Analyzing the Market for Convenience Stores: The Changing Convenience Store Industry.
The location quotient quotient - The number obtained by dividing one number (the "numerator") by another (the "denominator"). If both numbers are rational then the result will also be rational. is a useful tool for measuring the supply and demand for convenience stores The following is a list of convenience stores organized by geographical location. Stores are grouped by the lowest heading that contains all locales in which the brands have significant presence. in a local market. The calculation is simple and the concept is easy for the reader of an appraisal report to understand. This article provides information about how to construct a location quotient, where to obtain the data, and how to interpret the result.
To plagiarize pla·gia·rize
v. pla·gia·rized, pla·gia·riz·ing, pla·gia·riz·es
1. To use and pass off (the ideas or writings of another) as one's own.
2. Snoopy Snoopy
world’s most famous beagle. [Comics: “Peanuts” in Horn, 542]
See : Dogs
imaginative dog. [Comics: “Peanuts” in Horn, 542–543]
See : Illusion , that great American literary ace, "It was a dark and stormy night The phrase "It was a dark and stormy night", made famous by comic strip artist Charles M. Schulz, was originally penned by Victorian novelist Edward Bulwer-Lytton, 1st Baron Lytton as the beginning of his 1830 novel Paul Clifford. ...."
You drive up to the nearest convenience store to get gas. Without having to leave the car, a robotic arm A robotic arm is a robot manipulator, usually programmable, with similar functions to a human arm. The links of such a manipulator are connected by joints allowing either rotational motion (such as in an articulated robot) or translational (linear) displacement. from the dispenser reaches over and inserts the gasoline nozzle An orifice in an inkjet print head through which ink is sprayed onto the paper. Print heads with six thousand or more nozzles are common in today's printers.
Nozzle into a special cap on your vehicle. Your car is automatically fueled. Without having to open your wallet, an electronic reader scans a computerized sticker on the left side of your windshield and reckons the cashless transaction. You drive off into the night.
Such is the capability for customers in Sacramento, California “Sacramento” redirects here. For other uses, see Sacramento (disambiguation).
Sacramento is the capital of the State of California and the county seat of Sacramento County. as the result of a test market program by Shell Oil Company that recently unveiled the latest in fuel sales technology.
Petroleum marketing properties have completely changed over the last 30 years. Gone are the service bay buildings of the 1950s and 1960s. Today, convenience stores account for about 60% of all retail gasoline sold in this country (Interview with David Doane of the National Association of Convenience Stores The National Association of Convenience Stores (NACS) is a trade association that represents convenience and petroleum retailers. Founded on August 14 1961, it had more than 2200 retail and 1800 supplier company members as of 2006. , Alexandria, Virginia Alexandria is an independent city in the Commonwealth of Virginia. As of the 2000 census, the city had a total population of 128,284. Located along the Western bank of the Potomac River, Alexandria is approximately 6 miles (9.6 kilometers) south of downtown Washington, DC. ).  Not only can customers buy the old staples of milk and bread, but co-branded fast food from national chains, such as McDonald's, Burger King, and Taco Bell Taco Bell Corp., a subsidiary of Yum! Brands, Inc., is a Mexican-style quick service restaurant chain based in Irvine, California, United States. The restaurant has locations primarily in the United States and Canada, but also operates outlets in several other markets. are now offered for the customers convenience, as well as automated teller machines automated teller machine (ATM), device used by bank customers to process account transactions. Typically, a user inserts into the ATM a special plastic card that is encoded with information on a magnetic strip. and lottery tickets.
The consumer trend is for more and more convenience; this is driving the changes affecting this industry. These changes appear both in technology and store design; point-of-sale (POS (1) See point of sale and packet over SONET.
(2) "Parent over shoulder." See digispeak.
