Turning Insight into Action
Behavioral data, shopper trends can inspire new c-store strategies, store-level tinkering.
Two minutes and one second.
That’s the average time a c-store customer spends in the store. With about 30 seconds taken up at checkout, that leaves 91 seconds for shopping and what one behavioral researcher calls a “conversion” period—a “moment of truth”—in which the shopper becomes a buyer.
“This is a purpose-driven channel,” says Rajeev Sharma, founder and CEO of VideoMining Corp., a State College, Pa.-based firm that tracks shopper behavior using advanced video analysis and documentation. “People are coming in for a purpose. So how do they make their purchase decision? What are they looking for?” (For more from VideoMining, see CSP’s July 2012 cover story.)
Sharma, like many other data providers, taps into what drives conversion and, more important, what might inspire retailers to add or pull facings, tinker with counter sets and work with manufacturers to develop promotional offers that sing.
For Frank White, who recently moved into a new role as director of retail operations for Wheeling, W.Va.-based Tri-State Petroleum from a position at an Ohio-based chain, in-store studies conducted with the help of Pittsburgh-based Management Science Associates Inc. (MSA), led to specific actions. In the case of his former employer, it was resetting the frozen-food section of the store, as well as moving from a one-time promotional coffee strategy to one that was year-round.
“Data is there for you to use,” White says.
While studying store data may seem like an obvious, even foundational aspect of any successful business, interpreting it and turning the insights into action may be the trickiest piece of this evolving puzzle.
Typically that journey begins and ends with profitability, but it’s important to determine if the business is hitting its true potential. To that point, Don Burke, senior vice president of MSA, says numerous research tools become relevant. As an example, he talks about shopper segmentation, or studying a group of people who shop in similar ways or buy similar products.
Essentially, data providers will lump together a population based on specific characteristics, such as age, gender, common needs and behavior. This allows an operator to determine if a significant portion of his or her customers match a particular segment. If enough do, says Burke, then other data sources may show that segment having a product preference, such as certain premium beer brands.
“You have to figure out which segment your stores fall into and look into the behavior of those shoppers,” Burke says. “How are you not meeting or servicing their behavior?”
Of course, the root of all insight is data, and retailers are continually reviewing stats from their own sales numbers, as well as from independent firms and vendor partners, to gauge up-and-coming trends.
One of those research firms, Nielsen, released a c-store-centered study last fall that touched on everything from trending categories to emerging demographics.
Its industry scorecard confirms a positive outlook for the channel, both in riding out the toughest months of the recession and being positioned to thrive in the years ahead. The study cited convenience, drug and dollar stores as channels that experienced significant growth in recent years, with larger-box retailers and supermarkets seeing far less expansion.
One of the more significant in-store trends comes from emerging categories. (See chart at left.) Yogurt sales in c-stores alone rose 57% in dollar sales compared to 10% of total surveyed retail outlets (including c-stores) during the 52-week period ending Aug. 4, 2012, according to Nielsen. Noncarbonated soft drinks spiked 50% in c-stores vs. 6% for other outlets. Fresh-produce dollars at c-stores jetted up 38% vs. 5% at other outlets.
“The emerging leaders in the c-store realm have focused efforts toward on-the-go meals that provide quick and/or healthy options,” the Nielsen report said.
Addressing the makeup of current c-store customers, the report characterized shoppers as having middle to lower incomes (54% having incomes of $40,000 or less), predominantly male (27% male-only households), no kids (73%) and typically from households of two or less (65%). In other channels, females dominate with a 60% share. In c-stores, men occupy 54%.
C-stores also have a more ethnically diverse format over larger retail formats. For instance, African-Americans make up 9% to 11% of sales for larger retailers, but they’re 17% of c-store sales. The share is also higher for Hispanic households (13.7%). Asian households are another story at only 1%, lower than other chan nels in the study.
Having an existing connection with multicultural shoppers is an important starting point, says Todd Hale, senior vice president of consumer and shopper insights for Nielsen.
“If you aren’t linked with a popular segment now, you might have trouble connecting with them in the future,” so that existing connection is a critical foundation, Hale says. “But how much more could be done to take advantage of the fact that they’re connected today?”
African-Americans, Hispanic and Asian ethnic groups are projected to experience the largest growth nationally, especially the latter two. “You don’t have to create the [demand], but how do you nurture it and make it bigger?” he says. “Is it layout? Assortment? Advertising outside the store? Inside? How do you cater to groups set up to grow faster than the normal population?”
One answer could be promotions. The Nielsen study identified 14% growth in unit sales tied to promotions—four times the growth rate of non-promoted items. The study even evaluated two different types of promotions: temporary price reductions and product displays.
