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Convenience Store Business Plan

Market Analysis Summary

Our market is booming. Convenience store industry sales rose 8.6% for 2002. Overall U.S. retail sales grew by only 6.3%, and grocery sales followed with 2.4% growth, proving once again that the convenience store industry has become a powerful force in U.S. retailing.

Convenience stores serve the entire purchasing population of its geographical area but focuses on customers who need to purchase items outside of normal working hours such as swing shift employees and quick shoppers looking for snacks and related items. Therefore we have segmented our market into night shoppers, quick shoppers, and others. Growth rates for these three segments match the population growth for the surrounding area.

Our main competitor is 7-11 which holds approximately 30% of the industry. Other competitors include Circle K, Fastrip, and any of the 85 grocery establishments on the east coast.

4.1 Market Segmentation

Our target market for our test store encompasses a five mile radius in which the approximate population is 150,000 (based on census information).

The majority of the residents in this area are Caucasian (58.8%) Black (23.6%) and Hispanic (19%) with occupations classified as professional/technical, homemaker, or retired. The majority of household incomes range from $20,000 - $30,000 (50.3%), yet there are also affluent household incomes ranging from $50,000 - $100,000 (15.4%).

The median income in this area is $48,096, compared to the whole New York area which is $34,248. The typical "head of household" age is 25 - 34 (22.4%) or age 34 - 44 (23.1%) with a median age of 44.4 years old and an average age of 32 years old.

Target market segments
Convenience stores serve the entire purchasing population of its geographical area but focuses on customers who need to purchase items outside of normal working hours such as swing shift employees and quick shoppers looking for snacks and related items.

Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
Late night shoppers 3% 78,000 80,340 82,750 85,233 87,790 3.00%
Quick shoppers 2% 42,000 42,840 43,697 44,571 45,462 2.00%
Other 3% 30,000 30,840 31,704 32,592 33,505 2.80%
Total 2.68% 150,000 154,020 158,151 162,396 166,757 2.68%

4.2 Industry Analysis

Convenience store industry sales rose 8.6% to $86.3 billion for 2002. Overall U.S. retail sales grew by only 6.3%, and grocery sales followed with 2.4% growth, proving once again that the convenience store industry has become a powerful force in U.S. retailing.

Pre-tax profit margin in the convenience store industry was the highest since 1988 (1.8%). The 2002 results confirm that a new, upward trend is emerging. This upward trend is based on several factors, and occurred along with a slow rebound in the general economy.

Merchandise sales per customer increased 7.4% in 2000 suggesting that convenience stores are placing higher priority in filling the customers' needs. Companies that align themselves properly to fill those needs will be successful in the future.

4.2.1 Competition and Buying Patterns

7-11 holds approximately 30% of the industry market, and in 1999 their net income was $160 million. Other competitors include Circle K, Fastrip, and any of the 85 chain grocery establishments on the east coast.