Todd Passmore gets it: As your customer base changes, so must you.
When Passmore, district manager for Brentwood, Tenn.-based Mapco Express, realized that Hispanics had rapidly grown to 10% of the population near the company’s stores, his plano- gram needed to evolve.
The company started small, launching pan dulce, Spanish for “sweet bread,” at 13 of its 383 stores. Because the products come from a nearby fresh bakery, Mapco is able to control quality and waste, as well as the product’s stability.
Those 13 stores now sell about 5,000 of the pastries a month. “I always start a program with an exit strategy in mind, but I ended up not needing it,” Passmore said at the CSP 2011 Consumer Insights & Engagement Forum. Mapco is now eyeing more immediate- consumption Hispanic products, such as candy, gum and mints, with plans to roll them out to 150 stores.
The Hispanic population has been growing in unexpected places, according to Eric Johnson, senior director of marketing, immediate consumption, consumer insights & strategy, for Northfield, Ill.-based Kraft Foods Inc. In Mapco’s home state of Tennessee, for example, the Hispanic population increased 134% from 2000 to 2010, with many other states in the Southeast also experiencing triple-digit growth in that time frame.
By 2050, Johnson says, Hispanics could account for as much as 30% of the U.S. population. They’re also becoming more active at the c-store level, increasing from 12% of c-store shoppers in 2008 to 16% in 2010.
Nine of 10 Hispanic c-store shoppers saod in a recent survey from Palo Alto, Calif.-based Knowledge Networks Inc. that they wanted more items from c-stores that are currently unavailable, with the top request, made up of 34% of respondents, being baked goods— including pan dulce. Carlos Garcia, senior vice president of Knowledge Networks, commended Mapco for its authenticity in making that extra effort.
“Their heart was in it,” he said. “It wasn’t just an intellectual decision; they were doing this because they wanted to do it.” (For more on marketing to Hispanics, see the “Hispanics Now” sidebar, above.)
Gen Now
Hispanics aren’t the only emerging consumer, according to Johnson. Kraft internally combines Generation X and Y consumers, accounting for 42% of the population, into a “Gen Now” group. And the group has “enormous spending power,” he said, with college students ages 18 to 34 alone accounting for $306 billion and growing.
Johnson also shared numbers from Mintel International Group that show c-store customers ages 18 to 24 spend $38 in weekly, ages 25 to 34 spend $40, and ages 35 to 44 spend $36.
To build those baskets and appeal to Gen Now, retailers must be aware of the group’s three greatest needs: alleviate boredom, entertain me and get energy. Johnson said 56% of Gen Now customers in a recent survey say they find themselves trying to boost their energy at least once a week. “The good news is all the products and things that we work on from an industry standpoint really fi t into this group well,” he said.
As for why they go to c-stores, most said they are already buying gasoline. On the flip side, reasons they don’t shop in c-stores “really came down to the experience,” Johnson said. “We’ve got to continue to raise the bar here—half the people we talked to wished the c-stores were cleaner.”
Some also said c-stores didn’t carry the products they liked. “Health is becoming a much bigger animal,” Johnson said. The group relates overall health to happiness; although they enjoy “better for you” packaged food, they defi ne “healthy foods” as fresher and less processed, he said. They also think of health as being all about moderation, allowing for small indulgences.
Other key categories for Gen Now c-store shoppers include sweet-snack foods, savory-snack foods, energy drinks and beverages. “These are the categories that are all around us; it’s about how we continue to evolve these and grow these in a way that’s going to be relevant for the new and upcoming consumer,” Johnson said.
Such an evolution would not come without challenges, he acknowledged: specifically, how to reconcile SKU and space rationalization while ensuring diverse offerings. “How do we maintain the appeal and variety that truly is for the Gen Now consumer,” he said, “and at the same time operate a business that’s profitable?”
Consume Now
It’s not only about who the consumer is, but also what that person wants to consume on the spot. C-stores claim 20% of immediate-consumption (IC) trips, about half of QSRs’ 43%. But c-stores beat the competition when it comes to packaged foods, being responsible for nearly half (47%) of IC in packaged food. Also unique to c-stores is all-day snacking. “That is the one mainstay that you are going to always own,” said Krista Lorio, consumer insights senior manager for Minneapolis-based General Mills.
