8 Innovations for '08

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8 Innovations for '08

It's a new calendar year, but the convenience store industry continues to face many of the same challenges it did in 2007 -- satisfying customer needs for fresh and healthy food, speeding up the checkout process, creating a friendly and high-end store environment and attracting pay-at-the-pump customers indoors, just to name a few.

The difference this year is that many have already begun to tackle these dilemmas. Companies are building food commissaries so they can offer stores fresh-food options daily; contactless payment terminals allow customers to pay and go quickly; upscale store designs are cropping up throughout the industry; and television at the gas pump is no longer a dream for the future.

Convenience Store News editors picked out the top eight innovations retailers should keep an eye on and consider incorporating this year. These include the following: Going Green, Alternative Fuels, Payment Technology, Upscale Store Design, Digital Marketing, Super C-stores, Freshly Prepared Food and Healthy Eating.

Going Green

Green and gasoline may not seem the most natural of duos, but a growing number of convenience and petroleum retailers are taking steps to be more environmentally friendly at the same time consumers are growing more environmentally conscious.

In the first "Conscious Consumer Report" released by New York-based branding and marketing agency BBMG, nearly nine in 10 U.S. respondents said these terms describe them well: "conscious consumers" (88 percent); "socially responsible" (88 percent); "environmentally friendly" (86 percent); and "green" (65 percent).

Some of the ways c-store operators are going green include:

-- BP unveiled Helios House, a new Los Angeles gas station made with Earth-friendly farmed wood and reduced pollution paint; the rooftop holds 90 solar panels and a rainfall collection system; and low-energy lighting illuminates the gas island.

-- Nice N Easy Grocery Shoppes opened its first "green" store in upstate New York. A Hussman Protocol unit controls a bank of compressors that only supplies the correct power needed by the coolers, etc. Outside, two "reverse vending machines" encourage the recycling of cans, plastic and glass bottles.

-- Circle K stores in Yuma County, Ariz., installed Enviro green collection houses where people can recycle empty bottles and cans. Proceeds from the recycled products benefit Habitat for Humanity's area building efforts.

-- ConocoPhillips joined the U.S. Climate Action Partnership, a group that supports the enactment of national legislation to reduce greenhouse gas emissions.

In 2008, convenience retailers and manufacturers alike are expected to more openly publicize companywide environmental initiatives such as these.

-- Linda Lisanti

Alternative Fuels

The likelihood of alternative fuels changing the way c-store operators sell motor fuels will be a simple matter of supply and demand -- will they be amply available, and will they be attractively priced to interest customers?

There are 1,400 E85 stations in the United States, and last year, Kroger partnered with VeraSun to carry E85 at selected gas outlets. While most E85 stations are in the Midwest, the first public E85 station in New York opened last May and the first in Louisiana opened in August.

ConocoPhillips is expanding the accessibility and potential use of E85 by allowing marketers to offer this product under the branded canopy in the Midwest. The pilot program is available to about 1,300 sites in these states.

However, it will be pump price that matters to consumers. In November, competitive areas offered E85 for 60 to 70 cents less than a gallon of regular unleaded gasoline. In less competitive areas, it was selling at a price on par with gasoline, once E85's lesser mileage was factored in. In the future, how it will be priced relative to petroleum products is key.

On a parallel track, biodiesel blends can be found at more than 1,200 retail pumps to date. B20 (20 percent biodiesel, 80 percent diesel) and lower blends perform similarly to pure petroleum diesel, and sales of pure biodiesel tracked by the National Biodiesel Board, based in Jefferson, Mo., rose from 250 million gallons in 2006 to 450 million in 2007.

Perhaps more petroleum marketers will consider the latest move by Gate Petroleum Co., based in Jacksonville, Fla. In October, the operator of 225 gas/c-stores in six Southeastern states said its Gate Biofuels LLC would build a 55-million liquid biofuels terminal, expected to cost $90 million. It will receive and ship ethanol and biodiesel via rail, ship and truck, and provide storage for Gate and third parties. Gate will switch from selling gasoline at its Jacksonville-area stores to E10, and E85 will be available at some sites.

-- Barbara Grondin Francella

Payment Technology

A couple of years ago, contactless payment technology, or RFID, hit the market, but it took a little while for retailers -- not to mention consumers -- to embrace the idea of "tap and go." Whether it's MasterCard Paypass or ExpressPay, Visa payWave or American Express, the number of retailers offering the option continues to grow.

