SOI 2020: Through the Plexiglass

ALEXANDRIA, Va. — Can c-store retailers’ recent track record of growth continue after the pandemic is over? The answer depends on whether operators nail the basics of crisis management in 2020.

“We all have to really know our business,” said Charles McIlvaine, chairman and CEO of Coen Markets, Canonsburg, Pa., in a Q&A session during the NACS State of the Industry Summit Virtual Experience on the industry’s response to COVID-19. “It’s important that we understand what our numbers are and be honest and direct and realistic about it.”

McIlvaine and fellow presenter Chuck Maggelet, chief adventure guide for Maverik Inc., Salt Lake City, shared several pieces of advice to help operators move forward …

In a crisis, liquidity is paramount. “We need to live by the notion that cash is king,” McIlvaine said. “When we’re seeing demand destruction to the levels we are … and it can be for a long time, it means we need to go into survival mode.” Operators should shelve capital expenditure plans and talk to their banks about gaining liquidity.

“Look at all costs of business,” he said. “Those that are unnecessary, you need to pause.”

This is not necessarily a clear-cut exercise, especially when it comes to labor, which is retailers’ largest expense and control item. Retailers should consider their hours of operation: For example, does an overnight shift still make sense in the current environment? At the same time, with c-stores considered an essential business and unemployment rising, some would argue there is an obligation to hire. “We have some corporate citizen responsibility to keep as many people employed as we possibly can,” McIlvaine said.

In a crisis, communication is the keystone ofsurvival. “Bad news doesn’t get better with age, so from your senior leaders down to your customer service, make sure you tell them exactly what is happening, why it’s happening, what you and your team [are] doing about it,” Maggelet said. “Talk to your suppliers, vendors, competitors, share groups—all have got great ideas.

“Take control of this crisis,” he continued. “Now’s the time to be a true leader, not an administrator.”

“Our communication with customers is critical right now,” McIlvaine said. “Social media and online have shown themselves to be an easy and cost-effective way to get our messages out there and have a conversation with guests.”

Retailers—from management down to the front-line employees—need to show empathy to customers, McIlvaine said. He advised creating a response matrix to guide a company’s communication portals, whether social, online or email. It should be organized by circumstance/scenario and include action steps to take, considering employee impacts and processes to follow.

Operators should analyze supply chains and determine what disruptions could occur and how to deal with them.

For example, perhaps a direct-store-delivery driver is ill, which could stop deliveries and even create product shortages. “None of us can plan on just-in-time inventory,” McIlvaine said. “As we think through disruptions, what can occur in our supply?”

With lower inventory turns, product is sitting on the shelf longer and taking longer to be replenished. Shrinkage and spoilage become part of working capital, and retailers need to consider their financial ramifications.

For fuel, retailers should understand their contractual obligations with suppliers and discuss how to meet those terms amid demand destruction.

Inside the store, “go through what the winners and losers are in categories,” McIvaine said. Some, such as health and beauty aids or grocery, may temporarily merit expansion.

“Even though we talked about labor being our largest expense, it’s important to think about support,” McIlvaine said. Coen Markets has given employees hourly pay increases and a one-time bonus.

Maverik has focused on ensuring that employees have the personal protective equipment—gloves, masks and sneeze guards—cleaning supplies and training they need to work safely. It has introduced a preshift health check in which employees are asked to check for a cough, body aches and high temperature. “If you have any of those, stay home,” Maggelet said. And the chain is offering paid sick leave to employees who have tested positive for COVID-19, plus emergency care and pay increases.

As retailers step up their financial support for employees, Maggelet said, they will be competing with unemployment benefits offered through the CARES Act.

“Many retailers are offering pay increases of $2 to $3 per hour and bonuses,” Maggelet said. “It’s battle pay. Will that be enough to keep the MVPs? Is this going to be the new normal?”

Getting a handle of this “new normal” will require that operators challenge their previous planning.

“I would encourage you to review your projections and assumptions,” Maggelet said. “Understand where the break-evens are, the outcomes you need and the scenarios that increase the likelihood you will get there.” For Maverik, that includes projecting fuel demand as accurately as possible, and labor requirements.

When will the “new normal” for the c-store channel emerge? McIlvaine will be watching how quickly consumers return to restaurants, sporting events and concerts.

Maggelet is expecting about six months of demand destruction and uncertainty—and a possible resurgence of COVID-19 in the fall. He believes the recovery will have a start-stop quality, and that some regions will rebound faster than others.

In the meantime, all c-store operators can do to keep momentum from 2019’s growth and successes is stay disciplined.

“You can’t balance a bike that’s not moving forward,” Maggelet said. “Don’t expect to be perfect—just directionally correct.”

The 2020 NACS State of the Industry Summit Virtual Experience will be available for on-demand viewing through Sept. 1. Access critical benchmarking data, analysis, emerging trends and executive insights at convenience.org/SOISummit.