Tips from Industry Leader Bill Scott

HOW TO TURN YOUR CONVENIENCE STORE INTO MONEY GENERATING MONSTER

Its new program to help igsoa members. We will be posting weekly tips from Bill's most recent and the most comprehensive book on the subject. We are thankful to Bill Scott and his organization allowing us to help the needy people, trying to survive in tough environment.

Tip_1 (April, 2011 week_2)
Itemized Inventory Control in a Convenience Store:

The necessity for better inventory control in convenience store operations is a given. We cannot continue to shove $60,000 worth of inventory in a convenience store and wait till the end of the month to see if it has produced a profit, and we have come to a crossroads given the current environment. We need to know what’s in our stores, how long it will last, and whether or not an item is profitable. We also need to explore frequent price changes to give customers the impression they are receiving a bargain, reduce shrink and expand product lines within the same selling space.

The next question is, “What avenues do we explore?” I see three possible scenarios. That is not to suggest there may not be others:

(1). Follow the Wal-Mart model and develop proprietary, closed-loop systems. This option will require an enormous upfront investment and maintenance expense involving a rather large IT staff and hardware that retailers do not have at this time. It’s not to suggest it’s impossible, but technology and salaries have to get a whole lot cheaper to make it worth the investment.

(2). Follow the 7-Eleven model and hire a third party provider like the service we offer to manage your network and provide the software for you. This option is much more economical than the first one, because the costs can be shared by many thousands of companies. The downside is, it forces you to rely on a third party who controls the cost of the system. Also, the only advantage to the third party is the money you pay them for the subscription service. However, contracts can be negotiated for several years in advance. 7-Eleven recently renewed its contract with HP Enterprise Services until the year 2012. 7-Eleven could have adopted the Walmart model, but obviously they felt the cost savings were worth the risk. We have a customer now who is running in a similar model we created with their help.

(3). Convince your suppliers it's in their best interests to provide these services for you. I may be cutting my own throat, but I have to say that in the end, I believe this to be the best alternative. My reasoning is this: Suppliers would profit equally if such a system were offered and interfaces between suppliers and retailers would be seamless. I spoke with Nabisco two months before they were acquired by Phillip Morris and they indicated they would be amenable to such a relationship, citing their studies showed them if their drivers were to have knowledge of what products to load on their trucks before leaving the warehouse, it would save millions of dollars annually. More recently, I spoke to a representative of a large grocery supplier who told me a study they did two years ago indicated it would increase their sales by twenty-eight percent. I think they only looked at a few amenities in their study because I am certain the figure is at least forty percent or higher.

In conclusion, a supplier who comes up with a good plan to help manage their customer’s inventory on a per item basis would gain an advantage that will be hard to equal, and I predict that someday retailers will choose suppliers according to the services they offer rather than the deals they bring to the table. The benefits would be mutual, with the supplier coming out slightly ahead. It would also be much more economical to implement because suppliers already possess most of the hardware necessary to do it quickly.

(4). Cloud Computing has other amenities too numerous to mention. For example, we were recently able to implement a proprietary card system which collects store sales in real time, checks a customer’s credit before allowing the sale, and instantly charges the customer’s account. It was done quickly and cheaply because the Passport has a card reader as do the pumps and Gilbarco makes the transactions available for us to collect. As new things come along, Cloud Computing will play an even larger role. We will continue to research new possibilities as the market expands. The interesting thing about the knowledge gained from new technologies is they provide you with fresh

new insights you would have never thought about otherwise, but there is no doubt in my mind, Cloud Computing will breathe new life into the Convenience Store Industry and be a major stepping stone for the seventy year old industry.

I think I was seven years old when the Southland Corporation built the first Pak-A-Sak store in our neighborhood, across the street from our first shopping mall. I still remember the manager’s name that ran it. His name was Mr. Thompson. I wonder what Mr. Thompson would think about convenience stores today. Looking back, I don’t think he would see much has changed. I really think we need to do something about that.