With cigarette prices skyrocketing and profit from gas at an all-time low, retailers are scrambling to maximize profits from their already razor-thin margins. Coffee, tea and fountain beverage sales continue to have some of the highest profit margins in the industry.
A well-managed coffee bar will yield over 70-percent margins. What that means is for a store selling 75 cups of coffee per day, they will bring in about $20,000 in profits each year.
Here, I spotlight five easy ways for stores to create a measurable increase in beverage counter sales. My clients who have implemented these simple tips have seen an average increase in sales of at least 20 percent.
1. If you do not currently have a beverage counter, you need to get one.
Your basic setup should include a coffee bar with a three-pot brewer, a three-flavor cappuccino dispenser and a six-flavor fountain drink dispenser. I highly recommend having a fountain beverage dispenser with no ice machine attached.
Aside from the added cost of a built-in ice dispenser, having it separate will allow you to bag your own ice to sell, creating another stream of income, and will ensure that your employees are keeping the area clean and well stocked. Some of my clients earn an extra $10,000 in profits per year selling their own bagged ice.
If you are remodeling your store or have room to expand, the ideal setup should consist of a coffee bar with three satellite servers offering three different blends of coffee (light, medium and dark); a five-flavor cappuccino dispenser with three permanent flavors and two rotating seasonal flavors; and two iced tea urns for both sweet and unsweetened tea.
2. A clean store will equal a profitable store.
Customers are five times more likely to repeat business if they have a positive in-store experience. When customers were asked what factors influence their decision on whether they will visit a store again, 51 percent of people polled said a clean store was the biggest factor in their decision to return. Surprisingly, only 20 percent mentioned low prices.
A clean store is more than just having mopped floors, stocked coolers and neat, organized product. Wiping off the beverage counter is not enough. A little trick that I’ve used to see if a store is clean and well maintained is to open the latched door to their cappuccino dispenser. If it is dirty, I will use it as a training opportunity, but I will refrain from purchasing anything from their beverage counter.
Ignoring the nooks and crannies of your store could have a lasting impact on impressions and profits. Three places to always keep clean are the drip trays and drains, the nozzles to fountain beverage dispensers (especially the inside), and ensuring a clean, unstained coffee area (use urn cleaner for pots and satellites on a monthly basis). During the summer months, if you get gnats or flies, make sure to keep it under control. And please, oh please, do not forget about the bathrooms.
3. Bundle, bundle, bundle.
Bundling may give you a lower profit margin, but would you rather make 60 cents off a $2 purchase or 80 cents off a $5 purchase? You can begin by bundling your pastries and doughnuts with a 16-ounce or 20-ounce coffee, or a fountain soda with a roller grill item or pre-wrapped deli sandwich.
If you create a sense of scarcity by offering bundles during certain hours, this will help get customers accustomed to coming to the store on a regular basis. For example, offer coffee and a danish for a deep discount between 5 a.m. and 7 a.m. Being a little different from the store down the street helps create a certain loyalty and helps people remember what you have to offer.
4. Samples will turn into sales.
You should sample all new items. Set out 2-ounce sample cups for people to try product. Sampling helps ease a customer’s mind about trying a new item (especially if it costs more than they are used to paying). This will also help create a sense of confidence in your product because you are willingly to let people try out your goods first for free, showing that you know once they try it, they will want to buy it.
People are three times more likely to try a new product if they can sample it first. If it is a new product, have an employee give out samples at the register or fuel pump. Make sure you have employees ask customers if they would like to sample a product during each transaction, and concentrate your sampling efforts during the busiest hours.
If you are changing brands or flavors, offer samples and an introductory sale price for a few weeks before you increase prices. A small, well-timed price increase can have a dramatic effect on your profits because it creates the impression that your item is of a higher quality than what you carried before.
5. Customers cannot buy what you don't have.
It always amazes me how many stores I go to where they have a coffee brewer, but no brewed coffee. Or a tea urn with a cup on the spout that says “out.” Or a flavor of fountain soda that says “out of order.” Not only are you losing immediate sales, but you are creating the impression that you are consistently out of product and will have customers avoid your location and go down the street for their daily beverage.
Never be out of a product. If your supplier can't fill your orders, it may be time to find a different supplier. You should never be out of items. If your equipment breaks, have it repaired promptly with 24 to 48 hours. Any longer and you are damaging your business. When possible, keep an extra case of popular products on hand for emergencies that you can rotate on a regular basis.
Don't just brew coffee during busy hours. While it’s important to manage costs, you should always have a fresh pot of coffee that is no more than two hours old. By using a timer, it will remind you and your staff to brew a new batch. If you aren't selling coffee at 2 p.m., consider offering a midday discount to get movement.
Keep track of your sales any time you change something so you can measure its success. I am always surprised when owners can't give me an accurate estimate of how many beverage counter sales they have per day. Be creative and have fun coming up with ways to bundle and sample items.
Taking the time to implement these helpful hints will no doubt help increase sales. Maintaining a well-organized, well-maintained and diverse beverage counter will create customer loyalty and help drive sales traffic to other areas of your store.
Editor’s note: The opinions expressed in this column are the author’s and do not necessarily reflect the views of Convenience Store News.