Show Me the Profit!

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Show Me the Profit!

By Don Longo

Gross profit dollars is the most important criteria to convenience store retailers when judging the success of new products in their stores, according to Convenience Store News' latest New Product Scorecard research.

According to the exclusive research study, which includes responses from 122 convenience executives, approximately 82 percent of retailers cited gross profit dollars as their top criteria, compared to 78 percent who named "sales volume," which was the No. 1 criteria in last year's survey with 95 percent citing its importance.

Overall, two-thirds of c-store retailers said they added more new items to their stores last year than they did in 2007. Only 13 percent reduced their number of new products year over year.

On average, convenience stores added 43 new items to their store mix in 2008, compared with only 34 the year before, according to the CSNews research.

As in last year's survey, finding space for the thousands of new products introduced by suppliers is still retailers' No. 1 challenge; however, in the past year, "creating customer awareness" and "in-store execution" were the fastest-growing concerns. More than three-quarters of respondents cited "space" as their top problem in launching new products, but more than half cited creating customer awareness (up 6 points to 58 percent) and more than a third cited in-store execution (up 3 points to 36 percent).

In other breaks from last year's survey, retailers said they get their new product information mainly from wholesaler/distributors (79 percent), toppling manufacturer representatives from the top source (73 percent). Both figures were declines from last year, though. Trade publications was the only source that was cited more often this year as a place to get new product news and information, up 2 points to 72 percent of c-stores.

Highlights of 2009
According to information compiled for the 2009 New Product Scorecard by the Nielsen Co.'s Scantrack Convenience service, the packaged beverages category featured the largest number (2,416) of new UPC-coded products in 2008, but candy was the category in which new products made up the largest percentage of total SKUs in the category, at 19 percent. Salty snacks was also a big category for new products, but there was a drop-off in beer, other tobacco products, alternative snacks, and health and beauty care (HBC). On a percentage basis, however, new products in each of these categories represent between 14 and 20 percent of total products.

In general, new products must prove their worth within the first three months on the store shelf. Almost 90 percent of retailers (89.7 percent) said they give new products up to three months to succeed before being incorporated into their standard set. That figure is slightly up from 2007's 88.1 percent. Indeed, not a single retailer in the survey gave new products more than six months to achieve success and 8 percent gave new items less than a month to prove their worthiness to join the standard product mix.

Health and beauty care was the category that achieved the highest success rate for new products. More than half (55 percent) of the new HBC products reviewed by convenience store retailers were still being sold after six months of introduction. The next most successful category for new products was candy and gum (46 percent), followed by tobacco and salty snacks (both at 41 percent).

Price was once again named the best method of promoting new products, but signage moved ahead of shippers and in & out displays for the second-most effective promotional technique.

Increased convenience, healthier eating, energy/functionality and value appeared to be the four biggest catalysts behind the launch of new products last year, according to survey respondents. Comments included:

-- "Calorie packaging"
-- "Energy drinks and functional enhanced products"
-- "Health, energy and larger sizes"
-- "Packaging -- if it is colorful it sells more"
-- "Manufacturers' desire for bigger market share"
-- "New customers leaving fast food restaurants and using our stores for breakfast and lunch"
-- "Convenience, grab-and-go products"
-- "New sizes to offset price increases"
-- "Sustainability, health and home meal replacement"