February 14, 2019
Three Ways To Increase Sales
Everyone wants to make more money. In theory it’s relatively simple — increase sales, increase margins or cut expenses. Most people tend to concentrate on the last of the three (cutting expenses), but based on our 500+ years of c-store experience in retail we know that you can not save your way to prosperity.
OK, if cutting expenses won’t get us where we need to go, then let’s raise margins. Like expenses, margins are something that you should monitor and manage very carefully. However, this works best when selling distinctive goods and services — something the c-store is not known for. Yes, it can be done, but it’s usually a short term fix. If you raise margins too high, your customers will quickly start buying from one of your competitors.
That leaves increasing sales. Like making more money there are three ways to do it:
- Get more customers to come to your store
- Get your customers to come more often
- Sell more to your customers when they are at your store
The first generally is the most difficult. You either need to increase your advertising (or perhaps start advertising) to drive awareness and trial. This generally means putting enough effort (money and other resources) to get the customers to change their existing habit of buying from a competitor. The same is true for number two, although you might be able to accomplish this by changing/adding to your products/service mix.
The easiest way to increase sales is to sell more to people while they are at your c-store. There are lots of ways this might be done, but we are going to focus on cross merchandising. Ask most people today about this technique and they start talking about combo meals – hot dogs and sodas, etc. However, there are many other areas where you can cross merchandise. For example, the largest category in most c-stores is cigarettes, but few retailers cross merchandise lighters. Of course, yes, they have them on the counter, but they don’t create combo deals (have to be careful that the discount is placed on the lighter and not the cigarettes to avoid violating any minimum mark up laws).
This month’s issue focuses on car washes. Here again, many retailers utilize the well established cross merchandising technique of offering a discount on a carwash if the customer purchases a minimum number of gallons.
It’s often said that being successful is a matter of seeing the same things that others see, but seeing them differently. Offering a carwash discount for a gasoline purchase is fairly common. However, offering a discount on gasoline for a car wash purchase is not.
- Our experience has shown that people don’t get too excited any more about the first but find the reverse to be very attractive. For example, we know one retailer who posts two prices for regular fuel – one without a carwash purchase and one with (usually about $.10 lower). However a car wash typically has a margin of around 75% meaning an $8.00 wash has $6 in gross margin. At 10¢ per gallon it would take a 60 gallon purchase to wipe out the entire car wash margin (assuming that there was no margin in the lower price of the fuel). $.10 per gallon gets peoples attention! In order to do this you have to have a mechanism to allow it to be done automatically on the dispenser or a manual system that requires that the customer come into the store.
No matter how you elect to use cross merchandising, the goal has to be the same – drive sales without hurting your dollar profit per transaction. Look around at the natural tie-ins that exist at your facility, then get creative and find ways to make your existing customers want to spend more with you.