POS - point of sale ) scanners and pay-at-the-pump technology are being used at an increasing number of stores. But the latest technology is expensive. In 1997, the average required investment nationwide for land, building, equipment, and start-up inventory was $1,122,000 per store.  With an average store size of 2,900 square feet, the start-up cost is $397.00 per square foot of building area.  Because of the high cost of a modern convenience store, there is an impetus in this highly competitive industry to increase sales. To attract more families, women, and senior citizens, the innovative marketing concept of the "quick serve restaurant" (QSR QSR Quick Service Restaurant
QSR QoS (Quality of Service) Satisfaction Rate
QSR Quality System Regulations
QSR Quality Status Report
QSR Quality System Review
QSR Quarterly Status Report
QSR Quality System Requirement ) has been added to new store designs. The QSR is a scaled-down version of a fast-food restaurant that is part of the store building. It makes the convenience store a destination shopping experience.
How to Analyze the Local Market
In the last ten years, the Years, The
the seven decades of Eleanor Pargiter’s life. [Br. Lit.: Benét, 1109]
See : Time number of convenience stores operating in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. has grown by 57%.  With 95,700  convenience stores operating in the nation today, the chances are that you will be asked to appraise appraise v. to professionally evaluate the value of property including real estate, jewelry, antique furniture, securities, or in certain cases the loss of value (or cost of replacement) due to damage. a convenience store sooner or later, or more than likely you will be asked to appraise a proposed convenience store. So, you ask yourself, How do I analyze the local market? How can I tell if the local market for the subject is oversupplied or under-supplied? One tool that will help you answer this question is the location quotient. The location quotient is a common and simple calculation that has been widely used in a variety of regional economic applications, and it lends itself well to analyzing the local convenience store market. But, perhaps most importantly Adv. 1. most importantly - above and beyond all other consideration; "above all, you must be independent"
above all, most especially , the concept is easy for your reader to understand; the location quotient is a measure of the tendency for a particular type of business or industry to locate in an area. 
To make the calculation for the particular location quotient, you will need the following four numbers:
1. The population of your local market area. We will call that "Xa," the population of "Area A." Where to Get It: In smaller cities and towns, it is often appropriate to define the market as the entire community. The market could be a neighborhood or segment of a larger metropolitan area. In any case, this is one of the easiest numbers to obtain. Local government agencies, the U.S. Census, and local universities will nearly always have the figures you need.
2. The number of existing convenience stores operating in the market area. We will call that "Ya," the store count of "Area A."
Where to Get It: If your market area is a small, rural community you may simply count them for yourself. Use the Yellow Pages listing for "Convenience Stores" as a back-up reference. These listings are on the Internet and many of these websites will even plot them on a map for you. If your subject is a freeway location, the market area may extend several miles along the traffic corridor. You are trying to isolate all businesses selling gasoline that are potential competitors.
3. The population for the benchmark region. We will call that "Xb," the population of "Area B."
Where to Get It: The overall region is most easily defined as the state the subject is in. This figure will be used only as a distribution benchmark; it has nothing to do with defining the market area. Most of the time, you can proceed on the assumption that the distribution of convenience stores throughout the state is a normal market distribution. The location quotient analysis is going to tell you whether your local market has more or less people per store than this region you are using as a benchmark. State population figures are readily available; State agencies, such as the Commerce Department, usually have the figures you want.
4. The number of convenience stores in the overall region. We will call that "Yb," the store count of "Area B."
Where to Get It: The best source for this number is the National Association of Convenience Stores, an industry association that publishes the state-by-state count each year. Their Website is located at www.cstorecentral.com. See the End Notes of this article for additional information about navigating this site. Also see www.c-store.com for similar state-by-state counts and store growth projections for each state. This information is free of charge and no registration is required.
Make sure you match the year of the population count to the year of the published store count. It is doubtful that the store distribution for the state changes much from one year to the next, so, there is little danger in using a population figure and store count from a couple of years ago. What you are striving for is the numerical relationship between population and stores; the actual number of stores does not necessarily have to be for the current year. As a matter of fact, the store counts usually trail by at least a year before they are compiled and published by the industry.
