PHOENIX -- Volatility in the industry's workhorse categoriesmotor fuel and cigaretteshas forced retailers who wish to survive beyond the short term to seek out alternative sources of profit, said members of the Innovation of Leadership Super Panel at the Outlook Leadership 2006 conference.
If there's a lot of volatility in those two categories [fuel and tobacco], and 60% to 70% or maybe more of your business is tied to those two, it creates concern, said panelist Joe DePinto, president and CEO of 7-Eleven Inc., Dallas. We're going to have to innovate [image-nocss] to deal with the potential downsidesand make up for the potential lost profit.
Innovation is by no means a characteristic exclusive to a specific retailer or a chain with a certain number of stores. Simply, it levels the playing field for retailers willing to identify consumer problems and fix them or address an unfulfilled need, according to National Association of Convenience Stores (NACS) president Hank Armour, who moderated the panel. Innovation is the result of change, he said. It resets the table and allows the players who haven't been winning to win.
For Alimentation Couche-Tard Inc., Laval, Quebec, innovation has come from running a decentralized company as a one-store chain. Each Couche-Tard store is treated singularly, with store personnel empowered to make decisions to better serve customers, according to panelist Alain Bouchard, Couche-Tard's chairman, president and CEO. [Store personnel] are always in contact with customers, he said. It would be difficult for us] to make decisions at the head office because we don't have any.
Much of the industry's innovation has been driven by the supply side of the business. Chains such as 7-Eleven and Couche-Tard, which have thousands of stores, have benefited from close relations with key suppliers due to their size and buying powerbut they have not cornered the market on such arrangements.
It's easier for 7-Eleven because of scale, but that doesn't mean a smaller chaina nimble chaincan't work with vendor partners to make something happen, DePinto said. Our challenge is to eliminate stuff that's not selling and make space for new items. We have this pipeline of new products, and we have to know where to put them.
Systems to limit out-of-stocks have helped 7-Eleven innovate because, as DePinto said, We might be in-stock 99.9% of the time, but for the customer who gets there when we don't have something, we're 100% out of stock. While 7-Eleven has been able to innovate due to homegrown systems and a robust infrastructure framed around freshness and novelty, the people in the stores make such innovation possible, according to DePinto.
Our franchisees are independent business owners andthe most successful franchisees have solid leadership skills and empower people to work in the stores, he said. [As an industry] are we training [associates], empowering them, rewarding them and recognizing them for what they do?
Innovation also comes from the ability to harness and capitalize on buying power, which has been a challenge for the convenience channel when compared to larger, higher-volume supermarkets and mass merchandisers. Bouchard, DePinto and fellow panelist Sonja Hubbard, CEO of E-Z Mart Stores Inc., Texarkana, Texas, expressed frustration over the unfairness of the issue. This is purely a supplier power issue vs. a retailer power issue, said DePinto. We're not asking for anything that [other retail channels] aren't already getting; we just ask to be treated fairly. Until our industry consolidates more or comes together with co-op purchasing, this is going to be an uphill battle.
Serving new markets represents another means of innovation. Couche-Tard, for example, has worked to better understand the teen audience and has created teen-specific in-store items, as well as a Web site with content solely for the youth market. Until recently, the industry has struggled to capture another large and underserved consumer group: females. Smart retailers have found ways to reach and cater to this powerful demographic. Clean restrooms, security and customers, said Bouchard. Just like with men, but these three issues are more important to women.
DePinto agreed and added, This is exactly why you see Wal-Mart looking more like Targetbecause women don't like clutter. You'll see 7-Eleven starting to take signage off the windows. Women tend to like neat, orderly places to shop. Wal-Mart is beginning to move in that direction.
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