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CanadaSue
12-15-2008, 09:31 PM
This is a really good little article on corner stores & gives what I've been looking for for a long time - numbers, costs, profits, etc.

To explain one matter that might confound readers. A law was passed here in Ontario stating that from May 1st - no cigarettes could be openly displayed & certainly no ads or any other material with cigarettes brand or company names on it. They're hoping to discourage kids from starting. It hasn't & won't. The drop in profits & legal sales is due to a lot of smokers making 'arrangements' to buy smokes off the reserves. It's one hell of a lot cheaper & if anyone wants to know price differences, say the word. I can give them...:D

***New rules on cigarette sales hurting even the scrappiest of variety store operators, who already work long hours and see tiny profit margins

Dec 14, 2008 04:30 AM
Comments on this story (39)
Lesley Ciarula Taylor
IMMIGRATION REPORTER

The clock with the lavender plastic rim on the back wall of H&H Convenience is an hour and 18 minutes fast. This means nothing to Almaz Nebai. She tells time by the front door.

Starting at 4:30 p.m., it opens every few minutes. That lasts three hours. After that, every 20 minutes or so for another hour, then it tapers off until midnight.

A young Hispanic woman wants her regular small pack of Podium cigarettes, the cheapest at $6 with tax. A man in Docksiders and khakis buys two cans of Arizona tea and stuffs them into a backpack. An Asian woman in heels pulls money from her Louis Vuitton wallet to pay for two packs of DuMaurier. A middle-aged man wants a small Peter Jackson Light with his two cans of Arizona.

"If I get a dollar from the cigarettes, I'm happy," says Nebai.

"With Arizona, there's not much profit, a few cents, but my customers love it. It's good for you."

Times are tough all over, but "not much profit," that might as well be the theme song for Ontario's convenience stores, which have been struggling to get by since the province banned the open display of cigarettes last summer. Between 45 and 65 per cent of corner store profits came from cigarette sales; since such "power walls" were banned that's been cut by 30 to 50 per cent.

Dave Bryans, president of the Ontario Convenience Stores Association, expects a third of Ontario's 10,000 convenience stores will be out of business in five years unless the province curbs illegal tobacco sales and starts letting proven, reliable stores sell beer and wine.

But, for now, shopkeepers like Nebai, earning just pennies per hour, make do selling what they can.

Cigarettes, snacks and drinks pay the bills, but not all of them. Since she bought the business in April and moved into the flat at the back, she's been hunting for deals at Costco and Cash and Carry, clicking through Internet sites to find better suppliers. Rent is $1,600 a month.

A woman at Cash and Carry sent Nebai to Imperial Tobacco, so she gets some brands delivered. The rest she buys every morning, before she opens, whatever she is low on. Podium, made in Caledonia by Lanwest Manufacturing for sale off-reserve, comes from Costco.

With a diploma in accounting from Algonquin College in Ottawa and marketing courses from Seneca, Nebai has plans for this corner north of the Dundas West subway station. There's a Slovenian deli next door, a Jehovah's Witness temple down the street. Budget, Price Chopper and Shoppers are nearby. Houses on the streets behind her sell for just under a half-million. The store was Lee-Bee's West Indian Grocery for years before a couple tried it as a variety store, then gave up and sold to Nebai. She inherited candles, ceramic frogs, hair extensions and shelves of Christmas decorations with the hardware, Pringles, canned spaghetti sauce and kitchen stuff.

Around 11 one morning, she grinds Van Houtte beans for a fresh pot, splits a pack of Hostess cupcakes on two napkins and settles down to talk.

"I loved Ottawa, but when I came here, I loved Toronto, too. It was my first time driving on a highway when I came here from Ottawa."

"I found this place online for a reasonable price. It's a really good location, the main customer is from the subway, people back and forth in the morning and evening. During the day, they come from the neighbourhood. There are a lot of East Bloc people living around here. Everyone is very nice, very nice. It was a struggle at first. I was sometimes shocked that nobody was here, but it's picking up, slowly."

