Identifying Key Value Items & Avoiding Inconvenient Mistakes
Convenience stores provide a unique shopping experience that differs from other brick-and-mortar retailers. In the c-store format, every single product offering plays a much larger role in the overall success of the business, unlike grocers or mass merchants that can more easily survive a few unproductive items due to larger assortments.
Because a shopper is not usually making a pantry-filing trip, instead running into a convenience store for a quick need or last-minute buy, c-stores must offer an assortment that is perfected to the needs of the consumer at a price that grows profit. As a result, c-stores must have an astute awareness to know which items to make competitive and which to promote more often.
In order to leverage key value items (KVIs) for the maximum benefit of pricing perception, c-stores must accurately define which items are the most strategically important to convenience shoppers.
As they’re guided by data analytics to ascertain the exact KVIs, convenience store operators should avoid these common mistakes:
Letting Sales Volume Steer the Ship
Top-selling items generally make sense as a key value item. After all, consumers wouldn’t be making the consistent, repeat purchase of that item if it wasn’t valuable to them. However, it’s not best practice to prioritize top sellers alone, focusing pricing and promotion efforts on the “best of the best” and paying no mind to the potential of other c-store products.
Sales volume is a good indicator of consumer enthusiasm, but it’s also possible that the item is inelastic or has only minimal lift potential. C-store retailers who are more sophisticated in their value assessment are those that use advanced science to confidently determine their key items. It may come as a surprise that some top sellers could be excluded, while low-volume items need to rise in the KVI ranks.
Lacking Discernment to See the Big Picture
Good decisions in retailing today are made based on good judgment, a skill that is finetuned over time while leaning on good data. If a retailer doesn’t work to learn and use a discerning eye in the context of key value items, they’ll end up on either end of the spectrum: with too many KVIs or too few of them.
Simply stated, when everything is a key item, nothing is a key item. To be aggressively priced on every item in the c-store is not a profitable mode of operation. The c-store market is competitive, yes; but sustainable margin growth is not driven by being competitive on every single item.
To find that KVI sweet spot, retailers need access to insights that highlight the items that will be most impactful on sales and consumer price perception. Similarly, retailers need to keep the big picture in mind with the elastic nature of c-store products.
Some items will perform well on promotion, but aren’t necessarily key items in the context of everyday convenience-shopping life. Or, conversely, a base competitive price is most important for an item that doesn’t perform as well on promotion.
Without the data and the analytics applied properly, it’s impossible to really know where these differences are and how to translate them into sustainable value generation for the business.
Approaching KVIs With a Merchant-Led Method
The c-store market is full of new innovations, and retailers are right to want to embrace new concepts and test new products. However, letting merchants, CPG brands or other third-party entities influence a c-store’s most important items is also an ineffective approach.
Instead of making this mistake, retailers need to align KVI strategies holistically, keeping the broader company strategy and competitive objectives in mind. One merchant shouldn’t be able to compromise an entire enterprise strategy for price perception — every merchant thinks its top items are KVIs, even if they aren’t.
Leveraging analytics is the ticket to avoiding this mistake, using the insights to understand what works and where a new item’s price perception can make a real difference.
Adjusting KVIs will allow c-store operators to become stronger competitors that make more confident pricing decisions in a niche and hypercompetitive retail format, but only if they avoid critical errors when establishing those KVI lists in the first place.
Matthew Pavich is managing director of global strategic consulting for Revionics, an Aptos company, where he develops data-informed, industry-leading pricing strategies, processes, analytics and organizational fluency to help retailers meet the challenges of today’s increasingly dynamic and competitive landscape.
Editor’s note: The opinions expressed in this column are the author’s and do not necessarily reflect the views of Convenience Store News.