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Labor and swipe fees are the largest DSOE for convenience stores.

How to combat rising direct store operating expenses

Estimated reading time: 3 minutes

What is DSOE?

Direct store operating expenses (DSOE) are the costs associated with everyday store operations. These costs include utilities and facility fees, wages and benefits for employees, and card processing. According to data from the 2022 NACS State of the Industry Report, inside gross profit dollars exceeded DSOE in only 3 months in 2022. That means that for the other 9 months of the year, the average store spent more on DSOE than it made from non-fuel sales.

The biggest direct store operating expenses for most retailers are labor and swipe fees. For store owners looking to maintain a healthy bottom line, it is important to take steps to mitigate these expenses.

Reducing labor costs

In 2021, the average store employed about 15.3 employees, including full-time and part-time workers. In 2022, that number grew to an average of 19.7 employees because stores employed more part-time employees. In addition to paying each employee’s benefits and wages, stores must invest time into training every employee.

One way to save on labor costs is to attempt to reduce employee turnover. Though convenience stores suffer from higher-than-average employee turnover, retaining employees is key to reducing labor costs. Experienced employees that have already been trained and do not need owner or manager intervention as frequently as new employees lead to overall reduced labor costs. Improving training programs, creating a positive company culture, and offering a full benefit package are keys to employee retention.

The best way to save on labor costs is to optimize store operations using technology solutions. For example, counting inventory using an app, such as Retail360, and a handheld scanner. By having employees on the floor to do continuous inventory counts, the store owner saves on labor by having to do fewer after-hours inventory scans.

 Decreasing swipe fees

In 2022, 77.5% of sales transacted were with either credit or debit cards.  Each year, the percentage of transactions made using cards grows, as evidenced by steady growth over the past five years. Each card transaction has associated swipe fees, or fees paid from the retailer to the bank that processed the transaction. These fees average between 2 and 2.5% of the transaction amount, but sometimes can exceed 4%. That means that, as more transactions are processed on payment cards, retailers are forced to pay more.

To aid in the fight to reduce swipe fees, NACS suggests retailers contact their representatives in Congress and encourage them to support bills like the Credit Card Competition Act. The bill would introduce more competition to processing credit card transactions, therefore driving prices down. Congress passed a similar bill in 2010 requiring competition in debit card processing, which successfully reduced the financial impact of swipe fees to both retailers and consumers.

To learn more about swipe fees, check out our explainer on how they impact c-store owners.

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