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2018 SOI: Retailing's ‘Strange Bedfellows’

Seize unusual opportunities and create new experiences as disruption rewrites the retail playbook, Hale says

CHICAGO -- While predictions of a “retail apocalypse” precipitated by Amazon-driven e-commerce may be too dire, the headwinds of disruption are rendering traditional buffers such as format and store count moot for convenience-store retailers. In an era when disruption is rapidly becoming expected and even commonplace, “retail format is no guarantee of success,” said Todd Hale, Nielsen consultant and principal of Cincinnati-based Todd Hale Inc.

With almost 40 years of experience in the consumer research industry, including 30 years with New York-based Nielsen, Hale is a devoted student of consumer shopping behavior, buying and immediate consumption. He provided summit attendees with a fresh overview of the retail landscape and some of the trends affecting convenience.


Format Follies

The drug channel is contracting, and mass merchandisers are seeing a decline in store count related to Kmart store closings. In the supermarket channel, most of the expansion has come from high-end or low-end niches: Sprouts and Whole Foods or Lidl and Aldi.

“There’s still expansion going on, but we’re going to see a lot of contraction,” Hale said.

But 10 of the top 20 chains that have added the most stores in the past 10 years are convenience stores: Couche-Tard, 7-Eleven, Speedway, GPM, Casey’s, Andeavor, Sunoco, Cumberland Farms, Pilot Flying J and QuikTrip. And nine of the top 20 chains that now have the most stores are 7-Eleven, CoucheTard, Shell, Speedway, Chevron Texaco, BP, ExxonMobil, Sunoco and Casey’s.

However, as measured by same-store sales growth, the retail channel that continues to outperform others is home improvement. Home Depot and Lowe’s are doing well because “we’re investing in fixing up our homes and apartments because we’re spending more time there,” Hale said.

“You can’t just sit on the sidelines and watch for growth.”

Drugstores are suffering from either flat or negative front-of-store sales, driving growth through prescription-drug sales. With 90-day mail-order refills, consumers “are not making trips to drugstores anymore,” he said.

Dollar stores continue to proliferate and push channel boundaries, but Hale doesn’t see Dollar General’s DGX small urban convenience 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 the traditional format, he said.

Hale said convenience retailers should also be more concerned with Target’s foray into a smaller format. The company plans to open more than 100 hybrid c-store/drugstore/mass merchandisers. Most of the locations are more urban or near college campuses, so that threat may be limited.

Who Will Fall Prey to E-Commerce Next?

Difference in open-store count (2017 vs. 2007) 

The dollar channel opened the most stores from 2007, while consumer electronics stores closed the most locations.


Source: Nielsen/TDLinx | Note: U.S. channel totals are for stores that were open during the month of December 2017.

“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 introduced smaller fresh formats—bfresh and Main & Vine, respectively—but ultimately closed them. Publix plans to open a small-format store focused on organics to compete with Sprouts and Whole Foods. But none of the big supermarkets has had much success in rolling out a small format to compete with c-stores, he said.

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