Maximizing Convenience Store Profits: The Top 7 KPIs You Need to Track

As a seasoned entrepreneur, I understand the importance of tracking the right KPIs to ensure the success of any business. Convenience stores are no different. In fact, with the industry projected to reach $484 billion in revenue by 2024, keeping a close eye on the top seven KPIs is crucial for maximizing profits and customer satisfaction.

• Customer satisfaction rate: This KPI measures how satisfied customers are with the convenience store experience. When satisfaction rates are high, it is an indication of proper management of the convenience store, including items sold, customer services, and their pickup points while visiting the store.
• Average number of items purchased per transaction: This KPI measures the potential growth in your revenue. When customers frequently purchase more items at once, it can lead to increased sales and overall profits.
• Revenue growth rate: Revenue growth indicates whether the business is moving in the right direction. It's crucial to consistently, or frequently, experience growth rates in the overall revenue and ensure that the business is progressing as it should be.

These KPIs are just a few of the top seven you should be tracking when owning a convenience store. Keep reading to find out more about the remaining KPIs and how to track them to stay on top of your game in the competitive convenience store industry.

1. Customer satisfaction rate

Definition: Customer satisfaction rate (CSR) is a metric that gauges how satisfied customers are with the products/services offered by a convenience store or chain. Measuring CSR is essential for convenience stores since these types of businesses usually face heavy competition and need to retain customers by keeping them happy and content.

Use Case: Measuring CSR allows convenience stores to monitor and improve customer satisfaction levels. By tracking this metric, convenience stores can identify areas of improvement and work on providing better experiences for customers. Additionally, businesses can use CSR to evaluate the effectiveness of marketing and customer service initiatives and to understand how these initiatives impact customer satisfaction levels.

How To Calculate KPI: To calculate CSR, use the following formula:

Calculation Example: Suppose a convenience store had a total of 500 customers last month. Out of these customers, 425 were satisfied with the service and products at the store. The calculation for customer satisfaction rate would be as follows:

KPI Advantages:

• CSR provides an accurate representation of customer satisfaction levels and can be used to improve the overall customer experience.
• It helps businesses retain customers by identifying areas of improvement and providing better experiences to ensure customer loyalty.
• It is a valuable tool for evaluating the effectiveness of marketing and customer service initiatives.
• CSR can positively impact profitability, as satisfied customers are more likely to return and make repeat purchases.

KPI Disadvantages:

• CSR cannot tell the whole story, and may not be able to identify more in-depth issues that need to be resolved.
• It can be difficult to collect data if customers don't want to complete surveys or provide feedback.

KPI Industry Benchmarks: Industry benchmarks for CSR can vary depending on the type of convenience store. According to a study conducted by Convenience Store News, the average CSR for convenience stores is 82%. However, high-performing convenience stores can have CSR rates of over 90%.

2. Average number of items purchased per transaction

Definition

Average number of items purchased per transaction is a Key Performance Indicator (KPI) that measures the average number of items a customer purchases per transaction at a convenience store. This KPI is crucial in measuring the sales performance of a convenience store.

Use Case

Average number of items purchased per transaction can be used to gauge the effectiveness of various marketing campaigns and promotions. For instance, if a convenience store rolls out a promotion that offers a discount on buying two items together, the store manager can use this KPI to track how successful the promotion was.

How To Calculate KPI

Calculation Example

KPI Advantages

• Helps in measuring sales performance over time periods
• Effective in identifying successful marketing campaigns and promotions

KPI Disadvantages

• Does not capture revenue generated by high-priced items
• Relies on accurate data, which can be difficult to obtain

KPI Industry Benchmarks for the KPI: 'Average number of items purchased per transaction'

• The average number of items purchased per transaction varies across different industries. According to a study, most convenience stores have an average of 1.9 items per transaction.

3. Revenue Growth Rate

Definition

Revenue growth rate is an essential key performance indicator that enables convenience store owners to track the revenue increase or decrease percentage for a particular period.

Use Case

By measuring the revenue growth rate, convenience store owners can determine their business's financial performance. This KPI helps owners forecast their future revenue, identify successful strategies and business opportunities, and make informed decisions about investments and brand expansion.

How To Calculate KPI

Calculation Example

Suppose a convenience store's revenue was $100,000 in the first quarter and $120,000 in the second quarter. The revenue growth rate for the second quarter can be calculated as follows:

KPI Advantages

• Helps track business's financial performance and revenue.
• Enables owners to make informed decisions about investments and expansion.
• Identifies successful strategies and business opportunities.

KPI Disadvantages

• Doesn't consider profitability.
• Overemphasizes revenue growth at the expense of profitability and margins.

KPI Industry Benchmarks

The industry benchmark for convenience stores' revenue growth rate is approximately 2%-4% annually, based on sales volume, store size, and other factors.

4. Average time spent by customers in the store

Definition

The average time spent by customers in the store (ATSC) refers to the total time customers spend in the convenience store on average during their visit.

Use Case

ATSC KPI is an important metric that gives convenience store owners insight into the time customers spend in the store. This KPI can help store owners understand customer behavior, optimize staffing, improve merchandising and product placement, and increase sales.

