Every Sunday night on the way home from a visit with my grandparents, we would pull our car into the lot of the local convenience store, where Dad would buy the milk, lunchmeat and bread we would need for the following few days. These were items we needed to keep our family of five operating.
Today, as I look over an analysis Management Science Associates (MSA) recently completed on convenience store sales, I am struck by the different buying habits of the current convenience store shopper and the habits’ potential effect on category management.
The significant growth in single-person households is surely affecting sales. The convenience shopper today is often looking for an immediate fulfillment, an indulgence at a reasonable cost—that candy bar, slice of pizza, beverage or tobacco item that they want now--in contrast to the family necessities purchased in the past. This point is confirmed by the MSA analysis on the convenience categories with the greatest decline in category sales vs. the same period a year ago. Those categories include perishable and edible grocery, packaged bread, deli and milk. (See chart, p. 2.) While some of these categories continue to be major contributors to the bottom line, they reflect the convenience consumer’s declining purchases of household staples.
So what categories are showing the strongest growth? You guessed it: alternative and salty snacks, other tobacco products, candy, foodservice, liquor and packaged sweet snacks. (See chart, p. 2.) These are items that can often be consumed quickly and have an “at this moment” appeal to the individual shoppers in the store.
With the convenience store today becoming more of a destination for immediate fulfillment and/or indulgence, the categories that will appeal to this buying behavior need to be featured and managed properly.
The Foodservice Effect
Starbucks has thrived under this premise. Why have just a cup of coffee when you can treat yourself to a caramel macchiato? The convenience store today can provide a similar level of satisfaction by appealing to the shopper’s desire for quick gratification, and it can apply this concept to more categories than just hot beverages.
Foodservice offers a great opportunity to capitalize on this trend. The MSA study shows that foodservice is growing more than 5% vs. the previous year across the three convenience chains that we analyzed. Most important, while the percentage of sales that include more than five items in the market basket makes up only 4% of all convenience-store transactions, this percentage skyrockets to 20% when foodservice is purchased. (See chart, p. 2.) This is a slam-dunk for the convenience retailer if the right items are offered in foodservice and complementary categories.
Previous MSA studies have shown that the No. 1 item in a foodservice offering is the sandwich that can span both the lunch and dinner consumption occasions. And what is the top-selling sandwich? The turkey sub. It is followed by pizza as the second-best-selling food item (pepperoni is the No. 1 pizza choice), and then fresh salads. A convenience retailer that covers the three key areas of sandwiches, pizza and salads will satisfy the great majority of consumers looking for a quick bite.
As mentioned, however, the foodservice market basket does not stop there. It’s no surprise that the basket almost always includes a beverage, but additional purchases are typically potato chips, snack cakes/desserts, cigarettes and chocolate bars. While the typical total of a convenience store transaction is just under $7, the usual cash register ring with a foodservice purchase comes to nearly $10, with about half that amount spent on these additional items.
The convenience retailer needs to not only properly manage the foodservice category but, to maximize potential sales, also offer the right items in the categories most often purchased with foodservice. As an example, a recent category-management analysis MSA conducted for a convenience retailer showed that while chocolate bars accounted for nearly 42% of candy category sales, these bars accounted for only 28% of the confectionary items offered to their consumers.
Another MSA study showed that 55% of candy-bar purchases in the convenience channel are planned, while 45% are not.
That decision to purchase is based on the selection and placement of the desired candy items in the store. These findings suggest that this retailer is likely to capture more sales by adding items in the chocolate-bar segment that will further appeal to their foodservice and candy purchasers.
While sales of chocolate bars are strong during the lunch period, at what point during the day will the sale of these items peak?
Chocolate-bar sales in the convenience category are strongest from 5 to 8 in the evening. Yep, in the evening, when the convenience store shopper, after leaving another rough day on the job, heads home and wants that small indulgence to help them feel just that little bit better. (I typically head toward the coolers.)
CONTINUED: Meeting the Need
Meet the Need
Let’s take a quick look at alcohol-beverage sales in the convenience channel and see if this also reinforces the indulgence trend. As with chocolate bars, alcohol-beverage sales are strongest in the hours when most shoppers are leaving work and want that indulgence before, during or after dinner, with the strongest sales levels from 4 to 6 in the evening.
The wine category is gaining but still trails beer in distribution in the convenience category. Interestingly, however, a recent MSA analysis of convenience retailers that carried wine showed that this purchase had the highest market-basket ring of any other category in the store. When wine was in the market basket, the total ring approached $19, with about an additional $5 spent on other categories.
The potential for the convenience retailer to enhance sales and profitability by understanding and catering to the immediate-fulfillment/indulgence trend is particularly strong. In addition to applying the category-management ideas you will find throughout this issue, I would suggest starting category assessment by asking if the product selection in many categories will meet your shoppers’ need for that immediate gratification.
Are you a destination for the item that is going to make your shoppers feel just a little bit better? And if so, do you have the right product selection in the additional categories that they are going to purchase when they stop in the store?
Correctly addressing those two questions is likely to make a retailer’s day just a little more gratifying.
Top and Bottom Growth Categories**
Many of the top growth categories are consumed quickly and have an immediate appeal.
| Category | Dollar PCYA* |
| TOP 10 CATEGORIES | |
| E-cigarettes | 176.9% |
| Automotive products | 13.9% |
| Alternative snacks | 9.6% |
| Candy | 9.3% |
| General merchandise | 6.2% |
| Foodservice | 5.9% |
| Salty snacks | 3.6% |
| Liquor | 3.4% |
| Other tobacco products | 3.2% |
| Packaged sweet snacks | 3.2% |
| BOTTOM 10 CATEGORIES | |
| Prepaid cards | -15.4% |
| Perishable grocery | -15.1% |
| Publications | -14.2% |
| Edible grocery | -7.2% |
| Ice cream/novelties | -6.5% |
| Packaged bread | -6.3% |
| Milk | -5.4% |
| Nonedible grocery | -5.3% |
| Frozen foods | -5.3% |
| Other dairy/deli | -5.2% |
Source: MSA
* Percent change from a year ago
** Does not include gasoline and lottery
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