C-stores particularly own consumers’ energy and craving needs, she said. C-stores are also at an advantage when it comes to loyalty for IC trips. While an average of 43% of IC shoppers visit the same location weekly, they are “much more loyal” at c-stores (66%).
As for why they go to c-stores for immediate consumption, hunger is a big driver, with 19% going for a satisfying meal and 14% addressing that it’s “time to eat.” Cravings also are a driver, with “drink up” accounting for 22%. External reasons include gas pit stops (14%) and being in food deserts (17%).
The “easy satisfying meal” trip is driven by variety and value. They typically know what they want to buy when they come into the store, but they are also more likely to buy on special. “So this is a way that you can get them to up their ring or to try something different to get into their routine,” Lorio said. With their satisfaction with c-stores being average, she said, “There’s a lot of room to be able to boost that up.” The “time to eat” group appreciates unique hunger and pairing solutions. Adding a dessert to a well-rounded meal can also add a differentiator from QSRs. The group is taste-driven, she said, so offering their satisfaction guaranteed can be powerful. “If you feel good about your product, standing up and saying, ‘This is fresh, I believe in it,’ really will go a long way,” she said.
“Drink up” shoppers tend to be young and mobile, and can therefore be targeted with technology. They also like to try new products, so retailers might consider rewarding their loyalty in the form of a new product after they buy 10 drinks vs. offering another drink. They also see thirst as a craving, so variety is important.
The “food desert” is really about urban areas with limited shopping alternatives, and those shoppers tend to be millennial and ethnic consumers—and open to experimentation and uniqueness. While most c-stores shoppers are in and out in 2 minutes, these shoppers tend be spend 6 minutes or more. They also tend to make use of dining areas. “If you are stopping there for something quick and on the run, you don’t really want to eat it in mass transit,” Lorio said. Success in urban food deserts includes having a good selection of food in stock, good prices and the right assortment, because these stores are used more like a grocery store than c-store.
Pay Now
Just as consumers seek immediacy when it comes to consumption, cash transactions should also be quick. A new way to pay is on the horizon, while interest is being rejuvenated in a tried-and-true method.
Mobile wallets: Consumers today carry wallets loaded with credit and loyalty cards. They also might forget to bring coupons or gift cards on their shopping excursions. But new efforts from Google for the Sprint network and Isis, a mobile commerce venture involving AT&T Mobility LLC, T-Mobile USA and Verizon, integrate those capabilities into a cellphone. “Think of it as a way of digitizing your leather wallet,” said Tony Sabetti, director of POS & Payment Terminal Alliances for New York-based Isis. “So you’re integrating all this capability of payments, offers and loyalty so that when the consumer does that tap, they’re transferring all that information in one shot.”
That “tap” is enabled by NFC (nearfield communication) technology, which allows two devices to communicate in proximity, ensuring the use is deliberate. While easy payments might be “the hook” of the technology, Sabetti said, it also allows retailers to communicate with customers on a customized basis. “It’s about that personal relationship through the phone that you can leverage to motivate consumers to change behavior to buy more product, and to come into the store more often,” he said.
For Mountain View, Calif.-based Google, another goal of mobile wallets is to close the loop of online and offline shopping, according to Google’s Serge Kassardjian, strategic partner development, mobile commerce.
Historically, Google has driven intent to purchase on the Web with people searching for a keyword, looking for something to buy and then going to the Web page to buy it. That might not work so well to buy a taco, though. “Generally, what we’ve historically done very, very well is generate traffic to websites with the intent to buy,” he said. “Now we’re going to be serving ads to generate foot traffic into the store with the intent to buy.” Version 1.0 of Google Wallet was launched for the Sprint Nexus S 4G phone in five initial cities: New York, Chicago, San Francisco, Los Angeles and Washington, D.C., in October 2011. Participants include Chevron, Subway, Walgreens and Macy’s.
And while the two companies work with different mobile carriers, both agree about the importance of an open platform. “Carriers that operate us and the merchants that operate us were very specific,” Sabetti said. “They’re expecting this to be an open platform and they’re expecting it to be extremely portable. There is no value in going to market with a payment solution that appeals to 15% of the U.S. population.”
