How to grow convenience store margins

Retailers explain how they are finding new margin streams as costs stay high and competition is rife

I’m a margin-driven person, but I’m trying to keep prices low. How are other retailers keeping their margins?
Raj Dhother, Whitminster Store Gloucestershire

Kajan Thayalan, Go Local Extra Cambridge Steel, Manchester

“We work with AB InBev and they will give me free stock regularly because of how well I can merchandise beers and ciders in my beer cave. I can get around 25-30% margins on most of my alcohol. Parfetts will do good promotions and if you’ve got a lot of space in your stock room, you can bulk buy. That way you can give customers good prices, but keep your margins.

“We do it with all our categories. If a good price comes in, we buy lots of it. We’ve got storage spaces in both our shops, but we also have a separate storage place in Manchester. Nowadays margins are so low that you’ve got to buy stock when it’s cheap and buy enough for the whole year. Last year, a four-pack of Stella had an RRP of £7.99, but Parfetts did a promotion and we could sell them at £6 and still keep a 27% margin. We bought three pallets and we still have that stock and are stilling getting those margins at prices that are lower than other shops.”

Bipin Chawla, Late 24, Bangor, Gwynedd

“It depends on the demographic, but as we’re a 24-hour shop, we attach premium prices to our products and customers expect to pay that bit more because they’re getting that service. Having that 24-hour alcohol licence is a huge point of difference.

“We still get price-marked packs (PMP) on the fast lines whenever we can because it keeps customers coming in. But the most important thing is to make sure your store looks the part.

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“You go into so many convenience stores and they look tired and shabby, and that doesn’t enhance your margins because shoppers are accustomed to well-organised shops. They’ve been educated by the supermarkets, so we need to follow those systems. If they understand subconsciously that they’re in a decent store, then they’ll be happier to pay that higher price. If you walk into a shabby store and pay a high price for a Coca-Cola, you’re not coming back.”

Qaiser Mahmood, Da Shop, Cheadle Hulme, Greater Manchester

“With PMPs, you’ll be lucky to get 20% if it’s on promotion. And with food essentials you’ve got to stay competitive on prices. But you need to get 30% overall margin or you’re not making money, so you’ve got to look at other products that offer higher margins – things like toys, household products and stationery. You can get a 50% margin on these.

“I’ve got a big stationery, DIY and barbecue section in my store, and people now know to come to me for those things. It’s about having these things available and promoting it to customers. And they’ll buy other, lower-margin products as well, which boosts the overall basket spend.

“But if you’re not making 50% margins on toys, then you’re not doing it right. You’ve got to be stubborn with it. If it works, it works. You’ve got to think about what you can offer that will top up the margins you’re losing elsewhere in the shop.”

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