She and a friend left Asmara, the once-lovely Italianate capital of Eritrea, in 1985, when the 30-year civil war with Ethiopia was at its most brutal, walking for 11 days into Sudan. She was 25. "It was a terrible time. We were hiding from Ethiopian soldiers and Eritrean fighters. But the land around us as we walked was beautiful and we made a promise, my friend and I, that we would come back. She went to Sweden. She called me a few years ago to ask, `Remember the promise?' But she is dead now, of cancer."

There's not much room for sentimentality. A woman in a hijab and long skirt with no time to waste floats in looking for a toy for her son, who is 4 today. She leaves with Spider-Man and a long-distance calling card.

"I am so happy here," Nebai says. "There is hope for the future. I'm always thinking, planning the strategy."

She's been asking the Ontario Lottery Corporation for a terminal and might just get one this month. If she gets approved and there is a machine available, the security deposit runs from $2,000 to up to $6,000 for a full-scale Lotto Centre.

A key-cutting service, cellphone cards, movie rentals, maybe stamps although a store not far away already sells them and Canada Post picks its spots based on postal code. If she buys 60 DVD movies, a company will throw in another 1,000 but she needs a $100 Film Exchange Retail Licence to rent them. Her cut from the ATM machine is half the $1.50 service fee; if she buys it for $2,500, her cut is 85 per cent.

"I tried bread but I had to eat it myself. Perishables are a waste of time – people go to Price Chopper."

She tours the shelves, rating each item. "Bathroom goods are well-demanded. The house materials are really working well."

She brought a Zippo lighter display cabinet up from the basement and added cigarette cases to the stock because customers asked for them. If she gets the lottery machine, if she gets the cell phone card business (a $1,500 down payment, then $14 a month), if she can buy the ATM machine, if she can rent DVDs, if she builds up enough loyal customers, she might make it.

The store opens at 9 a.m., closes at midnight. "Sometimes, it can be like a prison." Then she smiles. "I didn't marry, I tried to. Now I like not answering to someone."

Her sister and two brothers, one with a master's in engineering and another with a degree in economics, wanted her to move to Germany to reunite the family, but she prefers Canada. After a refugee camp in Sudan, she had gone to England for surgery on her leg, gnarled with polio. A United Church in Ottawa sponsored her as a refugee.

"It is amazing. I never thought that I would live in Canada. We studied it in geography in school – lots of snow! – and now I've become a Canadian. I feel at home here. Everyone is from far away."


CORNER ECONOMICS

The classic mom-and-pop independent corner store in Ontario brings in from $30,000 to $50,000 a year.

For two people working 12-hour days seven days a week, that's from 49 to 81 cents an hour between them.

Dave Bryans, president of the Ontario Convenience Stores Association, and Hugh Large, an industry consultant and commentator who lives in Ballantrae, Ont., paint this picture of Ontario convenience stores:

• 75,000 people work in them.

• 85 per cent of the operators are immigrants.

• From 45 to 65 per cent of their profit was from cigarette sales, which have a low profit margin. Since the display wall went, that's dropped by 30 to 50 per cent.

• Snacks and drinks are the second biggest category. Snacks carry the highest profit margin. Water and energy drinks are expanding the most dramatically and now each represent 20 per cent of drinks sold.

• 70 per cent of sales are snack and candy impulse buys.

• Nearly half of the cigarettes sold in Ontario and a quarter of those bought by teenagers are illegal. The highest teen contraband rates, from 40 to 45 per cent, are in Mississauga, Aurora, Newmarket and Pickering.

• 90 per cent of stores check for age ID for cigarette sales.