How To Calculate KPI

To calculate ATSC, divide the total time customers spend in the store by the total number of customers:

Calculation Example

Let's assume that a convenience store has 250 customers in a day. The total time they collectively spend in the store is 1250 minutes. To calculate the ATSC:

KPI Advantages

• Insight into customer behavior and experience
• Can help optimize staffing and improve customer service
• Can improve merchandising and product placement strategies

KPI Disadvantages

• Doesn't account for varying types of customer visits (quick vs. leisurely, for example)
• Doesn't account for the size of the store and the number of products offered
• Inaccurate measurements can skew data and impact decision-making

Industry Benchmarks for the KPI:

Industry benchmarks for ATSC vary, but on average, 5-6 minutes is considered good. However, this can depend on factors such as store size, the type of products offered, and the store's location.

5. Number of Repeat Customers

Definition

The number of repeat customers is a KPI that measures the percentage of customers who make a second purchase at a convenience store. It is an essential metric in determining how loyal your customers are and serves as an excellent indicator of overall customer satisfaction.

Use Case

Repeat purchases are crucial to any convenience store's success because they prove that customers enjoy the products and services offered. Therefore, tracking and analyzing the number of repeat customers helps convenience store owners understand their customers' needs and preferences, identify opportunities for future growth, and improve customer retention strategies.

How To Calculate KPI

To calculate the number of repeat customers:

• Gather data on the number of unique customers during a specific period, such as a week or a month.
• Determine the number of customers who made a second purchase within the same period.
• Divide the number of repeat customers by the total number of unique customers and multiply it by 100 to get the percentage of repeat customers.

Calculation Example

Suppose during the last week, 500 unique customers visited your convenience store, and 150 customers made a purchase for the second time. To calculate the number of repeat customers, divide 150 by 500, then multiply it by 100.

KPI Advantages

• Helps measure customer loyalty and satisfaction
• Provides useful insights for customer retention strategies
• Serves as a reliable indicator of future business growth

KPI Disadvantages

• Does not necessarily indicate increased revenue or profits
• May be affected by factors outside of the business's control, such as external events or competition

KPI Industry Benchmarks for the KPI: '5. Number of Repeat Customers'

The average percentage of repeat customers in the convenience store industry ranges from 20% to 40%. However, it is essential to compare your store's performance against competitors in your local area for more accurate benchmarks.

6. Gross profit margin

Definition

Gross profit margin is a KPI metric that measures the amount of revenue a convenience store earns after subtracting the cost of goods sold (COGS). This KPI indicates how effective a store is at generating profit from the sale of its products.

Use Case

Gross profit margin is a crucial indicator of a convenience store's overall profitability. Monitoring this KPI helps store owners identify areas of inefficiency in their operation that may be negatively impacting profitability. By regularly analyzing gross profit margins, store owners can take corrective action to optimize the cost of goods sold, improve pricing strategies, and streamline operations to increase profitability.

How To Calculate KPI

To calculate gross profit margin, you need to divide the gross profit by the revenue and multiply it by 100. The formula for gross profit is revenue minus the cost of goods sold.

Calculation Example

Let's say a convenience store earned $20,000 in revenue and incurred $12,000 in COGS for the same period. The gross profit is calculated by subtracting the COGS from the revenue, which is $20,000 - $12,000 = $8,000. Using the formula, the gross profit margin is calculated as:

The calculated gross profit margin for this store is 40%.

KPI Advantages

• Gross profit margin is a reliable indicator of a store's ability to generate profits.
• It helps store owners identify areas where they can cut costs or improve pricing strategies to increase profits.
• It is a simple calculation that can be easily tracked over time to monitor changes in profitability.

KPI Disadvantages

• Gross profit margin does not account for overhead, labor, or other operating expenses that can impact profitability.
• It does not take into account the quality of products or customer service, which can also affect profitability.
• It may be difficult to compare gross profit margins across different stores or industries due to variations in cost structures and pricing strategies.

KPI Industry Benchmarks

Benchmarked gross profit margins vary widely depending on the specific industry and location. In the convenience store industry, the average gross profit margin ranges from 25% to 35%. However, factors such as store location, product mix, and competition can significantly influence this metric.

7. Percentage of Product Inventory Turnover Rate

Definition

Product inventory turnover rate is a KPI metric that measures the number of times per year a business sells and replaces its entire inventory. It informs how quickly a business is selling through its inventory and restocking in order to meet demand.

Use Case

Tracking product inventory turnover rate is essential for convenience stores to maintain sufficient inventory levels, avoid stockouts, and prevent overstocking. A high turnover rate indicates strong demand and good inventory management, whereas a low turnover rate signals the need for improvements.

How To Calculate KPI

Calculation Example

Let's say a convenience store had a COGS of $500,000 and an average inventory of $100,000. The product inventory turnover rate would be:

KPI Advantages

• Helps optimize inventory management
• Indicates sales and demand trends
• Enables comparison with industry benchmarks

KPI Disadvantages

• Doesn't consider the value of inventory
• May not be accurate for seasonal or fast-changing product lines
• May not factor in discounts or promotions

KPI Industry Benchmarks

The average product inventory turnover rate for convenience stores is around 6-8 times per year. However, this varies depending on the store size, location, and product mix.