According to Nielsen’s Gas Monitor Report, when gas prices rose, consumers reacted by limiting the amount of fuel they bought during each visit to the pump. But this trend encouraged more trips to the fuel island. Additionally, higher fuel prices encouraged consumers to shop more at c-stores rather than travel to additional destinations.
The economy is still sputtering even though gas prices have dropped to about half of last summer’s rate. As stores continue to experience more numerous customer visits, many c-store retailers are expanding the scope of the merchandise they sell, especially in the grocery aisle.
The gas factor isn’t the only reason many 7-Eleven operators are revamping and expanding their grocery offerings, however. "We felt our grocery section was not very well merchandised, so we are concentrating on improving it now," said Hashim Syed, a Chicago 7-Eleven operator and president of the 7-Eleven Franchise-Owner Association of Chicagoland (FOCA). "We were not really paying close attention to what was selling in the grocery aisles, but we’re watching that very closely now."
Tailor Groceries to Demographics
Every store is different, with a different demographic customer base, Syed said. The shelf space allotted to groceries needs to grow with it. Accordingly, 7-Eleven plans to rethink the products on those shelves by replacing "dead" items with new ones that better satisfy shoppers’ needs, expanding canned goods and adding some new frozen grocery items.
For his part, Syed plans to emphasize products that will appeal to the growing number of Hispanic customers, but not create a Hispanic-product section. "I think it doesn’t really fly well if you have a section just for Hispanic people," Syed said. "I don’t think we should make any consumer group feel uncomfortable by segregating their products. Hispanics have brands they like to buy, but they also want to feel part of the mainstream, so their products will go alongside all the other products we offer in each category."
Though grocery sales are growing, Syed is concerned that selling cigarettes may become more difficult under the new administration in Washington next year. The result could take away from the momentum c-stores are getting as a fill-in destination.
Fears that Democrats will push for more regulation is driving Syed to reconsider how to merchandise cigarettes, which are still 27-30% of in-store sales.
Customers Look for Bargains
Never underestimate the value coupons and specials can bring to grocery sales, said Denelle Fisher, store director for Salt Lake City-based Maverik Inc., who reported her stores are doing extremely well with groceries. Maverik operates 192 Maverik Country Stores.
"Consumers do come in and tend to buy more products now even though gas prices have dropped again," Fisher said. "I would say that when people come in to buy, it’s usually for snack foods. It’s for convenience, but they are definitely buying groceries as well."
Fisher’s stores draw quite a few customers with a solid hot food offering and discount coupons the company features on its Web site. "Every month we run specials and it makes a big difference in foot traffic inside the store," she said. "Right now, we have a special on 32-ounce Gatorade, two for $3 and we can barely keep it in stock."
Nice N Easy Grocery Shoppes also use specials to drive grocery sales, said Jared Sturtevant, the chain’s director of category management, noting that cereal sales are up 13%, driven by a two-box for $5 promotion. The company installed open coffin freezers in newer locations to make better use of space and plans to offer large packages of frozen vegetables and bagged dinners to drive ticket rings.
Nice N Easy still sells more cigarettes, beer, container drinks, general merchandise and snacks than groceries, but sales of some grocery items have grown exponentially. Two products that have been a big hit for the Canastota, N.Y. chain are two-quart jugs of pickled eggs and pickled sausage, both of which made the company’s top 50 for grocery dollar sales this year. And though sales of frozen yogurt makes up only 15% of the chain’s ice cream business, that number has doubled over the past year.
Groceries Can Sell Gasoline
You don’t actually need to stock groceries in order to boost grocery sales. Just ask Terry Johnson, vice president of marketing for Richmond, Va.-based Uppy’s. Several months ago, Johnson’s stores began a cooperative marketing program called "fuelperks!" with local grocery store Ukrop’s.
Ukrops already had a loyalty program in place for its customers. The collaboration came when Ukrops customers could redeem the points they earn on grocery purchases as discounts on gas purchases at Uppy’s. For every $50 spent on groceries at Ukrop’s, customers receive a 10-cent per gallon discount on gas at Uppy’s.
"The thing that’s so slick about this deal is it’s stackable," Johnson said. "If customers spend $200 on groceries, they get 40 cents off a gallon of gas." The program has benefited both, increasing sales at Ukrop’s and boosting Uppy’s gasoline volume by double digits—all without demanding one inch of shelf space in Uppy’s stores.
The arrangement remains indefinite, rather like being engaged to be married with no date set for the wedding. Johnson clearly hopes it will become permanent. "We both plan on it being a long-term program but neither one of us has said, ‘Yes, we’re committed to doing this for three years.’"
The engagement/marriage analogy is a good one, Johnson noted, because the companies’ relationship needs ongoing attention to make it work.
Strangely, the increase in gas sales hasn’t increased Uppy’s inside sales as much as Johnson had hoped it would. "We were seeing increases in inside sales prior to the beginning of the program last July," he said. "We still have increases in sales over last year, but they’re not as large as they were previously as a percentage of sales is concerned."
Given the severity of the economic problems of the moment, though, Johnson’s low rate of increase is enviable to retailers in lot of channels experiencing sales droughts.
"Anyway you slice it, I guess we should be happy that we do continue to have increases even if they aren’t as big as we would like them to be," Johnson said. "From what I understand, the majority of our competition is not." CSD