• More than half of the stores are chains and they're the most likely to survive, with stores such as Rabba that are the most diversified in the best position. Alimentation Couche-Tard Inc., which operates Couche-Tard, Provi-Soir, Dιpanneur 7, Mac's Convenience Stores and Beckers Milk, is the largest chain in Canada. Seven-Eleven has 500 stores from B.C. to Ontario. There are more than 150 Hasty Markets in the province.

• Lottery tickets are 10 to 12 per cent of business, with a low profit margin. Convenience stores in Ontario sell 1.4 billion tickets a year.

• ATMs are a small percentage of business; the commission on phone calls is also small.

• Shoppers Drug Mart, Tim Hortons and the combined store-and-gas-station are the biggest competitors, followed by 24-hour supermarkets.

• The benchmark for survival is 500 to 1,000 people living within a 1.6-kilometre radius.

• Groceries, often taking the biggest share of space and once a mainstay, are now the least profitable or sellable items.

• Healthier and grab-and-go foods are increasingly popular but slow to be stocked.


- Lesley Ciarula Taylor


http://www.thestar.com/News/Ontario/article/553525

VT9
12-15-2008, 09:40 PM
unless the province curbs illegal tobacco sales and starts letting proven, reliable stores sell beer and wine.

Wow. That's a triple whammy. No smokes, no wine, no beer. I can't imagine a convenience store, whether Mom & Pop or corporate surviving without those three.

CanadaSue
12-15-2008, 09:49 PM
Oh they sell cigarettes but the usual displays of various smokes right behind the counter has in all stores, been replaced by closed off shelves. The big chain stores were able to have fitted ones put in - either at the chains expense or for a relative pittance. Independent stores had to have them made to fit the individual store layouts. The local store I used by my last place was pissed - cost him almost $2,000 to have a decent, sturdy shelf built & installed.

What's really hurting cigarette sales is the rising taxes. A few years ago, a bunch of 'discount' brands came into being for about $1.00-1.50 cheaper. Most were crap & failed but about a dozen brands hung on & there's roughly 2 tiers of smokes now - the ultracheap, acceptable discount brands, then the big name brands which also come in a 'full price' & 'slightly cheaper' range.

The absolute cheapest pack of 25, (standard size here), smokes you can buy are something called Podium. The retail at about $6.50 a pack. For Export A, Dumaurier or Player's Filter, you pay close to $10.00 a pack. A carton of Player's Filter, (8 packs of 25 or 200 cigarettes) costs close to $70.00. If you can get to a reserve you can buy a bag right on the reserve for $20.00.

Some lucky customers can buy them through 'someone who knows someone' on the reserve for $10.00 for 200 smokes.

THAT is what's killing cigarette based revenue in ALL stores right now.

Mama Alanna
12-15-2008, 09:57 PM
:eek: $6.50 per pack, and say a pack a day habit. Times 365 = $2372.5 That's a hell of a lot of money to stick in your face and set on fire.

CanadaSue
12-15-2008, 10:46 PM
And that's the CHEAPEST legal cigarette you can buy. The average pack probably runs about $8.00. At that price a pack a day smoker will pay close to $3,000 over the course of a year. About $2,500 of that, if the $10.00 a carton 'in the know' discount price reflects true cost & a slight profit, is tax.

rb.
12-16-2008, 06:32 AM
And the prices Sue is giving is for Ontario only. When we left BC in 98, a carton was well over $50.00, while in Ontario it was about $20. I believe a carton in BC is now hovering around $100, for 200 cigarettes.

With the stores...what I don't get is this. My closest Mac's had, for years, a manager, and the same staff, being paid minimum wage. Probably about 5 of them, besides the manager. About 8 months ago, suddenly this young Indian couple is there night and day, with the father of one of them there at night (for company? security?). There had been a sign up looking for operators, but for all stores, not just that one. So. If Mac's made money paying about 6 employees, and all the related expenses, how is it that store operators make so little. They would take draws, not be on payroll. The trucks are all the same rolling in, so I would imagine the costs for the goods would still be the same.