Now you are ready to fill in the following formula:
(Xa/Xb) [divided by] (Ya/Yb)
Xa = population of area "a"
Xb = population of area "b"
Ya = store count of area "a
Yb = store count of area "b"
The result will usually be a number that is either greater than or less than one. If the number is less than one, for example .55, then the subject market has insufficient population to support the existing number of convenience stores, at least as compared to the normal distribution. In this example, the population would have to nearly double (it is at 55%) before the number of persons per store in the local market would be comparable to the region as a whole. If the number is greater than one (1), then the local market has more people per store than the benchmark region and perhaps new store development would be attractive in that particular market. If the location quotient is one (1), then the local market matches the regional distribution of stores to population.
Bonners Ferry: A Case Example
The location quotient is useful for quantifying what might otherwise be conjecture CONJECTURE. Conjectures are ideas or notions founded on probabilities without any demonstration of their truth. Mascardus has defined conjecture: "rationable vestigium latentis veritatis, unde nascitur opinio sapientis;" or a slight degree of credence arising from evidence too weak or too and guesswork about supply and demand in the local market. However, be circumspect cir·cum·spect
Heedful of circumstances and potential consequences; prudent.
[Middle English, from Latin circumspectus, past participle of circumspicere, to take heed : in applying the results. Other factors play an important role also, including:
* Proximity to traffic corridors such as major highways
* A higher percentage of travelers as opposed to local customers who may patronize pa·tron·ize
tr.v. pa·tron·ized, pa·tron·iz·ing, pa·tron·iz·es
1. To act as a patron to; support or sponsor.
2. To go to as a customer, especially on a regular basis.
3. the subject
* Unusual traffic count
In other words Adv. 1. in other words - otherwise stated; "in other words, we are broke"
put differently , the conclusions of a location quotient study should be judiciously ju·di·cious
Having or exhibiting sound judgment; prudent.
[From French judicieux, from Latin i applied.
To help you understand the ramifications ramifications npl → Auswirkungen pl of a location quotient analysis, consider an actual example from an appraisal of an existing convenience store in Bonners Ferry, Idaho Bonners Ferry is a city in Boundary County, Idaho, United States. The population was 2,515 at the 2000 census. The city is the county seat of Boundary CountyGR6. . Bonners Ferry has a population of about 2,500 people. The community is located at the northern edge of Idaho near the Canadian border and is rather isolated, as it is 30 miles from the nearest community of any size. So, the market is fairly well defined as being the community itself. The town lies along U.S. Highway 95, the major north-south highway North-South Highway may refer to road:
The calculations for the location quotient for convenience stores in Bonners Ferry looked like this:
Population of Bonners Ferry: 2,491
Convenience stores in Bonners Ferry : 10
Population of Idaho: 1,163,261
Convenience stores in Idaho: 513
(2,491/1,163,261) [divided by] (10/513)
.00214 [divided by]
The normal population distribution across the nation is about 2,800 people to one convenience store.  The industry considers a population base of 3,000 people per store to be a desirable threshold; in Idaho, the ratio is 2,268 people per store. With only 2,500 people and ten businesses selling gasoline, the Bonners Ferry market is clearly in trouble. The location quotient for Bonnets Ferry is 0.1097. In other words, Bonners Ferry has only 11% of the population necessary to support the number of existing convenience stores. In this situation, sales levels and margins for the stores in Bonners Ferry are expected to be below that of national averages because there are simply too many operators in the market. The location quotient shows a substantial disincentive dis·in·cen·tive
Something that prevents or discourages action; a deterrent.
something that discourages someone from behaving or acting in a particular way
Noun 1. for more convenience stores to locate there.
