Convenience-store chains emphasizing foodservice during the evening are gaining visits and market share, an industry analyst said Wednesday.
“It’s been Sheetz and Wawa that are starting to pick up share of total visits, and I think it’s because they’ve been a lot smarter and are reinventing the food platform,” said R.J. Hottovy, head of analytical research at Placer.ai, Los Altos, California.
Placer.ai named Sheetz, Wawa and 7-Eleven as post-pandemic winners, while Foxtrot also deserves notice, according to Polly Flinn, founder and principal at Flinnstone Strategies in Chicago.
Convenience stores proactive in opening new locations or expanding their foodservice offerings are benefiting, they said.
“Now versus pre-pandemic levels, they’re way ahead of where they were. So that suggests to me we’re seeing some encroachment on some other grocery and restaurant as well,” Hottovy said. “It’s not really breakfast and lunch. It’s the dinner daypart,” he said.
Focus on Value
The pandemic gave convenience retailers time to perfect their foodservice offerings and add drive-thru lanes or order-ahead e-commerce technology.
Retailers also took advantage of real-estate vacancies in urban areas to open new stores. While foot traffic slowed during the peak of COVID-19, it’s returning now, according to Placer.ai’s data.
Using office-visit data as one indicator of urban foot traffic, the return-to-the-office trend has brought back about 60% of office visits nationally compared with 2019 visits, Placer.ai said.
While cities lost population during COVID-19, many have gained it back, but not necessarily by the same people who left who have returned. Many New Yorkers moved to Florida and Arizona, he said. In Florida, Tampa and metropolitan areas near Cape Coral/Fort Myers and Sarasota/Bradenton were among the fastest-appreciating real estate markets in the nation, according to data from real estate solutions firm CoreLogic, Irvine, California.
Taking theses migrating New Yorkers’ place in the Big Apple are younger adults, Hottovy said. “Urban markets are being backfilled by millennials and Gen Z, customers who didn’t have the real estate or it wasn’t available to them,” he said. “That’s why we’re seeing convenience chains and dollar stores start to follow these people back to urban markets.”
In many metropolitan areas, city dwellers moved to the suburbs during COVID-19, while a smaller percentage went to rural areas. “We did see a loss at urban. It is the higher-income consumers that were responsible for the migration, (age) 35 and above and at the higher end of the median household income,” Hottovy said.
Artificial Intelligence
But urban areas are picking up again, based on foot-traffic data, said Placer.ai, which partners with app companies that provide geolocation data on anonymous consumers for research purposes. Auto-insurance companies are among those collecting the geolocation data, he said. Placer.ai receives a latitude-and-longitude notification on the cellular phone's whereabouts roughly every minute and assigns a unique ID that can be mated with a Samsung or Apple phone, Hottovy said. "It gives us 24/7 access to that device on a recurring basis. We’ve built up a panel of 25 million devices,” he said.
Then Placer.ai applies artificial-intelligence machine learning to observe what the devices’ owners are doing, such as what retail locations they’re visiting, to gather more information. Placer.ai also tests the data with its customers to verify it, Hottovy said.
Foot traffic at urban malls has increased since the start of the year, Placer.ai said. With plenty of real estate available in cities such as Chicago, convenience retailer Circle K, Chicago-based Foxtrot and others have opened new locations. Circle K is a unit of Laval, Quebec-based Alimentation Couche-Tard.
Foxtrot is doing well in Chicago by “going straight for the young professional,” said Flinn, a former executive at Giant Eagle and GetGo Café + Market, bp and Walmart. “You’re not going to see a doorman go for a cup of coffee there,” she said.
Foxtrot is what Flinn describes as a “crossover” retailer, one that meets two or more consumer needs. Foxtrot blends the retail concepts of coffee shop, gourmet-food mart and convenience store.
On its website, Foxtrot describes itself as: “Your corner store and delivery market.” It has 15 locations in Chicago, where it began, and it has expanded to Dallas, Washington, D.C., Virginia, Austin, Texas and Bethesda, Maryland.
Sushi Grab-and-Go
Its distinct recipes put it in a category of its own. It offers fresh sushi for lunch and grab-and-go salads and wraps. In Dallas, its gourmet pizza starts with crispy focaccia and choice of vegetable, meat and cheese toppings. Foxtrot also offers deals on alcohol pours, such as $3 craft beers during happy hour and $5 house rose wine by the glass. The stores also carry grocery items.
“In the overall grocery category, people are shopping a wide number of chains,” Hottovy said. Foxtrot appeals to a higher-income millennial and Gen Z customer, he said.
For urban dwellers who aren’t price conscious, they can cover several different shopping trips in one trip to a crossover store like Foxtrot, Flinn said.
“Consumers in an urban area are either working from home and going down from their apartment buildings on the way to the gym or on the way to meet friends or some sort of activity. They’re looking for meal solutions, a quick pick up and really not looking for a full-shop grocery,” she said. “You really have to reconsider your merchandising set for your urban store versus your suburban store,” she said.
Grocery Competition
The urban retail trend also includes grocery stores like Trader Joe’s, in a much smaller footprint than a 40,000-square-foot grocery store. Placer.ai’s data indicates Trader Joe’s has been outperforming traditional, larger grocery stores. Like convenience stores, Trader Joe’s also emphasizes quick trips.
“You see 7-Eleven and Circle K coming into these markets, and then you’ve got Starbucks and QSR expanding. There’s a lot of opportunity, and there’s some people who are doing it well,” Flinn said.
Foxtrot has quickly found a customer base in Chicago by offering fresh food, alcohol and traditional convenience items, Flinn said. For urban consumers near Foxtrot locations in several metropolitan areas, it’s a convenient spot for coffee, happy hour or a prepared meal.
The 5-year-old chain has stores in both downtown locations and residential neighborhoods. “You’re seeing (consumers) actually start to favor stores that are close to where they live. The bias has to be more about where people live and less where they work,” she said.
As for whether market could become saturated, Flinn doesn’t see an issue yet. But the various retailers are competing for the same customer, she said. “They’re all trying to figure out, how do I steal share from each other,” she said.
