The pandemic is still having an impact on food item preferences. Even if the pandemic feels like it's over, the psychological and economic effects certainly haven't disappeared. Before the pandemic, our data at PDI showed that everybody was laser-focused on healthy food choices. But we don't see a lot of people pushing for that right now.
Our operators report that indulgence is back to the over-the-top, add extra bacon, get the super-jumbo hot dog kind of world, where people are seeking comfort food in periods of higher stress. We can't ignore the psychological comfort of food because it has a deeply social, cultural and emotional effect.
In some ways, the convenience store has become the safe space for responsible indulgence that makes us feel better about our day when the world seems a bit overwhelming.
Fluctuating Fuel Margins: How to Make Up for Lost Profits
From a business perspective, foodservice can certainly be a high-margin space that helps you make up for softness in other parts of your business. However, you need to find the right balance inside that space to truly understand how much extra margin you can achieve from a marketing and promotional perspective.
If you have the right tools to produce the right amount and types of food at the right times and properly manage waste, there's enough margin in foodservice to experiment a bit with your products and offers.
The flipside is that even though foodservice is a high-margin category and a strong leader, if you manage it poorly, you may find yourself losing a lot of money very quickly.
Diving Deeper: Foodservice Preferences Across Regions
We've been having conversations with our clients about what food items work geographically. Some food items easily cross cultural boundaries, and c-stores can be a place where consumers are willing and even excited to try new things to satisfy their food curiosity without significant investment required.
We're consistently finding regions, though, where the food culture simply doesn't translate — and in many cases, it's more about logistics than the type of food. One example is that made-to-order patterns won't work in places where customers aren't willing to wait on you to make the food.
If your customers are going to a convenience space to get food, many want it in a ready-to-go box, so they can walk right out the door with it. A premade burrito might work for them, but they’re not going to wait for you to assemble a custom taco order.
Bringing Customers In by Leveraging Loyalty Programs
Loyalty programs can fit anywhere (which is what makes them challenging, usually). The primary difference with foodservice is that you might now have more margin to play with in terms of offers and promotions. It's like having a bit of extra flexibility to experiment, whereas with tight margins, you can’t afford to test as much.
The loyalty angle also factors in when you want to target individual customers. The golden opportunity inside loyalty is when you know enough about your customers that you can extend them offers that are unique enough to move them from a lower-margin item or lower total basket position to a higher-margin item or higher total basket position.
For example, a customer might have an impulse to buy something that's higher margin or contributes to a higher total basket spend. The question is: Can you as a store operator — by knowing their previous purchase activities — be able to identify the magic combination and tie it to a loyalty offer that leads to that higher-margin purchase?
In other words, if I'm buying a certain candy bar on 50 percent of my store visits, would I buy another item combined with that candy bar? If you can remind me about my candy bar and pair it with the right product in real time, there's a good chance I'll buy the second product.
The more data and insights you have about your customers, the easier it is to personalize loyalty offers that, in turn, increase your profitability throughout the c-store.
Overall, implementing foodservice into your business can yield profit when done properly. The key is intentionally activating on it. By understanding consumer wants and trends in 2023, convenience store owners can capitalize on customer loyalty and consistency.
As vice president of retail product management at PDI Technologies, Justin Baxley helps to identify and innovate opportunities to solve the modern challenges facing today's convenience retailers. He is regarded for his ability to connect with colleagues, customers and others throughout the industry community, as well as for his critical thinking and creative problem solving.
Editor's note: The opinions expressed in this article are the author's and do not necessarily reflect the views of Convenience Store News.