FLORHAM PARK, N.J. -- In Part 1, I introduced the analogy of the convenience retailer as a finely tuned performance car in a challenging race for volume. We explored pricing as the turbo charger, best used in short bursts for growing margin and exploiting daily opportunities, but not the best way to maintain or grow market share. We also looked at how dropping prices across the board to increase volume often results in price wars and minimal volume growth at reduced margins.
Is this article, we will look at the role of data in the race for volume.
The difference between high-performance cars from even five years ago is stark. Car manufacturers, engine suppliers and tire providers--virtually every force behind the driving machine has improved significantly in their area of expertise or fallen by the wayside. In the race for volume, retailers must be equally focused on constant improvement--fine-tuning performance to ensure they are squeezing every single drop of volume from their assets. Not doing so is to risk becoming increasingly irrelevant and, ultimately being taken out of the race altogether.
The key to staying relevant and constantly improving is to have access to critical data, the ability to analyze it quickly and the mechanism to apply it intelligently. If you take a close look at a Formula 1 car, it is part engineering marvel and part computer. Drivers are constantly updated with telemetry: tire wear, fuel levels, oil pressures, lap times and deltas to other drivers. They are also fed verbal information from their race engineer about weather, change in fuel strategy and amended race tactics. They are able to digest this information and decide the best course of action. Very little is left to gut-feel. Decisions are data driven and augmented by technology, smart engineers and amazing drivers. No time is wasted looking at irrelevant data; the focus is solely on what is important.
Successful retailers behave similarly. They eagerly test new products, new tactics and new ideas, implementing those that succeed and dropping those that add no value. Time and money are too valuable to waste on weak products, processes or technologies.
So which data should be analyzed? From a volume perspective, the most important measure is market efficiency. This measures how effective a retailer's sites are compared to competitors. A retailer with 10% of the sites in a market should, at minimum, be achieving 10% of the volume in that market. Less is an indicator that sites are underperforming.
Let's look at data from some of the top performers around the world. A fuel effectiveness value of 1 means that the retailer is achieving the expected volume from its sites; a value of 2 means the retailer is achieving twice as much market share than could be expected.
Retailers who know their fuel effectiveness score and measure it regularly are able to assess their progress against the rest of the market, giving them an additional edge in winning the volume race.
More retailers are also recognizing that overlaying the traditional volume and margin data with traffic count and demographic data adds significant value in determining reliable volume targets to set. Assembling the right data and organizing it into meaningful actionable insights allows you to make decisions to fine tune your engines (sites) for greater performance.
With attention to relevant data, retailers are able to test, analyze and rigorously implement improvements while eliminating products or processes that are not delivering value--keeping them in the lead in the race for volume.
Data provides the confidence and answers to validate what realistic achievable volumes should be. Starting with overall market share data and then adding site and competitor specific data, the driver of the convenience store race car knows the speed and direction needed to win the race for volume at each specific site.
Coming in Part 3 of "The Race for Volume" series: Competition. Click here to view Part 1.
See the July issue of CSP magazinefor more on how the challenge of fuel volume is affecting the convenience store industry.
Ian Thompson is the senior vice president of strategy at Kalibrate.
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