Early c-store industry adopters included Ex- xonMobil, Shell Canada, 7-Eleven, Sheetz and Wawa in 2005. In 2007, Spartan Stores, with more than 87 retail stores in Michigan and northwest Ohio, began accepting MasterCard Paypass; Kwik Trip installed Pinnacle PIN pads that include contactless RFID payment capabilities; BP upgraded its point-of-sale (POS) systems to accept Visa contactless payments; and Kum & Go recently announced it would begin accepting MasterCard Paypass at its more than 450 stores.

And while using a cell phone to pay for a purchase is common in places like Japan, this concept is just starting to take root in the United States. A cell phone is used as a contactless payment device, similar to a credit card, and consumers can use it to pay for purchases. 7-Eleven began implementing electronic card readers for Nokia phones in March 2007, and considering how far the industry has come with contactless credit cards, the cell phone payment trend is one to keep an eye on.

Biometric payment is another method that has been around for a couple of years, but it has not become as accepted as contactless credit cards. Some convenience stores have adopted the technology in an effort to reduce credit card fees, and others are testing it.

Overall, payment methods are changing, and cash is becoming a lot less common than it was just a few years ago.

-- Tammy Mastroberte

Upscale Store Design

Real wood floors, brick facades, stainless steel, earth-tone interiors -- they're not the materials making up a McMansion, but describe the increasing trend in convenience retailing toward upscale store design. The convenience industry is taking materials often found in the residential market or other retail channels and putting them to use for stunning effects never imagined when the c-store industry began 40 years ago.

Tile and cement floors are being replaced with real wood floors and noise-deadening carpet for Thorntons Inc.'s new store design. Meanwhile, brick fronts are all the rage for c-stores across the country looking for that neighborhood feel or trying to appeal to zoning boards.

And nothing says expensive like stainless steel. Whether it's appliances or the trim, this clean, sophisticated look is being used in QuikTrip's and Flash Foods' store designs.

And in Colorado, a small Cenex affiliate called Town & Country Supply Association used earth-toned walls to encourage customers to relax and sit down in a coffee shop setting -- a contrast from the former racing stripes that communicated quick in-and-out shopping.

The upscale trend boasts benefits, including an appeal to customers such as the wealthy, women and especially baby boomers.

Upscale store designs will continue to be used by front-runners in the convenience industry in 2008. Those that are implementing such designs -- including Thorntons, Cenex, Flash Foods and Village Pantry -- will continue to do so with success, and others will develop, test and eventually roll out refined store designs. Those that don't may have to face fierce loyalty battles when an upscale design appears across the street.

-- Mehgan Belanger

Digital Marketing

For years, the c-store industry has toyed with the idea of flat-screen TVs with advertising in the store and at the pump, but 2007 was the year they all seemed to dive in. And 2008 will see even more adoption.

Gas Station TV (GSTV) has been popular at the pump, debuting at Murphy Oil Corp. stores in 2007, and offering local and national programming peppered with vendor and retailer advertising on a 20-inch TV screen.

Nielsen Media Research, parent company to Convenience Store News, performed a study interviewing 418 adults, 18 or older, about their GSTV experience at the Murphy Oil stations. While 84 percent agreed GSTV is a good source of product information, 89 percent said they intend to watch or listen at their next fueling.

Also using digital marketing at the pump are Exxon- Mobil, Valero, 76, Shell and Arco, featuring Westinghouse Digital's PumpTop TV for audio and video.

With the success of pump marketing, 2008 may see retailers bringing this concept indoors. By 2011, 90 percent of all retailers will have in-store digital screens, according to the market research firm Frost and Sullivan. In December 2006, BP announced the launch of a forecourt and in-store TV network for its BP Connect sites in the U.K., and Sunoco launched an in-store pilot program late last year with GSTV, the first retailer to launch the in-store program.

And let's not rule out the endless possibilities that text messaging can provide marketers. Meijer has been taking this approach since 2006 when the company announced it would text message customers if the price of gas was about to raise more than a nickel, and the rumor is the company may be expanding the program.

