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Characteristics of Leading Convenience Store Chains

From zero gasoline margins to consumer value, study reveals common attributes

FORT WORTH, Texas -- In "the battle for the convenience spend," five key characteristics have kept leading retailers ahead of the pack, according to a recent analysis of leading convenience store chains.

"These leaders have demonstrated an ability to grow share in the convenience channel, and their offer stands up favorably against the best in other small-format retail channels such as drug, dollar and quick-service restaurants (QSRs)," according to the report from Trinitas Consulting Group.

Trinitas looked at five leading c-store retailers: Maverik, North Salt Lake, Utah; Wawa, Wawa, Pa.; QuikTrip, Tulsa, Okla.; Kwik Trip, La Crosse, Wis.; and Susser Holdings/Stripes Stores, Corpus Christi, Texas. From them, the consultancy "identified five common characteristics that contribute to their leadership position and have established a foundation for profitable growth and continued success."

Distinct & Compelling Consumer Value Proposition

The study defines a consumer value proposition as "a clear summary of the overall advantages of benefits that a customer derives from doing business with a particular merchant." The top retailers' value propositions distinguish themselves through price, customization, risk reduction and performance.

"Successful delivery of the value proposition results from these retailers' comprehensive understanding of their customers and an organizational ability to consistently execute on the underlying components that support the proposition," states the report.

Efficient Supply Chain

The analysis describes the typical c-store supply chain--a combination of a traditional wholesaler and myriad direct-store-deliver (DSD) providers--as "useful" but costly and lacking efficiency. The retail leaders, it adds, regardless of their specific approaches, "have uniformly moved toward a model with a focus on cost control, quality control, consolidation of DSD deliveries and high-frequency deliveries on a multi-temperature platform."

The study notes QuikTrip's investment in a logistics solution and it operating four warehouses that serve their stores. Wawa has developed a third-party solution in which its wholesale partner owns and operates a warehouse and distribution infrastructure solely in support of Wawa stores. And Maverik has consolidated many of its DSD products on its wholesale partner's deliveries.

Delicious Fresh Food

"The leading convenience retailers … have committed the resources necessary to develop and implement [foodservice] offers that are both fresh and delicious," the report states.

It specifically calls out Stripes' Laredo Taco Co. offer, which is manufactured on site from fresh ingredients, including tortillas made from scratch. Stripes customers visit Laredo Taco Co. 40% more often than do the Stripes "convenience only" customers," according to the report.

Meanwhile, QuikTrip's QT Kitchens commissary provides a full line of fresh product to all its stores, Kwik Trip runs its own commissary and bakery that allow for a proprietary menu of fresh sandwiches and baked goods, and Wawa and Maverik both allow customers to customize elements of their fresh food offers.

Low Fuel Margin Need

The report acknowledges the challenges a retailer faces in operating successfully on a small or zero fuel margin, but says the top retailers are doing it.

"Each of the industry leaders we reviewed operates at a negative CPGBE (cents-per-gallon break-even)," the report states. "The ability to operate profitably in a low-margin environment not only provides tremendous protection against margin volatility, but also allows these convenience retailers to compete against non-traditional fuel retailers who use fuel primarily as a tool to drive customer trip frequency to their large-format offer."

Aggressive Market-Based Investment

"The convenience retail leaders have demonstrated an ability to continuously improve their offer by anticipating the needs of their customers," the study notes. "Moreover, they have implemented an aggressive growth plan through entry into new markets, investing within their existing geographies or through a disciplined acquisition strategy."

QuikTrip, for example, has a track record of methodically and aggressively extending its footprint into new markets, generally through new-store construction. Wawa recently entered the Florida market with plans to build 100 new stores in four years. And Stripes, Maverik and Kwik Trip have all "grown aggressively by filling in and around markets where their brand is recognizable to the customer base and their offer is supported by their supply-chain solution.

"There is no magic bullet of single path to success in retail," the report concludes. These five companies "differ in many recognizable areas but have common threads that result in a clear competitive advantage and have positioned them to grow profitably into the foreseeable future."

Fort Worth, Texas-based Trinitas Consulting Group partners with companies engaged in the small-format retail and convenience retail industries to improve current capabilities, establish a sustainable competitive advantage, and secure meaningful and lasting results.

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