A convenience store or corner shop is a small retail business that stocks a range of everyday items such as coffee, tea, groceries, snack foods, confectionery, soft drinks, tobacco products, over-the-counter drugs, toiletries, newspapers, and magazines etc.
This is probably the most common types of retail businesses in South Africa and is usually found in densely populated neighbourhoods. This is also a stable and consistent business that is not very volatile if you get the location right. There have been a few brands in SA, starting with 7-Eleven now we are seeing PicknPay local, smaller Spar’s and OK Mini Mart etc.
This business is pretty straightforward you buy from wholesaler or distributor or even direct from manufacturer and sell (at a profit) retail to consumers. The value proposition of this business is convenience, this business almost never competes in price and is almost always more expensive than a large regional retailer you will find in a mall. Convenience in this case is time, is money saved in petrol, we also say safety, because if you go out, you could get into an accident or become another crime statistic (yes, you could become that in your home as well) but that is often how I (as a consumer and customer of this business think) am I going to get hijacked and one of the 55 people murdered every day in SA if I go to the mall?
Success in this business all comes down to location. You have to be close to a lot of people but not where there is a mall or strip mall in the vicinity, then your main competitive advantage is your extended business hours. But it might not be enough to be very successful.
What should you sell?
Depending on size and location, a bakery component will increase the value, you can buy premix and just have ovens to bake; some have hot meals but not all. And some have butchery, although you can just have fridges for fresh meat.
Franchise or non-franchise
This is a very contentious issue, franchises require significantly more capital to start and let’s be real there is nothing proprietary with what these guys do, you are all going to buy from Bakers or Baumanns or Simba and Messaris or Pepsi and Coke. You buy the product wholesale, add markup and resell it from a cash register using a cashier. Pretty straightforward. Your business is about being convenient for the consumer, you in the neighbourhood, people see you when they drive past, so you don’t need the same marketing support that a different business whose value proposition is not convenience is needs. So what value does the franchisor bring? A good franchisor (I know there was some issues with 7-Eleven a while back) will first and foremost have brand cachet and not just to consumer, it will be an asset that will (or should) have good resale value (it will almost always be a very consistent investment). You will be held to certain standards (which is great if you not a very meticulous person), you will benefit from the mother companies buying power combined with the extra margin convenience stores have. You will get the usual support from the franchisor, but everything is structured to replicate the mother company’s successful business model and systems. That is why if you have the capital and don’t have a lot of experience in business, it is almost always better to buy into a franchise group.
What if you don’t have the capital to buy into a franchise, is there are way to be successful? Yes, but it will be harder. First and foremost you need to find a good location, problem is there is not many out there, so you might settle for a location that is not very good (or that won’t meet the standards of a national franchise) does this mean you won’t succeed? No, not necessarily what will most likely happen is that your shop will not be as profitable as a franchised store, you will be able to draw an acceptable salary but it won’t be wildly successful. You might have to open more in similar areas, 2 or 3 to get to the same profit as a franchised store but at three times the work and stress.
There have been other trends in recent years where people (almost always foreigners) have come and opened retail shops in areas that would not meet the threshold of a good location where neither franchise nor even a local would be interested (due to low-profit potential) and they come and they live frugal (many people) in a little dingy room at the back of their shops. So they have a lower cost of living than me and you that have to pay our business premises and residential houses (and the dual accompanying expenses, Eskom, rates, water and taxes of being a citizen that the receiver of revenue knows about).
I don’t know what these guys endgame is, are they just working for the pot after escaping their countries, are they sending money home I don’t know what they are doing really. It does not seem to me like a very nice way to live, I don’t know what they are running away from and are almost always being viewed negatively by the locals in lower socio-economic areas because of the negative impact they have on local businesses. People say the locals complain because they can’t compete with them but how do you compete with people like that besides moving your family into a little room at the back of your shop and give them a terrible quality of life? That is worse than the “babbie” shops owners had under apartheid their house was next to or above their shops but they had actual houses and their children had rooms to study in peace in. It’s just ridiculous that we now have to live in this manner just to compete in our own country but not surprising.
I don’t think they add any value in our country, but they are part and parcel of the decay and decline in the quality of life we have seen in our country. But we can’t be surprised when an African country starts to resemble its continental peers.