How C-Stores Can Win Retail
By Jackson Lewis on May 18, 2017NEW YORK -- As retail transforms and channels blur, it’s important for convenience-store operators to focus on what separates convenience from the rest of the retail pack, according to a recent report from Nielsen.
The good news is this industry has a lot going for it. Nielsen’s report said “convenience stores are highly relevant to consumers’ on-the-go lifestyles and are well-equipped to deliver products that meet their immediate needs.” But that’s no reason to get complacent. E-commerce, click-and-collect programs and a new generation of small footprint stores are quickly encroaching on convenience. It’s important that c-stores identify what they offer that no one else can.
Read on for more information on how changing consumer trends are affecting the c-store space and what operators can do to keep customers coming back …
1. Fuel and shopping trips
For many c-store operators, differentiation means fuel, but Americans are driving less, said Nielsen. The report compares the year 1983, when 87% of 18-year-olds had driver's licenses, to today when that number has dropped to 69%. Gas prices are also rising. Nielsen pointed to a projection from the U.S. Energy Information Administration that the average household will spend about $200 more on gas in 2017 than in 2016.
Consumers are also making fewer physical shopping trips. Nielsen said that this shift in behavior is due to a number of factors, including the use of digital technology and driving trends. Nielsen Homescan data indicates that the total number of U.S. retail trips is down by more than 1 million since 2012. With this in mind, Nielsen attributes the industry’s recent year-over-year growth to consumers leaving stores with more purchases.
2. Who's shopping?
Who shops in convenience stores? Men, mostly. The report points out that this is a contrast with most other retail channels where women are the primary shopper.
The report also notes that only 28% of c-store and gas-station revenue last year came from households with incomes of $70,000 or more, placing the average c-store customer well below the overall retail average of 46%.
3. Top categories
Nielsen’s report said that 85% of all convenience-store sales in 2016 came from cigarettes, packaged beverages, candy, beer, salty snacks and other tobacco products.
More specifically, subcategories such as enhanced water; imported, superpremium and craft beer; ready-to-eat (RTE) meals; e-cigarettes; tools and housewares; and sparkling wine all saw mid-to-high double-digit sales growth in c-stores last year.
4. Healthy and fast
The study points to broader consumer health and wellness trends to explain the growth in subcategories such as RTE meals and enhanced water. RTE options were also padded by deli sales in 2016, which grew 8.3% to $1.2 billion last year. Consumers don’t just want healthy food, they also want it fast, the average c-store’s specialty.
5. Speed, experience and personalization
The more retail channels blur, the more c-stores need to focus on speed, experience and personalization, according to Nielsen. The study suggests an emphasis on health and wellness that goes beyond RTE.
6. Courting QSR customers
Speed has become an essential service element of quick-service restaurants (QSRs), and the study suggests positioning c-store delis near the front of the store, possibly with separate checkouts, to get customers in and out faster. It also suggests offering restaurant-style seating and broadening menus for in-store service.
7. Fresh is best
“Leading on fresh, natural food trends will be essential going forward, particularly as other channels have diversified into everything from sushi to gourmet sandwiches,” according to the report. It also said operators should be transparent about these attributes.
8. Me, myself and I
While the study doesn’t specifically mention loyalty programs, it does point out that c-stores should leverage digital marketing to reach customers on an individual basis. It said customers should receive offers and rewards that are determined by individuals’ shopping and purchase habits.