Spirit of Continuous Improvement
If you could start all over again and build your company from scratch, what might you do differently?
Dave Carpenter, president and CEO of J.D. Carpenter Cos. Inc., West Des Moines, Iowa, and 2012-2013 NACS chairman, would focus on his employees first.
Carpenter, who sold his c-store business a few years ago, acknowledged that his company was passionate about building great stores and finding perfect locations, but it did not have a committed workforce. He is now re-entering the business and has a goal in sight.
“I’m on a mission to make a company built by people,” he told attendees of the 2013 NACS Show opening general session. As an example, Carpenter pointed to Kwik Trip Inc., La Crosse, Wis., which donates 40% of its profits to its employees and enjoys incredibly low turnover and shrink.
“It’s a scary step: Can I create that kind of a culture?” Carpenter said. “I’m convinced that I will have a better business with a team that wants to succeed as much as I do.”
It also requires c-store retailers to make a greater investment in their people, with the debate over raising the federal minimum wage and protests at quick-service restaurants as the backdrop. “We need to do a better job taking care of our people,” said Carpenter. “The end result is people doing a better job taking care of the company.”
While the c-store industry has grown into a powerful retail channel, it also has room for improving its image. “In business, your image is your business,” said Carpenter. He shared the example of his company’s efforts to build a new store in Colorado, what he considered an ideal site for growth—no competition within 3 miles, close to an interstate—but instead hit a wall of opposition from local government officials and a homeowners association. They feared yet another dirty, dangerous gas station bringing crime to the neighborhood.
While Carpenter understood their fears, he disagreed with their belief that a moratorium on new c-stores was the solution. “How will existing stores get better if the competition is locked out?” he said. After a tough fight, the new store won approval and ultimately won over the locals.
While Carpenter acknowledged that c-stores will continue to get resistance from opening new sites—“I always think surely the next time will be easier, but it never happens”—they will soon have a new tool to help them make their case. NACS is creating a customizable tool kit retailers can use that presents the business case for c-stores.
“We want to turn the discussion from NIMBY—Not in My Backyard—to ‘What took you so long to get here?’ ”
And there is measurable success in the industry’s efforts to redeem its image. For example, thanks to NACS’ “Dangerfield” public-relations campaign, c-stores have become less of a target of charges of price gouging.
Carpenter also hit upon the need for c-stores to broaden their customer base beyond regulars who come in for smokes and gas, both of which have seen declining sales over the past few years. While there is still a place for traditional gas stations that focus on these two categories, it is the c-stores that embrace foodservice that are truly pushing the industry’s boundaries. The convenience channel rang up $31.3 billion in foodservice sales in 2012, Carpenter said, besting the biggest quick-service restaurant, McDonald’s, with a sum that is more than the second- and fourth-largest QSR chains combined.
“That’s great news, but we have so much further to go,” said Carpenter. It’s not a matter of if but when the c-store channel will become the biggest threat to competitive channels, he said.
Pyramid of Power
C-stores generate 80% of their overall sales from two commodities—gasoline and tobacco—that also happen to provide less than one-half of the channel’s profits. How do you create customer and employee loyalty to the other 20%? By transcending expectations.
Chip Conley, founder of independent hotel company Joie de Vivre, asked attendees at the opening general session to consider the similarities between his business and theirs. Both hotels and convenience retail are service industries. They both face grueling competition from traditional competition, as well as “disruptors” who appear to come from nowhere. And both have a workforce that is paid an hourly rate, typically has no higher-education experience and serves in what detractors consider “dead-end jobs.”
With hurdles such as these, how can convenience retailers even hope to come out ahead? It’s simple: Don’t limit yourself. “A great hotel is more than a bed,” Conley said. “A great c-store is more than convenience.” Rather, it is about strong company culture, providing a place for employees to live up to their potential, and winning strong customer loyalty.
For example, Southwest Airlines is widely admired for its strong company culture and enthusiastic employees. Several years ago, during the recession, Conley was on a Southwest flight and noticed that the airline’s CEO, Gary Kelly, just happened to be passing out peanuts to customers—most of whom had no idea who he was. After Kelly finished his task and retreated to the back of the plane, Conley introduced himself and began picking his brain. One of his questions: Why didn’t Southwest introduce baggage fees as the other airlines did during these economically troubled times?
Kelly’s response: After the other airlines began charging customers to check bags, these same customers started bringing more bags onto the planes as carry-ons as a way to avoid paying the baggage fees. Boarding a plane soon became a much more laborious affair for airline employees. In effect, the move turned flight attendants into baggage handlers and made their customer service responsibilities even more difficult to fulfill. It was a strategic error that crippled employee morale.
“The sign of a great leader in business,” Kelly told Conley, “is know how to get out of the way and let employees live their calling.”