Temporary price reductions drove 8.1% in growth in sales for 2011 and 11% growth in 2012, significant numbers considering dollar sales were $4.1 billion in 2011 and $4.5 billion in 2012. Retailers saw a greater growth rate with product displays—which rate higher in consumer interaction—at 30% in 2011 and 27% in 2012, albeit the dollar numbers are smaller, at $1.2 billion and $1.5 billion, respectively.
“Smart retailers have increased their displays and other promotional techniques,” the report said. “And it’s helping to optimize in-store promotions.”
And yet merely knowing something about consumer behavior or the effectiveness of a new facing or shipper placement is only the first step, says Priya Baboo, president of shopper insights for VideoMining. Basically, it’s the difference between knowledge and execution based on that knowledge.
That means taking data from consumer-behavior studies, promotional reviews and vendor research to influence store layout, secondary displays and foodservice choices, as well as front-counter, beer-vault and pump-island strategies.
So-called heat-map video studies can reveal where current store layout encourages bottlenecks, reveal destination points and suggest new placement strategies for products that naturally go together, she says.
Going back to the timeframe of 2 minutes and one second for the typical shopper, she says product adjacencies and strategic interruptions in traffic flow may be critical tools that encourage engagement and, retailers hope, conversion.
And while video studies can identify high traffic patterns, it can also identify people who slow down and actually spend time shopping. Sharma of VideoMining says c-stores ought to consider what he dubs “leakage.” No, it’s nothing to do with plumbing or cracks in the roof. It’s when a fully engaged shopper—someone taking the time to review a category in the store—decides not to buy.
The situation is a critical numbers game. Sharma explains it by developing a theoretical breakdown based on actual store categories. He cites an example in which 42 hypothetical people notice a category over a given time period. Of those 42, 11 stopped and actually shopped the category. Then, of those 11, seven bought something.
While it’s great that seven purchased, four did not. If the conversion sales brought in $120, the “leakage,” or cost in unsold goods, was $68.
“You’re missing conversion,” he says. “Look to see where you’re losing an opportunity.”
As a specific example, Baboo says her company’s studies sometimes find shoppers reviewing the roller grill after 4 p.m., essentially when there’s no new product available after the lunch rush. Again, shoppers are willing to spend the time to engage and shop the category, but they’re walking away without buying, possibly because items are out of stock.
Display organization may also be a factor, she says. Shoppers walking into a beer vault are still operating under a time crunch. They’re purposeful shoppers. If product placement is not clear, sectioned by cases, six-packs, bottles, subcategories and brands, then the decision is less convenient and the experience frustrating.
In just about every section of the store with every category of merchandise, Baboo says certain elements must be fine-tuned, including assortment, variety and placement—all done in a clear and obvious manner.
For any particular product, the shopping time is 25 seconds, she says, “so you have to be clean and simple.”
With or Against the Grain?
Still, raw data may not immediately lead to insight or a specific strategy. For instance, a customer segment such as young urbanites may trend high on Starbucks and Dunkin’ Donuts. Such a statistic may mean little to a c-store retailer.
But Burke of MSA says it clearly means that if the retailer sees a preponderance of this type of customer in his or her stores, a new strategy can emerge to better service that group of existing customers.
“It’s not that [the retailer] should become a Starbucks or Dunkin’ Donuts,” he says, but the retailer “can replicate items found in a Starbucks or Dunkin’ Donuts as a way to increase foodservice sales.”
Sometimes data even contradicts what a retailer may feel in his or her gut. As an example, Burke cites data found in an MSA study that aligns the sale of sports drinks at c-stores with the weather. His company took distributor data and compared it to national weather information over extended periods of time.
As one might imagine, sales of sports drinks rose as it got hotter. But, oddly enough, so did the effectiveness of promotions. So while a retailer may not be inclined to discount a product that will already see a lift in sales due to the heat—why lose the extra profit?— study data implies the opposite. Promote during the hottest days.
It’s all about incremental sales, he says, or new money based on what a retailer does or does not do. Combining a promotion with higher temperatures increases volumes. In the heat, people are lured to cold drinks, and as a result discover the promotion and possibly go ahead with an additional, impulse sale. At the end of the day, a retailer will wind up with more money than if he or she didn’t run the promotion.
“I can understand that temperature already drives sales, but your promotions will be more effective,” he says. “And you can drive more incremental sales when the temperatures are up.”
Back to Basics
The idea that numbers don’t lie may be one of the more critical notions to understand, especially when gut and instinct drive many in this highly entrepreneurial channel, according to Hale of Nielsen,
Even beyond tinkering with merchandise assortment or shipper placement, retailers have to face head on the issue of underperforming stores.
“What comes to mind when I look at data is: [Retailers] are not thinking about store closings as much as openings,” he says. “Too many [stores] are underperforming.”
While many factors surround the decision to close a store, Hale says running assets that continually lose money seems wasteful.
“You’re paying wages but not selling at a level where you’re creating profits,” he says. “Think about dollar stores—there’s a channel where you’ll see a lot of them open. But they’ll also close a lot.”