Article
The employee-free c-store
Self-service is widening margins for Illinois-based Get & Go Express, a group of unmanned "c-stores" developed by entrepreneur Jeff Parsons.
September 10, 2006
Calling Get & Go Express an "unmanned c-store" might be a bit misleading. It not only doesn't have a staff, but the goods are all stocked in machines facing outward. What's more, it doesn't have tobacco, alcohol, gas or lotto tickets — c-store staples. And its profit margins are even more distinct from its traditional cousin.
Founder Jeff Parsons is building the chain on a simple idea. He realized removing the employees would widen margins to the point that it was feasible, even without the traditional high-margin items that require employees to verify age. And he's augmenting his efforts with kiosk technology: deploying DVD rental kiosks and ATMs in the mix.
"When you talk about margins, right now across the board, we're running at 60-62 percent profit margins," Parsons said, comparing them to the 30-40 percent margins of a regular c-store.
The National Association of Convenience Stores backs up Parsons' appraisal in its annual industry financial reporting, and cites labor as c-stores' number one overhead, at 42 percent. And comparing Parsons' inventory to NACS' data reveals striking similarities to traditional c-stores than are outwardly visible: Get & Go Express, through its vending machines, sells the majority of top-selling c-store products, including sodas, foods and salty snacks.
Parsons' original unmanned stores were collections of traditional vending machines gathered beneath a single awning. He circumvented the normal wholesale mark-ups on items like soda by using third-party manufactured vending machines and stocked them with beverages from discounters like Sam's Club.
"Third-party retailers (normal c-stores) pay $18.20 per case of 24 bottles," Parsons said. "If you go walk into a Wal-Mart store or a Sam's store as a consumer, you can buy 24oz bottles for about ten bucks per case, and every weekend or so they'll have some of them on sale for $8 a case."
Other overhead is reduced, too. He said a new Get & Go costs $150,000 to build, a tiny fraction of a normal c-store. It also doesn't need the traditional c-store space, requiring 500 square feet or less to operate.
Parsons' latest location, in Hudson, Fla. has a sleek, red, branded look, cashless vending, fresh sandwiches and heaps of national media attention. Instead of separate vending machines, they're collected in the building's exterior, so the store itself takes the appearance of one big vending machine — even though different categories of product are still dispensed separately.
Though it's only been open since August, the store has regular customers. Real estate agent Tami Patrick started frequenting the Hudson Get & Go for snacks she used to buy at Walgreens and other local stores on her way to work and after dinner.
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The Get & Go unmanned "c-store." The building contains outward facing devices from which walk-up customers can buy most of a traditional c-store's most popular items. |
Jeff Lenard, director of communications for the National Association of Convenience Stores, said customer comfort with self-service machines is driving unmanned c-stores, a trend including Shop24 in New York, and SmartMart in Memphis, Tenn.
"Unmanned stores address the two biggest expenses — labor and real estate," Lenard said. "There is certainly a future for them. The key is that they must offer a tangible benefit to consumers. That's the key part of the equation, whether you're talking about a staffed or unstaffed operation."
Parsons has already begun franchising the stores. Owner/operator James Gray said his 300-square-foot location, one of the original models with 10 machines, sells about $150 daily on a strip mall parking lot. Gray said starting the company cost about $40,000. He said running the new store takes less than two hours per day, which stacks nicely with his job maintaining a golf course.
"It is performing quite well," Gray said. "We expected it to perform less than the numbers they give you because you wouldn't think people would buy that much soda and snacks and stuff, but it has performed like they said it would. It's very well-received."
Parsons is finishing an agreement to open 24 more of his unmanned c-stores. For now, he's shopping tradeshows for unique items to drive more traffic to his locations. And he's also considering how to offer products that require age verification.
"Thumbprint verification through Mastercard or Visa will most likely allow us to sell age-restricted items," Parsons said. "And we're talking to states about selling lottery tickets. But I'm over-the-top excited about this concept, because we are profitable in the simplest form."
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