Convenience Stores and Snack Bars

Industry data

 

Snack Bar

According to estimation, there are currently approximately 1,200 active snack bars in Israel.

 

Convenience Stores

According to Dun and Bradstreet Company, there are currently 2,500 active convenience stores in Israel (this data also includes small, corner convenience stores, which are not reviewed in this profile). Sales circulation in the industry is assessed at approximately 4.5 billion NIS per year. Approximately 50% of sales are comprised of cigarettes, and an additional 25% from soft drinks and beer.

 

Industry Sub-division

 

There is not always a sharp distinction between a convenience store and a snack bar. The distinction is made according to the store’s location and type of products sold:

  • Type 1- snack bars selling sandwiches and soft drinks. Located in strategic areas.
  • Types 2- same as type 1, only they are located in non-central locations.
  • Type 3- Snack bars selling candy, soft drinks, cigarettes, newspapers, popsicles, and sandwiches. Located in strategic areas.
  • Type 4- same as type 3, only they are located in non-central locations.

 

Market Characteristics

  • These stores are based on everyday product sales, mostly cheap products that do not require the customer to make an important decision or compare prices.
  • These stores are distinctive as they carry an array of highly available secondary consumer goods.
  • Prices are much higher in comparison to supermarkets,  
  • Stores are characterized by seasonality.

 

Customers: Defining the Target Market and its Size, Market segmenting

These stores are targeted for the general population, which can be divided into two main groups: regular customers vs. occasional/random customers. One primary target population is in the smoking public- approximately 24% of the adult population. The assumption is that customers out to buy cigarettes may also make additional, unplanned purchases.

 

Competition

Competition in the industry stems from a number of parameters:

  • Snack bars and convenience stores located in the business’ proximity.
  • Fast food restaurants.
  • Mini markets and grocery stores offering cheap, immediately available consumer goods.

 

Vendors

 

The wide range of products sold requires communication with a large number of vendors. Many vendors sponsor exterior signing, accessories, and stands for their products.

 

Marketing resources

Main marketing methods include exhibiting salient external signs and an attractive display. It is customary to place ice cream freezers and newspaper stands at the storefront and arrange the store in order to best promote sales of profitable products (such as soft drinks).

 

Factors Affecting Success:

Central location, the amount of direct competition in the area, inventory level, range of products, competitive prices, service quality, good sanitation, long operation hours.

 

Entry Barriers:

Entry threshold is low, as no professional training or prior experience is required. Main barriers are financial- cost of establishment and purchase of initial inventory.

 

Human Resources:

Due to long work hours, a shift change is required mid-day; therefore, more than one worker is required in order to operate the business.

 

Funding:

Required Equipment

Main equipment required is a counter, shelves, refrigerators, and signs, cash register.

A snack bar should additionally be equipped with a serving counter, a salad bar, refrigerators, an oven or microwave, and a coffee machine, if coffee is served.

 

Required Investment

The investment varies according to store size, location, required equipment, extent of initial inventory, etc. thus, it is important to prepare an investment plan that addresses these aspects before establishing a business.

 

 

Industry revenue and profitability

 

The industry is characterized by a relative abundance of unreported work, and therefore there is some difficulty assessing the true revenue. Average estimated yearly revenue per worker:

  • Type 1: 558-775 NIS thousand.
  • Type 2: 279-432 NIS thousand.
  • Type 3: 310-446 NIS thousand.
  • Type 4: 181-271 NIS thousand.

 

Typical Terms of Payment

Customer sales take place mostly in cash. Large sales may take place in credit cards.

Vendors- credit terms vary and range from cash (cigarettes) to EOM+30.

 

 

 

 

Risk Level:

Risk level in the industry is medium. In case of failure, the investment in appropriating the location will be completely lost. A partial return on inventory and supply may be possible.

 

Licenses and Certifications:

  • Local authority license is required, after receiving a permit from the Ministry of Health. 
  • Areas abundant with religious population require a Kashrus certificate, but this also requires the business not to operate on Saturdays and religious holidays.

 

Insurances:

Business insurance (for content and inventory), third party insurance, employer’s liability insurance, loss of income insurance, and food poisoning insurance if food is prepared at the premises.

In addition to the above, an insurance agent should be consulted in regards to the need for additional insurance.

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