It can be concluded that, in Bonnets Ferry, some operators will fail. In the highly competitive fuel sales business, the survivors will be those operators who are well capitalized and have invested in the latest technology. Ironically, for Bonnets Ferry, that group includes the latest entrants into the market, not the established stores. Each of these three new stores has the latest in fuel sales innovation including pay-at-the-pump technology and co-branded fast food. The older stores that had been in town for decades failed to invest in the latest technology and are now nearly functionally obsolete. Their market share will continue to decline. Either they will diversify into other product lines, or they will be forced from the market as supply and demand for convenience stores in Bonners Ferry balances out. So, although the location quotient spelled the death warrant for the older stores, for one or two of the newer stores it might actually provide some justification for investing in the latest, most innov ative equipment to muscle out the competition and enter an already overly competitive market. An appraisal of one of the new stores might not necessarily conclude that they should close their doors even though the location quotient shows an oversupplied market.
The subject in Bonners Ferry is situated along U.S. Highway 95. The higher-than-normal traffic is mostly in-town commuters rather than out-of-town travelers, so the high traffic count does not justify a greater-than-average number of stores. Four other competitors, including all three of the new stores, also had frontage on the highway, so the subject had no location advantage. My advice concerning the subject property was to liquidate To pay and settle the amount of a debt; to convert assets to cash; to aggregate the assets of an insolvent enterprise and calculate its liabilities in order to settle with the debtors and the creditors and apportion the remaining assets, if any, among the stockholders or owners of the the fuel service equipment and convert the property to another use. The reason for this harsh assessment was that at least $500,000 in additional capital investment would be required to make the subject competitive with the three new stores in Bonners Ferry. Four convenience stores in Bonners Ferry, even if they are the best the industry now offers, are still too many. The location quotient was one tool that helped analyze this market.
The location quotient can help appraisers to focus and get down on paper what may be obvious to a market observer. Other sections of the appraisal report, such as the highest and best use analysis and portions in the cost approach describing functional and external obsolescence ob·so·les·cent
1. Being in the process of passing out of use or usefulness; becoming obsolete.
2. Biology Gradually disappearing; imperfectly or only slightly developed. , can benefit from a location quotient study. The location quotient analysis helped me, perhaps it will help you too. In the key of Snoopy, in a characteristic root beer toast, "Here's to the man who invented the location quotient."
A number of useful convenience store industry sites are available on the Internet. Most of this information is free. Be sure to examine more than just the home page; often, information you want will be under a sidebar heading, such as "Industry Resources" or "Reports.
Web page for Convenience Store News. Their Industry Report covers every facet of the convenience store business, including profitability levels and product line margins. From the main page, go to "Market Research," then to "Industry Report." This comprehensive and useful report is available online for $275.
This site contains state-by-state counts of convenience stores and a market saturation In economics, "market saturation" is a term used to describe a situation in which a product has become diffused (distributed) within a market; the actual level of saturation can depend on consumer purchasing power; as well as competition, prices, and technology. study of all 3,100 counties in the United States. Check the pioneering saturation analysis located at www.c-store.com/saturation.htm. For annual projections of population and convenience store counts for each state through the year 2005, go to "Trends/Reports" from the main page, then to "Year 2005."
This site is the Website for National Association of Convenience Stores. These annual reports are the industry standard, and detail every facet of the operation of a convenience store, including average store size and construction cost, lease rates, and average monthly utility expenses. Here appraisers can obtain two of the most important industry publications:
State of the Industry, published annually by the National Association of Convenience Stores, 1606 King Street, Alexandria, VA 22314-2792. Available by subscription at a rate of $100 for non-members and $25 for NACS NACS National Association of Convenience Stores
NACS National Association of College Stores
NACS North American Catalan Society
NACS North American Catalysis Society
NACS Network Access Control System
NACS National Advisory Committee On Semiconductors members.
SOI (Silicon On Insulator) A chip architecture that increases transistor switching speed by reducing capacitance (build-up of electrical charges in the transistor's elements), and thus reducing the discharge time. The power requirement is also reduced in some designs. Fact Book, published annually by the National Association of Convenience Stores, 1605 King Street, Alexandria, VA 22314-2792. Available by subscription at a rate of $100 for non-members and $25 for NACS members.
