Convenience Still Key

C-stores must re-evaluate gas, reposition as alternative fuel retailers gain ground

COLUMBUS, Ohio -- Alternative gasoline retailers, including supercenters, supermarkets and warehouse clubs, are chipping away at the convenience store industry's gasoline shopper base, according to a TNS Retail Forward report. Recent TNS Retail Forward ShopperScape survey results indicate that one-third of shoppers are buying most of their gasoline at alternative outlets, up from 22% just three years ago.

"Fewer shoppers filling their tanks at convenience stores mean fewer shoppers filling their stomachs with higher-margin goods inside the store," said Jennifer Halterman, senior consultant [image-nocss] with TNS Retail Forward. "Skyrocketing gasoline prices also leave little change in shoppers' pockets for in-store purchases."

Alternative gasoline retailers now capture an estimated 13% of U.S. gasoline sales. TNS Retail Forward projects this figure will grow to 16% to 17% by 2012. "Continued high gasoline prices are making alternative players' cents-off promotions very attractive. As a result, we expect more shoppers to take advantage of the increasing number of fuel-reward programs," Halterman said. "Aggressive fuel-reward programs combined with the convenience of one-stop shopping makes it no surprise that more shoppers are filling up at these alternative outlets."

While gasoline helps generate traffic and boost inside sales, alternative gasoline retailers must continue to explore ways to offset hefty fuel discounts and a low-margin business. "Campaigns that tie fuel rewards to high-margin purchases such as private brands, nongrocery general merchandise items or in-store services will be critical going forward," Halterman added.

Likewise, c-stores must reduce reliance on gasoline and focus efforts inside their stores. "Convenience will remain key," she said. "However, adding destination appeal with unique product offerings, innovative marketing and new service offers will help drive traffic, retain shoppers and increase profitability."

C-stores also need to pay attention to the growing number of small-store food concepts rising on the scene. "C-stores must prepare for a future retail landscape that will be filled with an increasing number of small-store concepts that home in on convenience," Halterman said.

"C-stores must deliver a differentiated offer that not only delivers convenience but adds destination appeal," she said. "Ultimately, convenience stores that reduce their reliance on gasoline by focusing efforts inside the store will be best positioned for the future."