Non-traditional missions, food bundles and innovative products work for the convenience channel.
ROSEMONT, Ill. — Disruption is everywhere — from the increase in e-commerce to outside economic factors to competitive channels inching further into the convenience channel's turf.
Looking at the industry through a 10-year lens, key factors affecting convenience stores in 2008 included gas prices passing $4 per gallon, a dire economic situation, the beginning of the healthier lifestyle movement and smartphones growing in popularity and effectively changing how retailers sell things, according to Andy Jones, president and CEO of Sprint Food Stores Inc. in Augusta, Ga.
At the time, many wondered how the convenience store industry would survive, according to Jones. But convenience didn't just survive, it prospered with new categories. Notably, energy drinks saw 10-year industry growth of $5 billion-plus and c-store prepared foods saw 10-year industry growth of $41 billion, he noted.
"Disruption should make us think about opportunity," Jones said at the 2019 NACS State of the Industry Summit, which took place April 2-4 in Rosemont. Jones is also vice chair of the NACS Research Committee.
One area where disruption is especially hitting convenience stores hard is in the number of customer trips being made.
Excluding fuel, convenience store trips were down 2 percent in 2018, according to Jason Lobel, CEO and co-founder of SwiftIQ. Looking at some top categories, cigarette trips were down 2.4 percent, packaged beverage trips were down 3 percent to 4 percent, beer trips were down 3 percent to 4 percent, and candy and snack trips were down 2 percent to 8 percent. And not only are the trips down, but so are the categories themselves, meaning consumers are buying less as well.
However, there are some standout categories:
Other tobacco product trips are up 3 percent to 5 percent;
Food prepared onsite trips are up 3 percent to 5 percent; and
Lottery trips are flat to up 2 percent.
The downward trend in trips can be reversed through promotions, advised Lobel. Consumer packaged goods companies spend approximately $225 billion annually on trade promotions — and that amounts to more than 30 percent of their marketing and advertising budget.
"There are a lot of dollars floating around," he said.
There are several things a c-store operator should keep in mind when considering a promotion, according to Lobel. The list includes length of promotion, purpose of the promotion, support behind the promotion, and if the time is right for the promotion.
As for promotions in general, they fall into four primary types:
Save with bundles
Bundles with discounts
Everyday low pricing promos are not promotions, Lobel stressed, because customers come to expect them.
So, what is working in convenience? Non-traditional missions; food bundles and meal deals; first to market with innovative products; and tactical displays are the most successful, he explained.
On the other hand, what's not moving the needle are items bundled from opposite dayparts; no support (like signage); too many promotions; and small temporary price reductions, he said.
Still, it is not enough just to run a promotion. Retailers need to know if the promotion is working. "You need to ask yourself if you are using the wrong measurement tools for the modern world," Lobel said, noting that measuring units per week is just the tip of the iceberg.
C-store operators can mine a lot of trip data from store receipts, including basket size and items, loyalty information, and day and time of purchase.
"You really have to understand your stores, your assortment and your customers," he said.