What is convenient about convenience stores

The concept of the convenience store, popularly referred to in the vernacular as the sari-sari store, has been in the Philippines for a long time. Just like franchised convenience stores, they charge higher prices relative to the bigger retail outlets. Typically, they offer proximity and 24-hour service. This means the customer pays more for the convenience provided, especially if one needs to purchase only a few items.

Unknown to many, sari-sari stores also offer another type of convenience–credit. The neighborhood sari-sari store offers lista or a credit line for regular buyers. As a matter of practice, items purchased during the week are paid by the end of the week. People who avail of the credit terms are usually those who live in the neighborhood and get their pay on a weekly basis. These individuals are willing to pay more for their purchases because of the credit line. Value of convenience has a premium over the inconvenience.

Who defines the value of convenience?

The convenience store concept owner does not define the value of convenience. Rather, the micro-market or community served does. What is value of convenience to one community may not be true for another community. The amount of convenience premium over the reference price will vary from one area to another. A convenience store concept whose concept of the value of convenience is not acceptable to the community will fail.

What are convenient products/services?

If the product/service is not the convenience needed by the community, no amount of better convenient value will attract the community to buy. Since this varies from one community to another, a micro-market analysis must be done. This serves to identify what the specific community deems convenient. It will not only identify products/services but also the correct stock keeping units or SKUs.

In addition, the micro-market study must answer a series of questions. Are there other providers of convenience in the community? If so, how many and where are they? What products/services do they provide? What is their price or convenience value?

Remember that the community will go to the lower value provider of convenience. The micro-market analysis should provide information on both the demand and supply situation. In simple terms, micro-market analysis will identify what the community deems convenient and who are the current providers of convenience.

The cheaper priced reference source

There are factors that stem out of the convenience value equation. One factor is the location of the convenience store relative to the cheaper-priced reference source. As such, the current cheaper priced reference sources of products/services of the target community must be identified. How near or far from the community is the cheaper-priced reference source? If it is very near (right beside you), the convenience of proximity is not unique. Therefore, one must offer better value or some other form of convenience.

The issue of nearness or proximity, however, is not totally defined by linear meters. It can be defined as the degree of difficulty in getting to the cheaper reference source. The degree of difficulty can also be defined in any of, but not limited to, the following considerations:

• a short walk in a dark or poorly lit walkway;

• the number of public transport transfers; and

• the cost of transportation.

The more difficult it is, the higher the convenience value.

Credit as convenience

Another factor is credit. If the community around the store does not have savings or capital accumulation sufficient to tide them over to the next payday, credit becomes a critical convenient value. Purchasing items on credit is more convenient compared to borrowing from another party to buy items in cash from a convenient store.

The combination of these two factors will help define the value of convenience. It will determine the maximum amount of difference from the cheaper-priced reference source.

Abuse of credit convenience

The micro-market analysis must also identify who are the good payers in the community. Members of the community sometimes abuse credit convenience. Bad credit just moves from one convenience provider to another when the credit limit in one provider is met and the provider no longer wants to extend credit. This may just result to future bad debts for many convenience providers. Be sure that the credit convenience provides does not become a financial inconvenience in the future.

To recap, a convenience store must be able to understand its convenience value to the community. And because this value changes from community to community, do a micro-market analysis to define what the convenience value really is.

(Alejandrino Ferreria is the dean of the Asian Center for Entrepreneurship of the Asian Institute of Management. For further comments and inquiries, you may contact him at: ace@aim.edu.ph. Published "Entrepreneur’s Helpline" columns can be viewed on the AIM website at http//: www.aim.edu.ph).