These industry reports are essential to appraisals of convenience stores and are the sources that many convenience store operators use as a benchmark for their own operations.
This is the Website for the Petroleum Marketing Institute, highlighting current issues for petroleum marketing facilities, and trends in the oil industry. Current topics include environmental issues, such as storm water runoff Runoff
The procedure of printing the end-of-day prices for every stock on an exchange onto ticker tape.
If the "tape is late" then it can take a long time to print off all the closing prices. , which is a growing concern in local jurisdictions.
This is the Website for The Petroleum Finance Company, featuring useful industry trends. It also offers current information about large retailers such as Costco and Wal-Mart (hyper-stores) that offer gasoline sales and the probable impact of these retailers on the fuel sales industry.
Robert E. Bainbridge, MAI MAI Mail (File Name Extension)
MAI Multilateral Agreement on Investment
MAI Maius (Latin: May)
MAI Ministerul Administratiei si Internelor (Romanian) , SRA SrA
senior airman is a partner with Bainbridge, Bainbridge, McGary and Wade, Inc. in Ontario, Oregon Ontario is the largest city in Malheur County, Oregon, United States. It lies along the Snake River at the Idaho border. As of the 2000 census, the city population was 10,985. The 2006 estimate is 11,245 residents. . Mr. Bainbridge is an independent commercial appraiser A person selected or appointed by a competent authority or an interested party to evaluate the financial worth of property.
Appraisers are frequently appointed in probate and condemnation proceedings and are also used by banks and real estate concerns to determine the market who has been practicing since 1981. He holds a BBA BBA
Bachelor of Business Administration in Real Estate from Boise State University.
(1.) This calculation includes gasoline sales from fleet sales, truck fuel sales and marinas. The percentage of passenger car gasoline sold in the United States by convenience stores would be significantly higher than 60 percent.
(2.) National Association of Convenience Stores, State of the industry '98, published by the National Association of Convenience Stores, (1998): 14-16.
(3.) Ibid., 14-16.
(4.) Ibid., 30-31.
(5.) Ibid., 1.
(6.) Edgar M. Hoover, An Introduction to Regional Economics, 2nd ed. Alfred A. Knopf, New York New York, state, United States
New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , (1975): 147; and Peter Lloyd Peter Lloyd is the name of more than one person:
(7.) Here it was decided to include all businesses selling retail gasoline, even though two businesses were not convenience stores in the conventional sense. Each business was carefully described in another section, "Assessment of the Competition." Although this might arbitrarily lower the location quotient for Bonners Ferry, these properties were viewed as competitive with the subject and the appraiser took into consideration what effect their inclusion was having on the result. Even if these two properties were omitted, Bonners Ferry is still significantly oversupplied with convenience stores.
(8.) See www.c-store.com/saturation.htm, C-store Saturation Analysis, (December 31, 1997).
Bendavid, Avrom, Regional Economic Analysis for Practitioners, New York, NY: Praeger Publishers, 1974.
Hoover, Edgar M., An Introduction to Regional Economics, 2nd Ed., New York, NY: Alfred A. Knopf, 1974.
Loyd, Peter E. and Peter Dicken, Location in Space: A Theoretical Approach to Economic Geography, 2nd Ed., New York, NY: Harper & Row, Publishers, 1977.
McKenzie, Dennis J. and Richard M. Betts, The Essentials of Real Estate Economics, New York, NY: John Wiley John Wiley may refer to:
Richardson, Harry W., Urban Economics, Hinsdale, IL: The Dryden Press, 1978.
Weimer, Arthur M. and Homer Hoyt Homer Hoyt (1895-1984) was an economist who worked in real estate and created the sector model and urban model.
Hoyt studied at the University of Chicago, where received his J.D and Ph. D in 1918 and 1933 respectively. , Principles of Urban Real Estate, 2nd Ed. New York, NY: The Ronald Press Company, 1948.