How Small Operators Can Be Successful in a Post-COVID-19 World

NATIONAL REPORT — What are the critical challenges facing the convenience store industry's small operators? How does the financial performance of small operators (1-20 stores) compare with that of the industry's larger chains? What does it take to be a successful small operator in the convenience channel today?

Answers to these questions and more were explored during a recent Convenience Store News webinar that highlighted the results of CSNews' inaugural State of the Small Operator Study, which examined the financial performance of convenience channel retailers that operate one to 20 stores vs. the overall industry. 

"Despite the trend toward consolidation, the top 10 convenience store retail chains account for only 27 percent of the industry's total store count," cited CSNews Editorial Director Don Longo, who moderated the webinar sponsored by Reynolds American Inc. "Single-store operators still make up the lion's share of all industry stores (62.3 percent), and small chains — consisting of two to 20 stores — continue to represent significant sales revenue across all key categories, from fuel to foodservice." 

More than half of the industry's small operators said their annual revenues increased last year, reporting a mean average sales increase of 1.7 percent — remarkably similar to the 1.9 percent overall c-store industry sales gain in 2019. The average dollar amount per transaction increased at small operators. Inside the store, the average ring for merchandise excluding fuel was $11.40, up from $10.85 in 2018.

"We are hearing that during the pandemic, transactions have been down, but baskets have been higher than average," Longo noted, discussing the effects of COVID-19. "That's likely to continue for the remainder of the year."

The webinar also featured an insightful question-and-answer period with Roy Strasburger, president of StrasGlobal, a privately held retail consulting, operations and management provider serving the small-format retail industry nationwide. The talk delved into the critical challenges currently facing small operators and what post-pandemic advice Strasburger has for these entrepreneurial operators. 

According to Strasburger, the top challenges StrasGlobal and other smaller c-store retailers are facing currently are falling foot traffic because of COVID-19 concerns, the staffing paradox in a country that currently has a high unemployment rate, and difficulty getting products into the store.

"If the initial COVID situation that happened back in March and April was any indicator, it shows that if there's another massive lockdown or a distributor that can't get products out, small operators kind of fall to the bottom of the list when it comes to getting items," Strasburger explained. "Most distribution seems to go to bigger players."

The solution StrasGlobal came up with is alternative supply arrangements. For example, the company has been working with local restaurants and farmers markets whose items may not withstand a lockdown. It is selling those products in-store on their behalf.

Putting this kind of locality into focus has been a driving factor for success, according to Strasburger. Since a majority of StrasGlobal's contract-operated sites are located outside of urban areas, the company is trying to align itself to the neighborhoods it serves. This has given it the opportunity to define and understand its customers and their needs.

"This is more important than ever since people are dealing with out-of-stocks or long lines at grocery stores," he said. "We're trying to become more of a provider of things people need when they're at home, so we're going back to what c-stores were like in the 1960s and 1970s, acting more as a bodega than just a snack shop by supplying more of the items we were moving away from, like cooking supplies or household items and pet care.

"Adaptation is a huge advantage of the small operator over larger retailers," he added. "We can improvise and pivot quickly and if something doesn't work, we can change it just as quickly. We want to be as indispensable as possible."

Some key pieces of advice Strasburger has for small operators are:

Acceleration Is Key

At the start of the coronavirus pandemic, StrasGlobal did not have a way to communicate with customers to let them know that its stores were open and had essential items. In a unilateral move, the company is now accelerating its efforts around online ordering, delivery and a loyalty program to gain valuable information about its customer base and open a channel of communication that did not exist before.

Give Customers a Reason to Come to Your Store 

A twofold issue that has arisen from the COVID-19 pandemic is the impact of shrinking fuel gallons, which means less fuel sales and less opportunity to make a profit. To combat this issue, small retailers can focus their efforts on products and services that will drive customers to the store. StrasGlobal, for example, has had food trucks park on-site, and is rolling out an online delivery program for incremental sales targeting those consumers who aren't on the road much anymore.

Increase Center-of-Store Offers to Offset Higher Operational Costs 

Operational costs in health and safety investments have increased because of COVID-19; however, the visibility of these precautions directly correlates to customers' confidence levels with coming to the store. To maintain these efforts while offsetting the higher operational expenses, small operators should focus on higher-margin products like grocery and health and beauty care vs. snacks to maintain overall margin and profitability, according to Strasburger.

Rely on Your Resources

Small operators are hard-pressed to find new products in established categories now that trade shows have been cancelled and travel restrictions are in place at many companies. A key component for keeping the offer competitive is to borrow ideas from channels outside of convenience and utilize various online platforms that can give analyses and detailed information on items and services, he advised.

A replay of the "Small C-Store Operators Study Highlights" webinar is available here.