Increased channel blurring is making it tougher for convenience stores to retain existing customers—and harder yet to develop loyalty in new ones. With drug stores like Walgreens and Rite Aid now selling beer and wine, Dunkin’ Donuts offering a wide array of drinks, and fast feeders continuing to gobble up market share by offering consumers the convenience of service without having to get out of their cars, how can c-stores continue to do well?
The top question c-store retailers should be asking themselves is, “What is our competition doing that we can steal from them?” said Greg Parker, president of The Parker Cos. in Savannah, Ga., and chairman of research and development for NACS. “Our industry needs to be thoughtful about looking at those tactics we can steal from the guys who are trying to steal our customers from us. They’re coming into our space, doing a whole cadre of things to get our customers.”
New Product Royalty
Parker advocated a great tactic to fight back: Designate a specific in-store location for new products. “Many consumers, especially teens, consider food to be fashion, so making a separate display for whatever water and power bar is the latest trend is a good thing,” said Parker, whose chain operates 23 stores in seven Georgia counties.
Mike Ross, senior vice president of merchandising and fuel for Village Pantry, agreed and stressed the importance of paying attention to customer research. “Customers don’t like clutter,” he said. “We sell convenience. Customers want to be able to walk in, stage where they want to go inside the store and go there.”
To accomplish this, Village Pantry uses low-profile, angled gondolas with products strategically placed at the fronts and backs of the structures. “As the customers are driven to the back of the store toward the cooler, there are high-gross margin items as they travel back to the sales counter,” Ross said.
The company is also merchandising the four corners of the store to the max, featuring destination categories that include coffee, foodservice and fountain drinks. The strategy is reaping benefits.
“We are seeing growth in the categories that we had anticipated, because of the philosophical things that we did,” Ross said. “We’re seeing growth in some of our higher profit items—beer, coffee, deli, bakery items and fountain areas.”
Stay Ahead of the Trends
Deciding which new products to carry is a logical extension of understanding customers’ need states and following your company’s market brand, retailing experts say. The more information retailers have about their customers, the better they are at selecting new products that sell well.
“We held a branding seminar several years ago and identified working mothers as the consumers we most want to focus on,” Parker says. “If you please the working mother, you please everyone. Women are the game-changers.”
David Johnson, category manager and buyer for 140 Love’s Country Stores and Truck Stops, said c-store owners must rely on supplier partners to stay on top of trending data to satisfy key consumer groups. “Gathering information from the vendor, magazines, shopping grocery stores and TV ads and looking at our own trends on similar products already in our set is a must,” he said.
Last year, Johnson added Java Monster, Rock Star Roasted, Starbucks Double Shot 15-ounce cans, Propel Invigorating, Glaceau Vitamin Water, Smart Water and G-2 to Love’s beverage offerings, and all have sold extremely well. Love’s also runs special promotions to boost new product sales.
“Usually we start a new product at regular price and then after it is in our set for 60 days we will run a “buy two for a dollar or buy two, get one free, type of promotion” Johnson said.
If You Can’t Beat ‘Em, Join ‘Em
Sometimes, the smartest and most economically feasible move is to simply join the competition. Several years ago, when Asheville, N.C.-based CitiStop LLC revamped its portfolio by eliminating several stores the company felt weren’t going to be competitive in the changing market environment, company vice president Scott Shealy elected to add Dunkin’ Donuts in two of his remaining outlets. Citistop is presently replacing an existing gasoline c-store site with a third Dunkin’.
Ten years ago big discount and regional grocery stores didn’t sell gas—and pay-at-the-pump hadn’t yet made it necessary to find new ways to drive in-store traffic, Shealy said. “We’re finding we don’t have the economics to compete on street with Sam’s, Wal-Mart and Ingles Markets, so we have to come up with reasons for consumers to make us their stop of choice. Dunkin’ Donuts gives us a good coffee program and adds a strong brand to the property.”
But going this route comes with a price. Storeowners who choose a big brand should be ready to make additional changes in their existing stores. For example, when Dunkin’ came out with its expanded menu, deli sales at the adjacent c-store fell to the point where Shealy decided to remove the deli altogether.
Parker would like to see even more functional consolidation in the convenience channel. Seventy-two percent of fast food sales come from drive-throughs, he was quick to point out, yet so many c-store operators refuse to install drive-throughs. And if drug stores are selling the beverages that are a core category for the convenience channel, why aren’t c-stores including pharmacies and a more robust offering of health and beauty aids and vitamins?
Some Products Don’t Travel
Sometimes, introducing new products leads to opening a completely different retail outlet, as when Parker created the company’s Urban Market in downtown Savannah.
“I built Urban Market because it’s what I wanted as a consumer,” Parker said. “Initially, it didn’t look like there would be a robust financial return, but my wife and I went with our gut feelings and built it anyway.”
The 6,000-square-foot store, which stocks more than 5,000 standard and specialty food products and more than 10,000 convenience and impulse items—quickly became the second-largest wine retailer in the city.
However, Parker soon found that the free-range chicken entrees and high-end gift items that drew hundreds of customers downtown didn’t work well in other locations. “We’ve tried putting higher end products in our c-stores, and they don’t work,” he said. “In order to choose the right products for each store, you need to know exactly who’s shopping there and be nimble enough in your portfolio of stores to understand that different stores have different customers who have different needs.
“The bottom line,” Parker said, “is that you have to listen to the consumer.”
For example, Parker put $12,000 worth of top-shelf wine in one store that, from all appearances, should have been the perfect market for it: an affluent suburban community with homes worth upwards of $4 million.
“But it didn’t work—what sold best was Yellowtail,” Parker said. “We had an SKU for every kind of wine and we had very robust data and it still didn’t work. We finally realized that many of those expensive houses are fourth or fifth homes where people just aren’t there very much.”
Don’t Forget the Hamburgers
Despite all of the industry conversation about where the growth categories are and the ongoing efforts to boost business with loyalty and club cards, Parker said c-store retailers need to remain vigilant about the basic products that are core for the industry.
“The percentage of your profits that come from an increase in microbrews is miniscule. That doesn’t mean you shouldn’t carry it, just that you have to be careful about how you go to market,” Parker said. “Just remember, people still buy hamburgers—they buy them in greater and greater numbers—and the basic elements of providing convenience and outstanding service have been very good to us.” CSD