Things are looking good in the c-store industry. In a recent analysis conducted by Management Science Associates (MSA) of three medium-small convenience retailers, many of the top convenience categories are experiencing sales increases. Fuel, the No. 1 category, was up 12% in volume due to lower prices at the pump. Cigarettes sales rose 4%, packaged-beverage sales were up 8% and salty-snack sales grew 6%. Total in-store sales were up 3% during this time period.
Yet one fact hit me pretty hard: Only about 15% of those who purchased gas went inside to make a purchase.
JPMorgan Chase recently calculated that the average consumer was saving about $700 annually due to lower fuel prices. While many consumers realize these savings right in your front lot, they are pocketing much of the extra cash and spending it elsewhere. The JPMorgan Chase study showed that the top area where these fuel savings are being spent—or about 18%—is in restaurants, and about 10% is being spent in grocery.
How do you capture a larger portion of this extra cash? That’s where category management comes into play. If you maximize your product selection when times are good, you will see additional benefits when times are not so good. Aim to optimize sales under both circumstances.
Top of the Top
According to MSA research, the top five strongest growth categories are sweet snacks, wine, beer, other cold-case items and ice cream. Notice the similarity? Just as the study showed the largest incremental spending was at restaurants, four of these convenience categories are personal indulgences. And cold-case items are in sync with additional spending on groceries.
Consumers are willing to spend their newfound cash in your stores; you just have to figure out how to make this happen more often.
For example, MSA’s analysis suggests that retailers carry several mini-doughnut items, chocolate cupcakes and honey buns in the sweet-snacks category. In the wine category, MSA has routinely found that bottles selling in the range of $7 to $12 typically sell best. And we found that multipacks of popular-priced beer in cans were the strongest selling items, although it varies by location and shopper base.
It is equally important to communicate these categories’ availability and any promotional offerings. Window signage, fuel-tank messaging and even social media can provide opportunities to increase the incidence of in-store purchases.
Keep in mind that top-selling items can change based on the time of day, according to MSA research. For example, there are as many packaged beverages sold at 7 a.m. as there are in the afternoon hours. However, the top-selling item changes by time of day, from energy drinks in the early morning to CSDs by the afternoon. Consider this change in consumer demand, and your promotional, display and customer communication efforts should reflect it.
Basket Bounty
Also, be sure to focus on the categories that will provide the greatest chance for additional inside sales. The list below includes the convenience items most often found in the market basket of a fuel customer. These categories have the best chance of getting fuel customers inside the store.
Focusing on categories popular with fuel customers, along with those that are top sellers, will deliver the greatest return. To promote them, consider signage at the point of entry or payment, joint promotions across categories (e.g., rotating a savings offer across categories with a fuel purchase) and social media announcements.
Finally, foodservice can further increase your odds of capturing more gas-savings dollars. The MSA analysis showed that stores offering foodservice had 59% higher salty-snack sales and 33% greater packaged-beverage sales than those that do not have a program. And transactions involving foodservice had higher rings, or nearly $9 vs. $7 for the average transaction.
How often does your customer have an extra $700 in his or her pocket? The time is now to apply your category-management techniques and go after these additional dollars.
Fuel Market Baskets
About 85% of fuel transactions include nothing else. These products are most often included in the remaining 15%:
- Premium cigarettes
- Car wash
- Scratch lottery tickets
- CSDs
- Energy drinks
- Bottled water
- Cigars
- Chocolate bars/packs
- RTD iced tea
- Branded discount cigarettes
Source: Management Science Associates Inc.
Don Burke is senior vice president of Management Science Associates. Reach him at dburke@msa.com.
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