But “retail format is no guarantee of success,” Hale said.
Drugstores are suffering from either flat or negative front-of-store sales; they’re driving growth through their prescription drugs.
One opportunity for c-stores is related to aging populations, Hale said. “The nice thing about older people is that they shop a lot; they make a lot of trips. What else have we got to do? One channel that has been missing out on opportunities with trips for older people is the drug chains. How many of you have gone from 30 days to 90 days on your prescription refills, either at a store or through mail order? You’re not making trips to drug stores anymore,” he said.
Hale doesn’t see Dollar General’s DGX small urban format as a threat. “While it’s interesting that they’re playing in this space, their overall strategy is probably not to add a lot of these just yet," he said. "They’re experimenting with that format. I’d be more concerned about the fact that that they’re adding 900 stores” in its traditional format, he said.
Hale said convenience retailers should be more concerned with Target’s small format. The company plans to have more than 100 of these hybrid convenience-store/drugstore/mass merchandisers, although most of the locations are more urban or near college campuses, so that threat may be limited too.
“Operating a small format is something that everybody talks about and more and more retail channels are doing, but it’s not easy to do,” Hale said. Ahold and Kroger tried to introduce smaller fresh formats—bfresh and Main & Vine, respectively—but closed them down. Publix plans to open a small-format store focused on organics to compete with Sprouts and Whole Foods. But none of the big supermarkets have really had much success in terms of rolling out a small format to compete with c-stores, he said.