"In the United States, convenience retailing success is based on foodservice. There is no Plan B.”
I wrote that in April 2006 in CSP, after Tesco had announced plans to enter the U.S. market, but before it had developed its doomed Fresh & Easy chain. I had anticipated that it would introduce the Tesco Express format here. In the United Kingdom, Tesco Express stores are successful without relying on foodservice, because they make food shopping more convenient. They are profitable because they leverage the buying power, logistics and name of a top supermarket brand. They attract women, who trust the name, recognize the value and have no qualms about shopping in a neighborhood c-store. Tesco Express stores fulfill the original purpose of convenience stores: a place to “run in when you run out.”
My point was that the Tesco Express format was, in fact, Plan B.
Over the years, several U.S. supermarkets—including Publix (with Pix), Giant Eagle (GetGo) and Big Y (Big Y Express)—have entered the c-store business. In each case, logistical issues have seemed to cause them to focus on foodservice. They mostly use convenience-store wholesalers and suppliers, rather than their supermarket delivery chains, to supply their non-foodservice items. Even though they offer some of their private-label grocery items in these c-stores, they have forgone many of the advantages of the Plan B approach, which is to make their supermarket customers’ lives easier with parking up front, shorter lines at checkout and a product assortment meant for the fill-in shop.
Kroger has long been a major player in the c-store field, but its convenience-store division is composed of six separately managed chains of conventional convenience stores, mainly serviced by convenience wholesalers. However, the company is testing a Kroger-branded, 7,500-square-foot fill-in format with a large grocery and foodservice offer. That sounds a lot like Plan B.
Hy-Vee, a Midwestern supermarket chain, is also developing a small-format store with gas. Terrible Herbst, a Las Vegas-based c-store chain, unaffiliated with any supermarket, recently opened a large-format Herbst Market, with an assortment of fill-in grocery and perishables.
Do these developments indicate that Plan B might finally be an idea whose time has come in the United States? I don’t know. But if I were running a c-store company, I would certainly want to plan for it.
What Are the Challenges?
For supermarkets, the primary challenge is logistics. Supermarket warehouses are set up to deliver truckloads of merchandise to individual stores, and each store has docks and storage areas to receive them. Convenience stores do not have such facilities or capabilities. That is why U.S. supermarkets, after attempting to solve these issues, have taken the easy way out. They are contracting with convenience-store wholesalers rather than their own warehouses and supermarket wholesalers to deliver standard convenience-store assortments to their c-stores, forgoing the Plan B advantages.
But with the whole future of convenience retailing in flux—due to the development of battery-powered and autonomous vehicles, plus the continuous growth of e-commerce—this is no time to be complacent.
One thing we know is people will still have to eat and will continue to run out of things. So the fill-in aspect of shopping could become a more important part of the convenience-store offer in this emerging new world. The answer for supermarkets, therefore, must be a commitment to make it work (as it does in the United Kingdom), and not to take the easy path.
But how can I, as a c-store operator, benefit from this emerging trend? I don’t possess the grocery brand and buying clout, the food merchandising know-how or the logistics to apply it to my stores. One way is to partner with a local supermarket chain. After all, each of us has something the other could benefit from. The supermarket could provide these elements to my c-stores and I, in turn, could provide neighborhood fill-in access to the supermarket’s customers. This could be done by having my c-stores include a co-branded supermarket section. This is not an original idea: Several years ago, in Cape Town, South Africa, I visited an Engen c-store with a co-branded Woolworths Supermarket department, which was very successful.
While foodservice—Plan A—will continue to be a crucial part of all convenience retailing, the addition of Plan B could well be what sets the leading stores apart from the also-rans.
Gerald Lewis is a convenience-retailing consultant. Reach him at glewis@c-man.net.
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