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Luna's Convenience Store

Market Analysis Summary

The Aspen Estates is a newly built apartment complex in the western suburbs of Jenniville. Construction is scheduled to continue for the next eight months, however 350 condominiums and townhouses are already complete and approximately another 175 are scheduled for completion in the next eight months.

All of the residences are for sale, not rent, so it is expected that the household income of the residents of Aspen Estates will be higher than the national average. Household income is estimated at $85,000 – $100,000. Many of the residents are workers at seven large technology companies that are located within a 20 mile radius of the Estates. These workers tend to be young, 25 – 45, married or living with a partner.

4.1 Market Segmentation

The “Yuppies” are young upwardly mobile individuals aged between 23 and 33.  Their household income is between $55,000 and $80,000, they have very active busy lives and are conscious of their health.  They are single or living with a partner.

The “Young Parents” are couples with young families aged 27 – 37.  They were Yuppies with a focus on entertainment and fun, but now their main focus is their one to two children.  They have less spare time than they used to, so convenience is important to them.

The “Healthy Middles” have the highest income $90,000 to $120,000.  Much of their time is still spent taking care of their children, but their children are old enough to spend the occasional evening alone if their parents want a night out.

The “Healthy Middles” is the smallest market in the Aspen Estates, but potentially the most lucrative for Luna’s.  This group has an expected growth rate of 5% per year, beyond the influx of new home owners as the Estate residences are filled up over the next eight to 18 months.  The Yuppies are the next most lucrative group.  Although they have smaller household incomes than the “Young Parent” group, they have greater disposable income, since they have no children.

The following Market Analysis table includes residents of the Aspen Estates and the surrounding neighborhoods.

Convenience store cafe business plan, market analysis summary chart image

Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
Yuppies 5% 750 788 827 868 911 4.98%
Young Parents 5% 880 924 970 1,019 1,070 5.01%
Healthy Middles 5% 500 525 551 579 608 5.01%
Total 5.00% 2,130 2,237 2,348 2,466 2,589 5.00%

4.2 Industry Analysis

  • The convenience store industry is highly fragmented, though larger players, such as 7-11, dominate since they are based in very high traffic areas and have the money during the early eighties to grow quickly.
  • Gross profits are typically 20 – 22%, with net profits

4.2.1 Competition and Buying Patterns

Convenience stores are small retail outlets, generally 2,000 to 3,000 square feet. Their product lines usually consist of staple groceries, beer, cigarettes, software drinks, dairy products, gasoline and some nonfood items. These stores not only sell products but convenience as well. They are generally located on busy streets, with easy-access parking outside the front door. The stores are often open 24 hours a day seven days a week.

The typical customer at a convenience store is a blue collar male between the age of 18 and 34. Beer and cigarettes together represent about 1/3 of merchandise sales. However, Luna’s is targeting the “Yuppies,” as the professional market grows.

4.3 Target Market Segment Strategy

The market segments identified in the previous section are the key groups that live closest to Luna’s.  These groups have been chosen because of their geographical location as well as their income levels and lifestyles.  Since the most attractive group have young children, the store will have a large candy area, as well as other products that parents need regularly for babies and young children, for example diapers and baby food.