The Power of New Products
New products. Two little words that hold big meaning for both retailers and suppliers in the convenience store industry. Two little words that can also hold big promise, particularly for the industry’s single-store owners as they seek ways to stand out in a crowded marketplace.
To discover how independent convenience stores are tackling new products and how their approach differs from their larger chain counterparts, Convenience Store News for the Single Store Owner and sister publication Convenience Store News recently conducted exclusive new product research that polled c-store operators of all sizes. The last time this New Products Scorecard study was conducted was back in 2010.
Industrywide, the majority of c-store retailers that responded to the survey fielded in late 2013 said they have been testing a greater number of new products compared to previous years. The research, however, revealed that more single-store owners than chains have been increasing their new product stock. More than 60 percent of the single-store operators polled said they increased new products in the past year vs. 55 percent of the chain operators polled.
Only 15 percent of single stores and 8.5 percent of chains said they decreased the number of new products they carry in the last year. The rest of the respondents said they stayed the same.
While single stores lead when it comes to increasing their stock of new products, chains (two or more stores) still add more new products annually than independents — an average of 72 items vs. 46, respectively. When asked how many new products they add annually, the top response from single stores was overwhelmingly 10 to 25 items per year. This was also the top response among chains, but was matched by the percentage who said they add 26 to 49 items yearly.
Across the convenience channel, the challenges to adding new items haven’t changed much for c-store retailers in the three years since CSNews’ last New Products Scorecard study. Lack of space and creating customer awareness continue to be the biggest obstacles industrywide.
However, a key challenge for single stores that’s not shared by chains is distribution issues. Only 18 percent of chain respondents cited this as an obstacle compared to 42 percent of single stores.
Another difference seen between the industry’s chains and independents is the sources they rely on for new product information. Single stores rely most on their wholesaler/distributor, whereas chains rely most on trade publications followed by manufacturer representatives.
Once new products make it into the stores, the industry’s single-store owners are less patient in regards to giving the items time to prove themselves. A quarter of single-store operators (vs. 10 percent of chains) said they give new products just one month to show a return on sales.
Among single stores and chains, though, the greatest percentage of retailers give new products a little more time than that — two and three months were the top responses industrywide.
Using six months on the shelf as the measure of success, CSNews asked retailers in which categories new products achieved the highest rate of acceptance. Fifty percent of new items in the packaged beverages category were still being sold six months after being reviewed and introduced to store shelves. Other categories with high rates of new item success were meat snacks (47.4 percent), candy/gum (44 percent), electronic cigarettes (43 percent) and salty snacks (38.8 percent). The lowest success rate was in beer/malt beverages, in which only 20.9 percent of new items were still being sold after six months.
When it comes to judging the success of new products, gross profit dollars and sales volume are the two most important criteria weighed by all convenience retailers. Ninety-five percent of respondents said it’s all about the gross profit dollars, while another 93 percent cited sales volume (retailers could select more than one answer). Another 65 percent cited the excitement that the new item creates in the store as an important factor in judging its success.
As for the most effective way to promote a new item, suggestive selling by store employees is still regarded as the best method. Slightly more than 85 percent of all respondents indicated this, about the same percentage as three years ago. Other methods mentioned this time around were price promotions (80 percent), signage (69 percent) and shippers (58 percent).
The latest CSNews New Products Scorecard study fielded several new questions. For the first time, retailers were asked to rate the job done by manufacturers in developing new products for their shoppers. Fifty percent of both single stores and chains said manufacturers do a “good” job and about 35 percent said “very good.” While no chain respondents said manufacturers do a “poor” job, 3 percent of single stores did. Conversely, 2 percent of chains gave manufacturers an “excellent” rating whereas no single-store respondents did so.
Another new question gauged retailer involvement with suppliers on new product development. This question, more than any other, showed a divide between chains and single stores. Three-quarters of single stores (75 percent) said they have no input in the process. Among chains, this percentage dropped significantly, to 47 percent.
Industrywide, only 6.5 percent of retailers described their contributions to new product development as a “close collaboration” with their suppliers.