Putting a Premium on Value
NATIONAL REPORT — There's more than one reason to feel optimistic when taking a broad view of the U.S. economy.
While challenges undoubtedly persist, unemployment is low, inflation is coming down and the economy itself appears resilient, according to National Retail Federation Chief Economist Jack Kleinhenz. Individual consumers, however, have more than one reason to feel pessimistic.
Inflation may be moderating, but its long tail continues to have an impact on day-to-day purchase decisions. Several retail industry experts have observed larger numbers of consumers who are living within a budget, seeking ways to wring the most out of every dollar and cutting back in certain areas to make sure they can still get what they most desire.
A deal is what they're after these days. According to the 2024 Convenience Store News Realities of the Aisle Study, which surveyed 1,500 consumers who shop a c-store at least once a month, 59% of participants cited the price of products as the No. 1 factor that defines a positive shopping experience for them — up 5 points from a year ago.
It's no surprise then that operators are rushing to demonstrate that the best way consumers can spend their money is with them — particularly in foodservice, which saw a bevy of summertime specials. In July, McDonald's announced the extension of its $5 Meal Deal, while Krispy Krunchy Chicken debuted a $4 Value Meal. Fast-casual and quick-service restaurants also have explored a variety of limited-time offers targeted at cost-conscious consumers.
It is clear that convenience store retailers must act purposefully in planning and promoting the value they offer. But one-size-fits-all deals won't do the trick — operators must understand the details of what shoppers want, how they want it and what they're willing to pay for it.
"Our data still indicates that consumers are making price-conscious decisions, whether that is trading down to value-based retailers or making multiple visits to different retailers," said Elizabeth Lafontaine, director of research at foot traffic analytics firm Placer.ai, headquartered in Santa Cruz, Calif. "However, we've seen pockets of traffic growth among specialty categories that are promising."
As a concept, value is deceptively simple. Lafontaine noted that in terms of today's consumers, the word carries two distinct definitions: the price paid or perceived savings on an item or during a shopping occasion; and the more intangible elements of the shopping experience such as convenience, service and product quality, all of which leads to overall customer satisfaction.
Striking the Right Balance
For convenience retailers, the effects of ongoing inflationary pressures and high interest rates don't have a single point of impact. Instead, they have "rippled through all areas of business," according to Chris Hartman, vice president of fuels, advertising and development at York, Pa.-based Rutter's, the operator of 80-plus c-stores.
"We've seen some customers making choices and avoiding impulse decisions, which differs from 2021 and early 2022. Tobacco is probably the biggest area that has been impacted across our industry, with customers trading down due to price increases," he said. "However, our breadth of offerings at Rutter's has helped mitigate some of the economic impact, as our customer base is very diverse."
Hartman pointed out that although price point is an important component of value — particularly in foodservice — quality and speed of service also drive customer behavior. The goal, he said, should be to find a balance rather than race to the bottom.
"Customers have unique needs and therefore, our stores offer a variety of items at different price points with wait times that meet, or exceed, customer expectations," he continued. "However, our mantra is to never sacrifice quality for price. That has resonated with our customers and helped us continue to see sales growth."
Michael Bloom, chief marketing and merchandising officer at GPM Investments LLC, a wholly owned subsidiary of ARKO Corp., reported that customers are making fewer c-store shopping trips but buying more per trip. "This is a helpful indicator to businesses, so they can adjust their promotions and offerings accordingly," he said.
The Richmond, Va.-based retailer makes it a point to emphasize different aspects of its value offer across the company's network of 1,500-plus stores and 34 banners.
"Our approach to value as a concept also has several different meanings. We are very convenient, which adds value as customers don't have to drive far, which adds savings. We have a loyalty program, which adds significant value by way of price and flexibility for enrolled members," Bloom told CSNews. "We have strong promotions, which address the price-conscious consumer, and we have a great assortment of products defined by what the customer wants and expects."
For the full story, check out the September issue of Convenience Store News.