Holding the Advantage

AWMA C-Metrics Convenience Industry Outlook Forum lays out a three-step plan

Every convenience store operator is well aware of the increasing competition facing the industry, whether it’s from dollar stores nudging their way into the tobacco category or drugstores adding small grocery lineups.

Convenience stores, however, can hold the advantage as long as they stay focused on understanding their customers, working with their suppliers and wholesalers to meet the needs of those customers, and keeping an eye on the competition, as attendees learned at the American Wholesale Marketers Association (AWMA) C-Metrics Convenience Industry Outlook Forum, held in New Orleans at the end of June.

In the fast-changing world of convenience retailing, it has become more important than ever to stay on top of trends, and the “key to the puzzle” is better understanding the consumer, advised Scott Ramminger, president and CEO of AWMA. Using current industry data to see where convenience store categories stand today and where they are heading is one tool for staying in sync with consumers. But in order to translate these insights into growth, he said the players in the supply chain need to build stronger partnerships.

STEP 1: KNOWING YOUR CUSTOMER

According to Sandy Skrovan, U.S. research director with Planet Retail, the younger generation will account for a higher percentage of c-store shoppers in the next five years. With this generational shift will come an increase in diverse ethnicities; an increase in reliance on smartphones and technology; and an increase in the importance of social media.

The consumer of the next five years will be combining these factors to be armed with more information when shopping, leading to higher price transparency, Skrovan said.

She also pointed out that over the next few years, there will be an increased polarization among consumer income, materializing in a greater percentage of both low- and upper-income households as the middle class gets squeezed.

STEP 2: KNOWING YOUR COMPETITION

While c-stores in the past competed with other c-stores for consumers, operators today face increased competition from other retail channels, especially dollar stores. That being said, convenience stores do have their own inherent strengths, noted Viv Penninti, president and CEO of InfoRhythm Inc., which partnered with AWMA on the event. For example, convenience fits with consumers’ lifestyles; c-stores offer a simpler assortment and sell gas; and consumers build relationships with c-store employees through the high frequency of their trips.

At the same time, convenience stores do have some weaknesses: limited space, high transportation costs to multiple store locations, high out-of-stock levels and high employee turnover.

Still, convenience stores are forecasted to see 3.4-percent growth by 2017, which Skrovan said falls somewhere in the middle of the grocery retail spectrum. Warehouse clubs and value (dollar) stores are forecasted to see the highest growth at 4.9 percent and 8.4 percent, respectively.

Retailers on the West Coast in particular should be on the lookout for dollar stores, she said, adding that this region presents “wide open territory for dollar stores right now.”

The end result by 2017 will be a shift in market share across the overall grocery retail spectrum, Skrovan concluded.

STEP 3: KNOWING YOUR PARTNERS

To some, talk may be cheap. But when it comes to the convenience channel, it could be the difference between success and failure. This is especially apparent when the conversation is between all three links in the supply chain — retailer, supplier and distributor.

Opening the lines of communication among all three main players will help build new product launches, fill voids in inventory and get the right merchandise mix inside a convenience store.

Joe Hamza, vice president of sales and marketing at Tedeschi Food Shops Inc., explained how an improved dialogue about new products would spell success for the New England chain. “New products are what drive growth in any category. They are important for retailers,” he said. There is a big challenge with communication on these products.”

Specifically, Hamza said retailers need enough lead time on new products from their supply and distribution partners to effectively execute the process of getting those products into the stores. In addition, retailers need to know who the target consumer is for each new product.

Another major challenge is the lag time in communication from manufacturers about what products to remove in order to accommodate new products. “Manufacturers are slow to delete existing items, so space is limited for new products,” Hamza noted. “We need our manufacturing partners to be more forthcoming.”

Successfully executing a new product introduction into c-stores is only part of the battle. The challenge then becomes keeping those products in stock. It’s very difficult to successfully build on a new product if it is out of stock soon after introduction, according to Hamza.

“Manufacturers, suppliers, retailers, consumers — for that to work effectively, everyone has to be in sync,” he said. “The only way to be in sync and work in harmony is by sharing information.”