To provide a path toward building Joie de Vivre into an employee-focused culture, Conley adopted psychologist Abe Maslow’s “Hierarchy of Needs,” a pyramid that shows the different steps toward reaching true work happiness, or self-actualization. As you move up Maslow’s pyramid, you move toward a more representative version of yourself. In essence, it was a map for employers to help employees attain the old Army slogan “Be all you can be.”
While Maslow’s pyramid was designed for people in mind, Conley saw its potential use for businesses. “If humans can be self-actualized, why not a company?” he said.
For Joie de Vivre, Conley created a hotel hierarchy of needs, with the basic physical needs of the customer—a comfortable, clean bed—at its base. At the top is identity refreshment. Around this, the hotel company built boutique concepts based on magazines that personified their potential clientele. For example, one hotel had Rolling Stone as its touchstone, and another had The New Yorker.
For c-stores, the hierarchy of needs has convenience at its base, ascending to friendliness and then serving customers’ unrecognized needs. Conley shared the example of a c-store he frequents. The store’s owner asked Conley what items he would like him to stock. After Conley suggested a few—vitamins, protein bars—the retailer stocked them. This same operator had in fact asked all of his 25 top customers this question and delivered where he could. The result: All of them, including Conley, shared their positive experience with friends.
“When you provide something unexpected,” said Conley, “you create more loyalty.”
High-Level Thinking
Where does a man in a lawn chair tethered to dozens of weather balloons and floating thousands of feet in the air cross paths with a chain selling almost as much pizza as Pizza Hut? Retailers featured in the annual Ideas 2 Go presentation reinvent the notion of retail gas and convenience by bringing in products, offers and experiences outside the norm.
The 53-minute video featured retailers from Washington, D.C., to Bend, Ore., and spoke of the unique ideas that differentiate them from their competitors.
Brad Call of North Salt Lake, Utah-based Maverik, like others retailers featured, found ways to boost the customer experience. Graphic elements at his stores focus on an adventure theme, with actual mannequins inset in the ceiling sporting ski wear or riding canoes.
“Yes, we sell the same [soft drinks],” said Call, comparing his products to what the competition offers. “But hopefully this experience will be more fun; endorphins will flow and ours will taste a little bit better.”
Call also spoke of the company’s “black” debit card, a loyalty program that takes advantage of cheaper interchange fees to save the company money and reward customers. Encased in a fold-open pamphlet that describes the rewards system, the black magnetic-stripe card gives customers 6 cents off every gallon every day, plus points for purchases. Customers can redeem points at the store or turn their points into dollars for local charities. The points also earn customers entry into various contests to win adventure-related prizes.
“We don’t send out mass offers,” he said. “We specifically target things they want. We connect with them.”
While Call operates a 244-store chain, independent operators also demonstrated creativity through the use of ethnic cuisine. Several Washington, D.C.-area retailers each spoke of how breaking the stereotype of “trashy” gas-station food was important to the success of their locations. R&R Taqueria, Elkridge, Md., featured Latin-inspired flavors; Fast Gourmet, Washington, D.C.; Thai Pan, Leesburg, Va.; and Seoul Food DC, Wheaton, Md., focused on Asian-inspired food.
Ankeny, Iowa-based Casey’s General Stores also spoke to food, specifically pizza, for which it has earned the title of the fifth-largest pizza chain in the country, having developed a reputation in small towns. Representatives for the 1,750-store chain spoke of enhancements it has made in recent years, increasing cooler-door space and improving upon its pizza operation—often seeing 100% increases in foodservice sales after doing so.
Casey’s also is testing pizza delivery, overcoming internal concerns about encouraging the customer to stay home vs. walking into a store. So far, the effort has raised awareness and increased pizza sales.
Single ideas often grow into new profit centers, as with Stop and Go Mini Mart, Bend, Ore. It’s already a hub for beer with its beer cave, made of spray-can foam and chicken wire, which was a unique and highly original sight for attendees. The store’s owner, Kent Couch, had the idea of adding craft-beer station The Growler Guys, which lets customers buy beer on tap to take home.
The store started with eight fountain heads and since has “exploded” to 36 different flavors. Taps are changed five times a day as a way to keep up with what employees believe is a new customer base coming in specifically for growlers.
Couch is a one-of-a-kind retailer, with features at his store including a roulette wheel that lets customers win prizes, and a 40-foot fueling hose for vehicles that have to park far away from the island. He also sailed into the air several years ago in a lawn chair made airborne by dozens of weather balloons. The stunt brought national attention to him and his business.
