By Jerry Soverinsky
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Since 1996, Alfredo Lujambio has been making the annual trek to the NACS Show. A true industry veteran, he has develÂoped a deep list of industry contacts that he cultivates carefully at each Show, while gaining new insights that he leÂverages for operations back home.
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It’s a similar story for hundreds of other NACS Show attendees, who inÂclude everyone from single-store operaÂtors to executives from chains with hunÂdreds of units. The only difference with Alfredo: He’s not trying to maximize sales at a single company; rather, he’s trying to redefine an entire country’s convenience store industry.
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If you head south of the border (stopÂping at Mexico), you might just find one of Alfredo’s newest convenience conÂcepts, SPR (pronounced "super"), that he helped create. And along the way, you’ll no doubt run into any one of the hundreds of name-brand stores that he had a hand in developing and refining.
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Lujambio’s industry experience dates to 1996, when he joined 7-Eleven-Mexico’s corporate office in Monterrey. (A forÂmer J.C. Penney executive in the United States, he spearheaded the company’s first international expansion in 1994, when it opened stores in Mexico.)
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In addition to strategic planning, he also took a hands-on approach in operÂations management. Working with a logistics vice president from the corpoÂrate office, he developed the first comÂbined distribution center 3PL model for Mexico’s 7-Eleven. During this same period, he also helped renegotiÂate the contract with the company’s main dry goods supplier.Â
Set on aggressive growth for 7-Eleven, Lujambio assembled a team that acÂquired a regional chain in Guadalajara, converting it to the 7-Eleven brand and adopting a stable of U.S. food items that resonated strongly with the Pacific states audience.
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With a successful M&A under his belt, Lujambio joined Almacenes DisÂtribuidores de la Frontera (ADF) in 2000, a 70-year old firm with a massive portfolio â€" including beer distributors and large retailers â€" working as the commercial director for the company’s 90-store Del Rio chain.
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Lujambio revitalized ADF’s Del Rio brand in Mexico, overhauling its invenÂtory, marketing, merchandising, adverÂtising and foodservice operations. Within six years, the company opened 90 more units and achieved sales of $200 million, distinguishing itself as one of Mexico’s top convenience store performers.
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In 2006, Lujambio accepted a posiÂtion with Circle K’s master franchisor in Mexico City, opening a number of stores in Puebla and reorganizing its franchiÂsee system.
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At the same time, Lujambio’s reputaÂtion among the country’s c-store profesÂsionals was growing, as he began delivÂering lectures and classes on business and retailing themes while contributing articles to industry publications. And in late 2006, he sensed an opportunity and set out on his own.
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"There was a huge interest from enterÂprises and investors across the country â€" including some in the gas station business â€" to learn and explore [opportunities] in the retail sector," Lujambio recalled. "I decided to form a consulting services firm prompted by potential customers …When [they] confirmed their interest and I knew we could support them, I knew the new firm had been born."
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Lujambio’s firm, RTM Retail ToolÂbox Mexico (mercalta.com), specializes in the convenience store industry but works with all retailers irrespective of industry. Separate divisions focus on reÂtailing operations and industry data and trends research, complementary disciÂplines that offer well-rounded assistance for everything from start-ups to mature companies.
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Lujambio believes that his latest conÂvenience store project will have a proÂfound effect on Mexico’s c-store industry.
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Mexico’s convenience store industry is dominated by OXXO, a company formed in the late 1970s by Fomento Económico Mexicano (FEMSA), the company that owns Tecate and Indio beers, as well as the nation’s largest soft drink bottler, Coca-Cola FEMSA. The company has experienced rapid growth in the past several years, growing from 1,000 units in 1998 to 4,100 in 2005 to more than 9,000 today. Its numbers are impresÂsive:
- Serves the equivalent of Mexico’s total population every two weeks
- 73,000+ employees
- $5.02 billion in annual sales
- 33.8 percent gross margin
- 8.3 percent operating profit ($0.419 billion)
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By comparison, 7-Eleven operates 1,240 stores in Mexico, and Extra (conÂtrolled by Grupo Modelo, Mexico’s largÂest brewer) runs 950 units, the second and third largest convenience store reÂtailers in the country. Including regionÂal chains, the entire convenience store count in Mexico totals 14,000 units, or roughly one store per 8,000 residents. (By comparison, Lujambio notes, "maÂture" convenience markets offer one store per 4,000 residents. The U.S. ratio is roughly one store per 2,100.)
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Mexican convenience stores are popÂular destinations for commercial activiÂty, with many offering bill paying serÂvices and bus and airline ticket sales. Many also include an ATM. 7-Eleven has recently received approval from the country’s banking regulatory commisÂsion to become a financial intermediary, in partnership with the country’s largÂest national bank, Banorte.
