The Power Of Suggestion

Exclusive CSNews Survey Shows Retailers Leaning Increasingly On Employees To Suggestive-sell New Items

The success rates for new items introduced to the convenience store industry last year were down in all seven major product categories tracked in the Convenience Store News New Product Scorecard, but retailers nevertheless increased the number of new items on their shelves and increasingly relied on store associates to make consumers aware of those products.

According to the exclusive CSNews survey, the success rate of new products — that is, the percent of products reviewed by retailers that were still being sold on shelves after six months — was down between 3 and 11 percentage points across the major product categories last year.

The survey also found that despite the sluggish economy, half the retailers surveyed increased the number of new products they added in 2010 over the previous year. Interestingly, while gross profit dollars and sales volume were still the two most important measures for judging new product success, a larger percentage of retailers in 2010 cited “buzz or excitement created at store level” as an extremely or very important measuring stick — an eight point increase from 2009.

Suggestive selling by store employees remained the most effective technique of promoting a new item, according to retailers — perhaps indicative of the importance of creating store level awareness of new products. More than eight out of 10 retailers rated “suggestive selling by store employees” as the most effective promotion method for new items last year. That was a significant 10-point increase from 2009 and a six-point margin over the second most effective method — running price promotions — which itself was up three points from the previous year.

At CSNews' Candy and Snacks Roundtable last summer, retailers listed suggestive selling as a “best practice” to encourage sales of confectionery items. Erin Slater, category manager at Travel Centers of America, with 187 sites, noted the retailer had “huge sales in a tested two-week period” following an informal training initiative to instruct all cashiers to encourage more impulse candy buying through suggestive selling. “We do suggestive selling with candy, too, especially on new items,” added Bill Tencza, senior category manager at Quick Chek, with 123 stores. “The power of suggestive selling is awesome,” agreed others at the roundtable.

Retailers responding to this year's New Product Scorecard research appear to believe suggestive selling works beyond the candy category.

On the flip side, signage and on-shelf promotions each took a six-point drop compared to the previous year, according to retailers.

Although ranked as only the eighth-most effective promotion method, digital advertising (including own company Web site and social networks) scored a solid five-point increase over a year ago and leaped over print advertising in terms of effectiveness. (See Figure 3).

While half of the retailers surveyed said they introduced more new products in their stores in 2010 than in 2009, 36.2 percent said their number of new SKUs remained the same. The mean average number of new products introduced by retailers increased to 58.2, up from 46.8 and 43 in the previous two years. (See Figure 5).

The continuing problems with high unemployment and lackluster retail sales had a negative effect on the success rate of new product introductions last year. Candy and gum repeated as No. 1, with 41 percent of new items still being sold six months after introduction to retailers. However, that figure was seven points lower than the previous year. Health and beauty care (including the hot energy shot category due to NACS defined product definitions) had the second-best success rate at 38 percent, but that figure was nine points lower than in 2009. (See Figure 1).

Of the seven major categories tracked (see Figure 1), salty snacks had the best performance compared to the previous year with a 37 percent success rate, down only three points from 2009. Beer and malt beverages took the biggest hit in terms of success ratio — scoring a 32 percent success rate, down 11 points from the previous year. Tobacco was down five points to 35 percent, edible grocery down four points to 24 percent and packaged beverages down six points, to 23.5 percent — the lowest success rate in the survey among the major categories.

SPACE LIMITATIONS

As in the previous two years of the survey, limited space continues to be the biggest challenge to launching new products in the convenience store channel. More than three-quarters of retailers cited space as their biggest problem. Other challenges included creating customer awareness (56 percent of retailers), in-store execution (30 percent) and lack of manufacturer support (28 percent). (See Figure 6).

On top of that, retailers had less patience with new items last year. More than nine out of 10 retailers gave a new product three months or less to prove its worth on the shelf. Only 8 percent gave new items four months or more, and none kept a new item past six months if it wasn't producing anticipated results. In 2009, 11 percent were willing to wait four to six months for positive results and 2 percent were even willing to keep trying a product for more than six months.

“We want to see continuous demand with a decent profit margin,” said one respondent to the survey. Another said the time on shelf varies “it could be based on the time of year, the weather, promotion, etc.” But, indicative of the growing retailer attitude, another respondent said, “If it doesn't sell right off the bat, it's not worth keeping.”

Two trends seemed to have the most significant impact on new product introduction in 2010. Value and health were the most significant drivers for the launch of new products in the past year, according to verbatim responses of retailers.

Retailers talked directly on the importance of value during difficult economic times with comments such as these:

■ “Better product for the same price”

■ “Cost effectiveness”

■ “Larger value packages”

■ “Lower price points to re-capture business lost because of poor economy”

■ “Price is huge in this economy”

■ “A new frugality”

They also said new products that addressed consumer health concerns were popular, with such comments as:

■ “Continuing trends in functional foods”

■ “Healthier eating habits”

■ “Less sugar”

■ “Mainstreaming of organic natural products”

■ “Natural products with eco-friendly packaging”

Asked to name their single most successful new product introduction of the past year, retailers listed the following items or trends:

■ 3-pack, 24-oz. beer at a price

■ 5-Hour Energy drink and shots

■ 12-percent alcohol content beer

■ Arizona teas

■ Cheap cigarettes

■ Rave cigarettes

■ DEF (diesel exhaust fuel)

■ Four Loco

■ New Mike's hard items

■ New packaging on gum and mints

■ Kettle chips

■ L&M cigarettes

■ Loose tobacco

■ Lotus incense

■ Marlboro Special Blends

■ Rock Star Recovery

■ Silly Bands

■ Trojan condom

■ White Out Mountain Dew

■ Wine, at below grocery store prices

■ New flavors of Wrigley 5 gum

■ Generic and private label brands

■ New foodservice items, like biscuits and gravy

Retailers' top three sources of information about new products remained the same: their wholesaler/distributor, manufacturer reps and trade publications, with the latter two sources increasing dramatically in the past year. (See Figure 8).

By strict SKU count as a percentage of total category SKUs, candy/ gum continued to be the category with the largest percentage of new products, followed by salty snacks and packaged beverages, according to Nielsen Co. research. (See Figure 9).

As a new addition to this year's CSNews New Product Scorecard, giant international research firm, Mintel, provided an analysis of the top label claims on new products introduced to the U.S. market in the past year. Kosher, No Additives/ Preservatives, All Natural, and Microwaveable were the top four claims made on new food products last year. For new beverage items, the most often cited claims were Kosher, Ethical/Environmentally Friendly Packaging, All Natural and No Additives/Preservatives. (See Figures 10 and 11).

Fig. 12

Number of stores operated by respondents

METHODOLOGY

The 2011 CSNews New Products Scorecard was conducted via electronic survey to a random sample of convenience store operators. Results include responses from a total of 157 convenience retailers. Single-store operators represent 32.5 percent of the total, with 67.5 percent are from chain operators (those with two or more c-stores).

Regionally, 32.9 percent of respondents are headquartered in the South, 27.1 percent are from the Midwest, 21.4 percent are from the West and 18.6 percent are from the Northeast.

The research project was supervised by Debra Chanil, director of market research for Stagnito Media's Food Group.