-- Tammy Mastroberte

Super C-stores

Last fall's arrival of Tesco plc's Fresh & Easy concept in California got the most press, but other retailers, including mass merchant Wal-Mart Inc., grocery store operators Brookshire Brothers Ltd. and Giant Eagle Inc. are testing or already changing the competitive landscape with "super c-stores."

More convenient to shop than supermarkets, these stores offer fresher, more healthful and/or more upscale products than a typical c-store or traditional grocer. With some emphasizing single-portion or smaller packages, these retailers are tapping into the nation's growth in single households and desire to eat on the go. They're benefiting from centralized distribution centers, too.

Also, expect them to push quality and innovation in more profitable private-label products. If successful in California, Arizona and Nevada, Tesco plans to open some 200 Fresh & Easy stores by February 2009, and half of their products will bear the Fresh & Easy private label, according to reports. As in c-stores, most items will be sold in small packages -- one roll of paper towels, for example. Approximately 10 percent will be prepared foods.

Meanwhile, America's retail behemoth Wal-Mart is reportedly eyeing a smaller store concept -- 10,000 to 20,000 square feet -- expected to open this year with pilot stores in California, to appeal to higher-income consumers.

Last fall, Jerry Johnson, president and CEO of Lufkin, Texas-based Brookshire Bros., told CSNews its merger with Polk Oil Co. will unveil an 8,700-square-foot store with fresh produce, meat, a pharmacy and clinic services -- a concept appealing to retirees traveling by foot.

Already open in Pennsylvania: the 14,000-square-foot Giant Eagle Express concept, combining Giant Eagle's GetGo's gas and convenience items with the supermarket operator's photo and DVD rental services, fresh meats, produce, prepared foods and drive-thru pharmacy.

Next up? Whole Foods reportedly is considering a test of Whole Foods Market Express, focusing on convenience.

-- Barbara Grondin Francella

Freshly Prepared Foods

For today's convenience store retailers, putting their best foot forward in foodservice means putting freshness forward in their offerings. Along with consumers' growing affinities for organic, locally grown and better-for-you foods, they also want fresh products -- the fresher, the better -- and that's not likely to change in 2008.

C-store operators are relying on a variety of approaches to deliver freshness in their foodservice, whether through a grill program or grab-and-go sandwiches.

Quite a few companies are either creating new or enhancing existing made-to-order, fresh-food programs, while several others are setting up commissaries to prepare fresh goods, which are then shipped daily to their stores. Still, a number of retailers are opting to partner with vendor companies, which also seem to have realized the need for greater perceived freshness, and as such, are improving their product lines as well.

Experts note that consumers judge freshness based on factors such as: seeing the meal preparation, sampling the food, smell, presentation and the presence of a "made-on" date.

The increasing appearance in c-stores of large, open-air cold cases stocked with fresh produce, salads, fruit cups and more is just one example of the fresh movement in action. And 2008 is sure to bring additional examples, as the innovation gains momentum, compelling even more convenience retailers to reinvent and become a fresh-food destination.

Those who do so will have the opportunity to cash in on another innovation projected to impact the convenience industry next year -- healthy eating. Foodservice experts maintain that consumers perceive fresher products as healthier, even if they're really not.

-- Linda Lisanti

Healthy Foods

More than ever, stocking an assortment of healthy options will be critical to food retailers in the upcoming year. For the c-store industry, this means anything from a significant investment in the foodservice section, to savvy marketing of existing products as "healthier for you."

One such example of a retailer making the investment in foodservice is Mechanicsville, Va.-based Fas Mart, which added a new rotisserie chicken program in six stores to meet consumer demand for healthier options. At these locations, customers can buy a quarter, half or whole chicken by itself, or as a snack or dinner.

Another strategy the c-store channel can use is enlisting shelf space for "better-for-you" options -- such as low-fat, zero trans-fats, organic, low-calorie or no-sugar versions of consumers' regular brands -- so health-conscious consumers can try the alternative to their not-so-healthy snack. Some retailers may consider going the route of the grocery channel and putting a number of better-for-you options in one section, effectively making a healthy foods section inside the store.

The last method retailers can adopt is marketing existing products with a healthy angle. It may be surprising what c-store items could be sold as healthier options -- sports drinks in place of soda, functional water in place of bottled water; nuts, seeds or bars in place of salty snacks -- with just a bit of marketing.

-- Mehgan Belanger