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It’s no coincidence that the parent companies of OXXO and Extra are both involved with beverage companies. Mexico’s gasoline retailing is handled solely by state oil company PEMEX, which means that unless convenience stores form partnerships with PEMEX franchisees to build adjacent stores, they must rely on other products to drive traffic. As a result, beverages, beer and soft drinks in particular, occupy a dominant footprint in each store.
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Because of that ubiquitous, nearly geÂneric retailing strategy, Lujambio sensed an opportunity when a team of investors approached him in 2009 to help create a new c-store brand in San Luis PotosÃ. "The new c-store had to offer all the benefits of a typical OXXO plus some differentiation," he said. "The idea was to initially offer Internet kiosks and photocopy services…[eventually, we would add] national lotto…retail web music, cell phones and digital imaging."
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The majority of Mexico’s retailers operÂate in typical mom-and-pop fashion, where the owner and his family memÂbers work as clerk, cashier, accountant, tech guy and stock boy.
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"[They are] virtually attached to their businesses, missing the opportunity for growth and expansion," Lujambio said, "living day-to-day [and especially vulÂnerable to] unexpected events…such as sickness, divorce [or death]. They [are] weak opponents to organized c-stores."
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Lujambio knew he could exploit such a vulnerability, though he had to also keep in mind that distinction from OXXO was paramount for success.
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"There are all those changing consumption habits, like mobile phone usage, tobacco restrictions, beer and spirits consumption and industry competition,"
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Lujambio explained. And recognizing that many of the chains "were not very fast implementers, that opened up [more opportunities] …For instance, OXXO had unsuccessfully offered Internet connection in some [of its] stores before."
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While attending the NACS Show in 2009, Lujambio finalized deals with a number of vendors, including Bunn-o-Matic, Kysor Warren and Maddix.
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He also began scouting top locations in the central Mexican city of San Luis PotosÃ, implementing a model he develÂoped that assessed supply, demand, barÂriers, generators and trends to predict sales and profit. And finally, he inked a deal with a regional PEMEX gasoline franchisee to settle stores adjacent to their gas stations (he negotiated a deal that allowed a grace period for rent payÂments, too).
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In 2009, after significant market testing, a new brand was unveiled: SPR, an acroÂnym for Servicio (service) Práctico (practical) y Rapido (fast). "It can be proÂnounced as ‘super,’" Lujambio said. All of the stores over-deliver on his mission to differentiate themselves from OXXO as well as the mom-and-pop stores.
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"We put a lot of attention to interior design; it creates a fresh store experiÂence," Lujambio said, stressing the imÂportance of first and lasting impressions.
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"And we are the first convenience store [chain] to offer Wi-Fi in every store," Lujambio said proudly, "along with 24-7 photocopying services." AdÂditionally, all SPR stores stock "strong, local assortments â€" products that the customer really wants," he said, alludÂing to his competitors that focus on their parent companies’ brands.
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Borrowing a note from his American colleagues, he made sure that all SPR stores carved out strong coffee proÂgrams, featuring appealing private brands and fresh ground beans.
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The first SPR store opened in March 2010, and within 14 months, the compaÂny opened seven more, and is now on track to open a total of 30 units by 2013. "Sales are exceeding budgets and profit is scheduled to reach break-even before month 18," Lujambio said, with "ROI going to be met at month 20."
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Lujambio’s turnkey plan also included developing a comprehensive operations manual, a price policy, HR profiles and position descriptions, and ongoing straÂtegic support. "We will keep updating the commercial strategy based on the right customer values so that it can gain customers’ preference throughout MexÂico," he said.
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Additionally, Lujambio implemented a comprehensive training program that emphasizes customer service, as well as a robust promotional program characÂterized by shorter cycles, which allows more promotions each year.
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It’s a deliberate, well-researched apÂproach that has led to a successful launch for SPR while maximizing its likelihood for long-term success.
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The time is right for growth, Lujambio said, and he points to Walmart for proof, which has recently entered the conveÂnience store business in Mexico with a small footprint format. As a result, he imÂplores his colleagues to capitalize on what he calls a "fertile" business opportunity.
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"For all [my] successful, hard workÂing colleagues in the U.S., [I] strongly recommend to take a fresh look [at] Mexico and consider expanding your business in a thriving market too close to ignore and so promising that it can reÂally enhance your bottom line," LujamÂbio said. "Especially in times less certain for the domestic consumer."
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If you have any questions about getÂting started, just ask Lujambio. You can find him at the NACS Show â€" this year or any other.Â
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Jerry Soverinsky is a NACS Magazine and NACS Daily contributing writer.
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