ATMs: During the economic downturn, many consumers turned to using cash as a budgeting mechanism, according to David Dove, managing general partner of Beaver Creek, Colo.-based Dove Capital Partners. “There’s one thing that I find, and that’s if I don’t have cash in my wallet, I can’t spend it,” he said. Also, 66% of consumers say they use an ATM located in a retail store to save time, he said.
Numbers such as that spell opportunity for retailers, according to Tom Pierce, chief marketing officer for Houstonbased Cardtronics Inc. Citing NACS data, he said average ATM sales per square foot are about $70 (assuming a 4-square-foot ATM space), compared to $41 for the average product—meaning retailers should treat ATMs as a category.
According to recent Nielsen data, 42% of consumers were influenced to select a particular store because an ATM was there. And Pierce said the ATM’s 2% gross margin driver places it between milk and ice cream in importance.
Opportunities also exist at the transaction level before (location search technology, sweepstakes and surcharge-free and fee-free programs), during (onscreen advertising, loyalty and rewards, and instant offers) and after (couponing and promotions, fee-related updates and social media).
When choosing which bank to work with, 74% of consumers said the extent to which ATMs are located in convenient places was an important factor. Meanwhile, only 19% of banks see ATMs as a key factor in customers closing an account, Dove said: “So the banks don’t necessarily have the importance thing down on ATMs, and that creates an opportunity for you.”
Hispanics Now
Hispanics account for more than half (56%) of U.S. population growth in the past 10 years, with an annual buying power that already exceeds $1 trillion, according to Carlos Garcia of Knowledge Networks. In 2010, 16.3% of the total U.S. population was Hispanic, with 23.1% under 18; 14.1% are adults. Garcia suggests there are 10 important things to know about marketing to Hispanics:
1. There are many types of “Hispanic consumer,” with the population also being broken down into country of origin, acculturation level, socioeconomic group, geographic distribution and shopping and purchasing behaviors.
2. Garcia suggests not leaving Hispanics in an “isolated marketing island.” Retailers should recognize unique issues while treating them as part of the new American mainstream “to avoid condescension, language miscues and message confusion.”
3. Translation is not the issue, with English-to-Spanish translations also seeming transparent. Translation should include meaning, tone, mood, flavor and cultural context.
4. Young Latinos want to be known for who they are, not what they are.
5. Mom knows best—outside of the c-store context. Mom mostly buys the food, OTC drugs and cleaning and household supplies, but she tends to think about others first, going to extraordinary lengths to make sure families are “clean, well-fed and content.”
6. Realities—such as limited budgets, large families and low wages, high incarceration—don’t get in the way of Hispanic families fi nding ways to eat in abundance, enjoy each other’s company and be happy.
7. Hispanics don’t live in a one-onone world. Garcia said Hispanics might buy not only for themselves, but also for neighbors, friends, people who might drop by and others. Market to a social context.
8. The buying process for Hispanics is changing. Hispanics in construction were hit disproportionately by the recession. They consolidated families, pooled money, moved in with each other and learned to use coupons and find bargains.
9. Advertising focused on Hispanics isn’t only in Spanish anymore, and it’s about feeding and maintaining relationships through concert sponsorships, online advertising or games, sharing recipes, etc.
10. Hispanic research is fun, but it isn’t easy. Garcia points out that it isn’t just about numbers and statistics, but about a living, breathing, evolving population— and it takes respect, knowledge, cultural insight and resources.
Women Now
Of the 303 million people in the United States, the majority, 51%, are female, according to Susan Morris, principal of The NewHeight Group. They control 33% of the country’s wealth ($9 trillion), giving them “power of the purse.” And they buy most of everything, whether for the home, office, charities or nights out with friends, parents or children, making them “chief purchasing officers.”
They also are critical to the c-store channel, according to Eric Johnson, senior director of marketing, immediate consumption, consumer insights & strategy, for Kraft Foods Inc. In 2008, women accounted for 44% of c-store shoppers, but that number declined to 42% in 2010. Women’s mean dollars in total spend is $33 at c-stores, substantially lower than their male counterparts’ $37. Both statistics suggest that c-stores have an opportunity to grow their female consumers’ shopping business, and Johnson said adding just one more $1.50 item to that basket could mean a $2.1 billion opportunity for the industry.
Morris also pointed out that women’s power of the purse can extend beyond their own purchases, because they are avid about sharing likes and dislikes with all of their networks. “Women are going to talk, so make sure it’s a great story,” she said.
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