Best Strategies for Increasing Beer Sales
Top-quartile retailers sell nearly seven times as much beer as those in the fourth quartile, according to a new report by Anheuser-Busch, St. Louis. The difference, according to A-B’s C.J. Watson, is a balanced approach and a consistent pricing strategy.
Watson, vice president of category management, reported the results of the A-B study during a NACS Show workshop titled “Getting Crafty with Beer Sales.” The study, which included 40,000 convenience stores across the United States, unveiled the following beer quartile sales figures:
- Top-quartile retailers sold $315,272 in beer.
- Second quartile: $193,739.
- Third quartile: $130,913.
- Fourth quartile: $46,045.
Part of the study took a closer look at more than 300 stores, which showed a balanced beer strategy was most often successful.
According to the report:
- Retailers who focused on craft beers at the expense of premium beers succeeded in outperforming the c-store industry average only 21% of the time.
- Those that focused on premium beers and downplayed craft beers succeeded 70% of the time.
- That said, a beer strategy that highlighted both craft and premium beers beat the industry average 90% of the time.
Watson said a balanced approach more closely reflects the way consumers think about beer. “People want all segments, so we have to manage all of them,” he said.
The top quartile also has a consistent pricing strategy, maintaining craft prices that index at 175 compared to premium beer prices—i.e., if an average six-pack of premium beer costs $6, a six-pack of a craft beer costs 75% more, or $10.50.
It’s a matter of setting expectations for the consumer, Watson said: “If you’re not asking them to pay more consistently, how can we expect them to trade up regularly?”
Grow Traffic, Image and Spend
Forget about the ABCs of improving convenience store sales. Doug Middlebrooks is more interested in PITA.
Middlebrooks, assistant vice president of shopper marketing for Coca-Cola Refreshments, developed the acronym as a way to underscore the four ways a retailer can sell more stuff.
P: Population, or store traffic.
I: Incidents, or how many of those customers buy snacks or beverages.
T: Transactions, or how many times they buy a snack.
A: Amount, or how much they spend.
Middlebrooks offered suggestions for growing each element of PITA (see PDF).
“There’s not one area that’s right for every retailer; it depends on your store,” Middlebrooks said. “This helps you frame up which marketing opportunities to focus on.”
Adventure's First Chairman
As likely to wrestle a shark or crawl the length of the Great Wall of China, Brad Call, whose boyish looks and buoyant persona project an adventurous spirit, is hardly the face of caution.
So when the Maverik Inc. executive accepted the proverbial mantle of leadership as NACS’ chairman for the next 12 months, an air of spontaneity permeated an industry often known for its conservatism. “This should be a fun 12 months,” one former NACS board member mused. “I hope NACS knows what it’s in for.”
Then again, Call himself can rarely predict the next thought that will emerge from his fast-paced mind. More comfortable in a Hawaiian shirt and loafers than jacket and tie, Call delivered an entertaining compact history during The NACS Show closing session of his family and its business—a story steeped in entrepreneurialism and large clans, notwithstanding his wife and nine children.
The story starts in 1928, when his pioneering grandfather, Reuel T. Call, opened the first of what is today more than 240 convenience stores, with the company’s headquarters in North Salt Lake, Utah. And it continued with an uncle who, observing the stultifying extended Wyoming winters, built a high-altitude airplane.
A heritage of self-starters had been born. Today, it is found in Maverik’s Adventure’s First Stop stores, a one-of-a-kind convenience concept replete with resplendent in-store images of whitewater rafters, surfers, skiers and those who celebrate boundlessness.
“We’re passionate about thrilling our customers and emotionally connecting with them through adventure,” said Call, who holds his company’s unique title of vice president of adventure culture. Among the examples of thrill, he cited that when Maverik opens a store, it does not hold a grand opening, but rather an open house—one loaded with activities and adventure.
In addition to adventure, Call’s other favorite word is also the name of his Wyoming hometown: Freedom. “I love living in freedom both literally and figuratively,” he said. To that end, Call hoisted a bladder-buster mug at least five times the size of what New York City Mayor Michael Bloomberg would have permitted in his failed bid to cap the size of carbonated soft drinks.
“We should all have the freedom to make our own choices, right?” he said. “That means our customers should be able to make their own choices, without anyone telling them what they can—or what they can’t—buy.”
That choice means the right to sell fattening items as well as healthier options. “It’s an awesome thing that our nation is focusing on health, fitness and fighting obesity,” he said. “Your responsibility and my responsibility is to provide healthy options. But it’s not our responsibility to tell customers what they should and shouldn’t eat.”
To facilitate better health, Maverik is developing an app called “Consume It, Burn It” that rewards users for their exercise and, the company hopes, entices them to buy items at the store.
At the end of the day, he said, it’s less about the calories you take in and more about the calories you burn. So, he exhorted, “get off your butt and burn it."
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