Published in CSP Daily News
New construction means bigger risk, reward for smaller c-store operators
MINNEAPOLIS -- When Clay and Mia Lambert bought a convenience store close to the University of Minnesota in 2003, they almost immediately saw its potential. "Once we cleaned the place up that we bought, we started busting at the seams with new business," co-owner Mia Lambert told CSP Daily News. "So we knew that we had some opportunity that we weren't capitalizing on in the old structure."
For smaller retailers, the channel phenomenon of new construction may be a bigger, riskier decision than for chains, but it can also be a lucrative decision--one many retailers are opting for as construction and land costs become more favorable.
While working the old station for six years, Lambert and her husband Clay eventually rebuilt the site, resulting in its Metro Petro location, a 3,500-square-foot store that's designed to appeal to female customers with a unique color scheme, unique materials and an overall focus on safety and security.
For smaller retailers, "their biggest strength is knowing the trade area, knowing the market and knowing the customers very well," said Jim Fisher, CEO and founder of site-selection firm IMST, Houston. "A vast majority of the time they're able to compete in a successful way as long as they have a facility that's on par."
In its exploration of an apparent boom in c-store new builds, CSP magazine's April issue revealed the difficulties of competing against expanding chains and their new, 5,000-to-6,000-square-foot formats.
On the other hand, Fisher said that with the right facility in the right location, so-called independent retailers can compete and take advantage of the opportunities that exist. "It's harder to find opportunities that present themselves for ground-ups, but they might take over a facility that's underperforming on its potential, take that over and make it the cash cow that it has the potential to be."
What he tends to see with retailers operating less than 10 stores is a tendency to spread new builds out two or three years apart. "For independents, it takes a lot to do one new store a year," he said. "With the financial resources and time needed, for many, it's just not possible."
Tasks such as zoning, licensing and permitting can take months to over a year before any construction begins.
"It's a monumental assignment that takes time out of your business," Fisher said. "Then you build that one store. It's your baby and it's still growing. To turn around and commit to another project is huge."
The commitment is also much riskier for a smaller retailer. "I don't care if you're a 7-Eleven, a Wawa or a Kwik Trip … no one intentionally builds a marginal facility; however, if that should be the case--if something was not right because of lack of due diligence or the trade area changed, those companies are in a better position to withstand [the hit] than a [smaller retailer]. In that case, if your second store is marginal, it can destroy you."
So for smaller operators, the pressure is enormous. A missed attempt on an expansion opportunity may drain the existing business. So to take that risk is the tough question many expansion-minded independents have to face. "They're saying to themselves, we've got a really good facility," he said. "So we've got to think about how willing we are to risk it all on another one."
For more coverage on new construction within the c-store channel, watch out for the April issue of CSP magazine. For more on Mia and Clay Lambert's Minneapolis store, click here.