers, pain relievers, bandages, and batteries. Capture those impulse add-ons which boost profits through increased volume.
Related Read: 5 Ways To Improve C-Store Inventory Management
Cater selections to your clientele. Offer healthier drinks and low-sodium snacks if your store is located near a gym or fitness center. Stock extra automotive items if you operate a convenience store off a turnpike. You can also stock local sports team logo goods, rain gear, or winter gloves, depending on your location and the season.
One-half of your profit margin calculation is what you sell the goods for in your store. The other half of that calculation is how much you’re buying those products for from your suppliers. If you can renegotiate your rates with your suppliers through strong vendor management, you can maintain existing retail prices for your customers while increasing your profit margins.
Renegotiating with major suppliers can lower wholesale goods costs. This allows you to maintain existing retail prices while widening profit margins. Aim to optimize bulk order discounts, secure rebates for large purchases, and reduce delivery fees on regularly ordered inventory.
Start by approaching your top three vendors. Request updated pricing catalogs and discuss optimizing frequent orders of their bestselling items for your store. For example, can you get a discount on a bestseller if you order it in bulk, rather than receiving new, smaller orders weekly?
Don't neglect to ask about rebates on large orders. Some suppliers offer one to two percent rebates if monthly or quarterly purchase volumes hit certain thresholds. When you reexamine your relationship and pricing with your vendors, you can boost profits without changing any other processes or pricing.
Our final tip for increasing the profit margin of your convenience store is to invest in a unified point of sale system. These solutions provide real-time sales and inventory visibility in one platform.
With the right POS system, you can streamline inventory, using analytics to see which items have the highest turnover rates and margins — this allows you to make better ordering decisions for your store. For example, if 20 oz premium waters show the fastest sales velocity and highest margins, ensure they are prominently displayed and adequately stocked.
Advanced POS systems also offer features like customer loyalty programs, age verification software, dual pricing (also known as cash discounting), and flexible payment processing. When you invest in the right point of sale system for your store, you can boost profits, simplify operations, and keep customers happy.
C-Store POS is a point of sale system designed specifically for convenience stores. We offer software with features for inventory management and store operations, helping with high-risk sales like managing sales of products like CBD, kratom, and delta-8. We also offer customizable hardware solutions with all the tools you need, from barcode scanners to custom label printers. Check out our custom pricing tool to see your ideal solution today.
Keeping your convenience store profit margins in line is essential for your store’s success. Following the tips listed in this post can help you boost profitability, but remember: Not all of these tips are equally effective.
The tip that is most likely to impact your store’s success is to implement a unified point of sale system. A robust POS solution can revolutionize operations in your convenience store and help you keep customers happy, turn more profits, and grow your business.
If you want a point of sale solution designed specifically to protect convenience stores and their profit margins, C-Store POS might be your solution. Our solution was built for convenience stores and bodegas, offering critical features like flexible payments, integrated dual pricing, and advanced inventory management, giving you everything you need to run your store more efficiently.
Schedule a demo of C-Store POS today to see how our solution can help you manage your store and boost your profits.