Strategies for Little Short Stop Stores to Grow in the Competitive Convenience Store Industry in Can

Background of Little Short Stop Stores and Its Challenges

In late 2018, Gerry Bes, the general manager of the Little Short Stop Stores (LSS) convenience store chain, was considering the significant challenges that lay ahead for his company. LSS was a privately held chain of 30 convenience stores located in southwestern Ontario, Canada, focused mainly in the cities of Kitchener and Waterloo. Owned by the Arnold family, LSS celebrated its 50th anniversary in 2018. Bes had graduated in 1991 from Wilfrid Laurier University with an International Institute for Management Development Master of Business Administration degree and was an adjunct professor at the university’s Lazaridis School of Business and Economics, where he taught global marketing. Bes was also a business partner at the local organic farm Beswood Farms. Bes had gained 20 years of global marketing experience working at Nestlé S.A. (Nestlé). His current role running LSS was a very different experience from his consulting experience and having served as managing director of Nestlé Bangladesh and chief marketing officer of Nestlé Caribbean. The convenience store industry in Canada was extremely competitive, dominated by multi-national chains including 7-Eleven Inc. (7-Eleven) and Circle K Stores Inc. (Circle K). Consumer tastes were shifting due to changes in lifestyle and generational preferences. Salary costs had risen significantly after the province’s minimum wage was increased to CA$141 per hour on January 1, 2018, up from $11.60 per hour. Another planned increase to $15 per hour on January 1, 2019, was cancelled by the newly elected provincial government.2 Same-store sales growth had become more challenging for LSS, with two-thirds of revenues restricted by government-regulated pricing (e.g., lottery tickets and tobacco products). Bes had found ways to reduce costs, but he was more interested in innovative ideas to grow LSS same-store sales. Year-end results for 2018 showed that some short-term solutions had offset the higher minimum wage rate to avoid posting a loss, but Bes had to find sustainable strategies to increase revenues and compensate for ongoing higher expenses from 2019.

Bes was proud of LSS’s strong local reputation among customers within the communities the stores served. Despite a highly competitive industry, LSS was not only surviving but was outperforming its rivals. However, Bes knew that for LSS stores to survive another 50 years, the company could not be complacent. It had to identify and evaluate new strategic paths. LSS had set an annual target to grow at 500 basis points (or 5 per cent) above the industry average, which had seen little to no growth over the previous four years. In 2019, Bes had to present to the LSS board of advisors a creative but implementable way to achieve the projected growth rate. Although he was confident about many viable options to explore, he was aware of a strong preference from the board to contain geographic growth within the current region of southwestern Ontario. Authorized for use only by Priscilla Shumba in  at Kwantlen Polytechnic University from Sep 08, 2020 to Dec 31, 2020. Use outside these parameters is a copyright violation.

The Canadian Convenience Store Industry Overview

According to the Canadian Convenience Store Association, a store had to fit several specific characteristics to be defined as a convenience store: the building size had to be less than 5,000 square feet (460 square metres); the store had to provide off-street parking or convenient pedestrian access, or both; the store had to feature extended hours of operation, with many remaining open 24 hours a day, 7 days a week, even on statutory holidays; and the store had to offer at least 500 stock keeping units and a varied product mix that included a significant selection of beverages, snacks, candy, tobacco products, grocery items, gasoline, and lottery tickets (see Exhibit In 2017, convenience stores in Canada comprised a $56 billion industry,4 with 27,239 convenience sites employing more than 234,000 people, just over half of which were full-time employees. These locations included both independent owners (65 per cent) and corporate (35 per cent) owners such as LSS, that operated multiple stores.5 In 2016, of all the convenience stores in Canada, 9,089 locations were in Ontario, slightly increased from 8,992 stores in 2015. Ontario locations generated approximately $18 billion in revenue in 2016, with $13.5 billion coming from convenience stores that offered gasoline and $4.5 billion from standalone convenience stores.6 In Ontario, 5,560 of the locations were independently owned, compared to 3,432 that were owned by corporations.7 Convenience stores served metropolitan, urban, and rural communities,8 although most Ontario locations (5,412 stores) were in metropolitan centres.9 In Ontario, the convenience store industry consisted of two main categories: (1) companies that owned and operated convenience stores nationally and internationally (e.g., 7-Eleven, Circle K), and (2) small, independently owned (commonly referred to as mom-and-pop) convenience stores. Few regional chains

 Like LSS that were privately held and family owned existed. In the Niagara region, the Stewart family owned more than 90 stores, operating under the banners of Avondale Food Stores, Avonmart, and Dollar Mart.10 In the Ottawa area, another Canadian family owned 52 Quickie Convenience Stores.11 The impact from the January 1, 2018, increase in the provincial minimum wage (to $14.00 per hour) was estimated to cost approximately $50,000 per store, which was particularly hard to absorb for small and family-run stores, many of which were owned and operated by entrepreneurial new Canadians. At the time, 83 per cent of Ontario convenience store retailers predicted that the total proposed minimum wage increases (up to $15.00 per hour) would lead to employee reductions over the following 12 months. Some convenience store retailers expected to see more than 250 reductions in paid positions in 2018, while 80 per cent of retailers expected to hire fewer part-time employees.