Channel Blurring Boosts Need for C-store Innovation
RESTON, Va. — The convenience retail channel has become a staple of many consumers' daily lives, but as other retail channels look to attract those quick trips, convenience store operators need to rise up and meet consumers' changing expectations.
Many pieces of U.S. convenience retailing need reinvention, according to Chelsea Gross, an analyst with RetailNet Group LLC, a retail advisory firm.
"Ultimately, we are seeing the expectations of the convenience trip being defined by certain innovative c-store retailers," she said.
Citing today's channel-blurred environment for convenience retailing — from grocery initiatives to quick-service restaurant initiatives — Gross pointed out that c-store operators can learn from these "disruptors" because they are now, increasingly so, a direct competitor to traditional convenience retailers.
"We can apply a lot of the ideas they are implementing into our stores," she explained.
Speaking during a recent webinar entitled "Trends and Analysis of the Ever-Changing Convenience Retail Landscape," Gross noted there are two ways to increase retail sales growth: add new shoppers or increase the basket size of existing shoppers.
"Globally, we no longer can count on an influx of new shoppers. We can expect 61 percent of global retail sales growth to come from increased spending of our existing shoppers. In the U.S., this is very prominent because we see foreign population growth and household sizes shrinking a little bit," she said during the Sept. 27 webinar hosted by the Convenience Distribution Association (CDA), the trade organization that works on behalf of U.S. convenience products distributors. "Shopper acquisition is not as important as shopper retention these days."
Taking cues from competitors — both inside the channel and outside — can push a convenience store to the front of the pack.
"It's not just about convenience retailer No. 1 vs. convenience retailer No. 2. Nearly every big-box channel has decided to move into a small box of some kind. Discount operators always had that smaller box and always competed with that lower price point, but drug has really increased its assortment to include more fresh foods and more services," Gross explained.
Drug has a particular competitive advantage against convenience because there's the pharmacy shopper who will always have to go back to fulfill their pharmacy needs. "Convenience should certainly be watching for drug," she cautioned.
THE CONVENIENCE SUPERSTORE
Gross breaks the convenience channel into two segments: traditional convenience (like 7-Eleven) that most consumers are familiar with; and convenience superstores (like Wawa and Sheetz) that are rolling out new experiences.
"These are experiences where the family goes to the gas station, but they also sit down and have a quick meal. It's very easy to order because of automation in the store. They do things like have a separate counter for tobacco, so there is quicker checkout for those people who are looking for that quick trip," she said. "They are really reinventing the experience in convenience in so many different ways, and you see it unfold from a sales- and store-growth perspective."
Convenience superstores are not only outpacing sales growth for the total convenience industry, but also for the total U.S. retail industry. And the same can be said in terms of store growth. Notably, Gross cited, convenience superstores represent six of the top 10 convenience banners for sales added, and five of the top 10 convenience banners for stores added.
"They are really starting to have a role in the growth platforms for convenience," she said.
However, retailers should not just copy what a chain like Wawa is doing. Rather, they should find ways to innovate further around what they see, she advised.
Gross laid out a few key areas that will be changing over the next four or five years for convenience retailers:
- Trip types: Convenience retailers are now deciding to have many different trip occasions inside their stores, not necessarily just the impulse trip.
- Meal solutions and prepared food: It's not even about adding that basket of apples inside the store. Certain convenience retailers have a food offering that is unparalleled; and that anyone would want to eat and experience with their family.
- Future of the frontend: Self-checkout, mobile payment platforms and new digital technologies can be implemented for a faster checkout experience.
- Retail health: Mass merchandisers have been doing this as well, but convenience has not really increased the assortment to the same extent.
- Desire to experience: Convenience needs to notice what consumers are spending their money on — vacations, concerts, brunch with their friends on the weekend, etc. — and add these types of experiences into stores, or make them better at least from a navigational standpoint.
- Pricing and promotion: Convenience retailers have often had a higher price point than retailers in other channels. As ecommerce has driven lower prices across the board, this is something to continue to watch.
Gross also offered some examples of leading innovation in the convenience channel. For example, 7-Eleven Inc. has strengthened its private-label offering and is giving its proprietary 7-Select brand prime shelf space in the stores. Sheetz Inc. is moving beyond traditional convenience store locations by setting up shop on college campuses, "capturing consumers while they are in that transitional period to peak consumption at retail, which happens at about [age] 25 to 34," she noted.
In addition, she pointed to Casey's General Stores using mobile to up its game — notably, using a pizza game on its mobile app to engage consumers. However, she noted that since consumers use about three to five apps on a frequent basis, retailers should consider partnering with high-frequency apps like weather or social apps to engage more consumers. Automation and click-and-collect pickup points are other opportunities c-store operators should be exploring, Gross added.
"Channel blurring is a real challenge and opportunity for [convenience] retailers. They need to find new ways to differentiate ... whether investing in a quality experience or investing in that seamless trip — finding ways to offer better navigation around the store, better trip planning, better meal planning within the store," she said. "It's no longer about location."