Newsflash: Business Has Been Tough
Business has been tough for 12 to 18 months in the convenience store business. While Wall Street imploded just over a year ago, gasoline retailers and distributors had been riding a wild rise in supply cost caused by record high crude oil prices in July of 2008, only to followed by a very rapid drop in prices as the rest of the economy “fell off a cliff” to quote a pundit, reducing demand overnight. Volatility of supply costs pushed a lot of jobbers to the brink, and some went over the edge with the rest of the economy.
So, while our stores and chains were ahead of the curve in starting to feel the pain, we were right there with everyone else as consumer confidence shrank, and maintaining business became very, very tough. When the top-line revenues aren’t growing, but actually shrinking, but the expenses aren’t going down, the obvious place to look to get more benefit from the operation is to cut cost.
Cutting Cost Leads to Better Results
And, everybody looked to cut as much as they could and still stay in business as a viable competitor. Both stories underneath this, on Walgreens and Starbucks, are about cutting cost to keep the profits growing. Howard Schultz, the founder and CEO of Starbucks, was on CNBC this afternoon to tout the national rollout of the “Via” instant coffee product; but what he talked about the most was the cost cutting initiatives within the firm allowing them to keep profits near the levels that were expected. Walgreen Corp also attributed better than anticipated results to cutting cost.
“Abandoned Cart Syndrome”
That being said, about a week ago I read an interesting article on the supermarket sector, where they have been aggressive at reducing cost, as they compete in a very tight margin industry. There is more and more of what they are calling “Abandoned Cart Syndrome” where a customer who came in and shopped the store just leaves the full cart and walks out when they see the lines at the checkouts, lengthened by reduced labor allocations. So the question posed was, when does cutting cost become cutting service? And when does that impact your business negatively in the long run? Does that customer come back?
Well, in the case of a Convenience Store, we might not have abandoned carts, but we very well could have cut cost to the point that we have abandoned sites. Customers who came in, and you were out of stock on the need, or they had to wait in line 3-4 minutes to buy a single item. Take a good hard look as you pare those costs, and make sure it’s not service that’s suffering.
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