Are You Still Convenient?
By Jackson Lewis on Oct. 17, 2017CHICAGO -- The convenience of a c-store is here to stay, according to David Portalatin, vice president and food industry analyst for the Port Washington, N.Y.-based NPD Group, who presented Oct. 17 at the 2017 NACS Show in Chicago about what defines convenience today.
He assured retailers that a convenient location, staying open 24 hours and offering convenience-store staples such as gasoline, smokes and Cokes would insulate this industry from macroeconomic changes caused by generational shifts and technology.
But only for so long.
The migration of commerce from physical to online shopping is still churning. More Americans are working and eating at home than ever before. While consumers once defined convenience by what they could quickly and easily drive to, convenience today is defined by how fast products can reach customers instead.
Click through for tips from Portalatin on some of the changes American retail is experiencing and what c-store operators can do to ride the wave of success …
Live in the now
In the late 1970s, it was not uncommon for successful restaurants to experience year-over-year traffic growth of about 7%. Business is not as bright for restaurants today. “If you’re growing at 1%, you’re probably leading the pack right now,” said Portalatin.
And while c-stores have largely been unaffected by this downward trend in foodservice, Portalatin said the industry’s immunity will not last forever.
“Convenience stores have outperformed the rest of the restaurant industry for seven years now,” said Portalatin, “but let me caution you. This trend, too, may have reached maturity. In the second quarter of 2017, convenience stores actually declined more than the rest of the foodservice industry.”
He clarified that c-stores are still ahead of the game when it comes to breakfast, and independent operators are largely faring better than their larger counterparts, but the message was clear: Unless this industry innovates and disrupts itself, it will eventually be disrupted by an outside force.
Embrace technology
While brick-and-mortar foodservice is lagging in growth, online growth does not appear to be slowing down. Today, 7.4% of Americans have ordered groceries online. Amazon Prime is in 15 million U.S. households. And while restaurants have seen a steady decline in traffic, they have seen a 54% increase in digital orders in the past year alone, according to Portalatin.
He suggested that convenience retailers double down on the strengths of convenient locations and 24/7 service, but also explore ways to insert themselves into e-commerce. For instance, if Amazon continues to purchase retailers, why shouldn’t convenience retailers be a part of the equation? C-stores are close enough to most everyone that they could make excellent points of pickup or delivery for just about any online order.
How to double down properly
No physical retailer can match the massive number of SKUs that Amazon constantly has in stock, but what it can do is offer customers a set of items curated specifically for them.
Portalatin used Foot Locker as an example of this strategy, a company that has come up against some stiff competition online. “Nearly 40% of Nike sales are direct to consumer,” he said. “How do you operate a footwear chain successfully in that environment?”
The answer is to be specific and personalized in product assortment. Foot Locker met this challenge by opening subbrands such as Lady Foot Locker, Kids Foot Locker, Runners Point and more. These brands sell only one category of footwear. This takes the guesswork and indecision out of the purchase. When customers go to these locations, they know what they are looking for and they know that they can find the item they seek.
Go to the customer
The transition to a more web-based economy may mean some painful realities for convenience stores. Yes, Portalatin said, it is easier for most brick-and-mortar retailers to launch a click-and-collect online order system than it is to deliver, but the reality is that many consumers today expect items to be delivered to their homes. “Someone will figure out how to do it, and that’s who’s going to win,” he said.
Portalatin used Texas grocer H-E-B as an example of a retailer who has done this successfully. “H-E-B partners with Shipt. I can get anything I order delivered to my front door at a time that I specify,” he said.
Retailers need not reinvent the wheel when considering delivery options. There are plenty of existing players in the e-commerce space that have the infrastructure to make this happen, including Shipt, DoorDash, UberEats and others.
Are you experienced?
Portalatin also encouraged operators to pay close attention to the experience customers have when they visit their stores. Many of today’s consumers are spending money on experiences instead of physical items, he said.
Using H-E-B as an example again, he discussed the chain’s Hot Summer Nights cooking demonstration package. Customers could pay $20 per person for a plated dinner with wine pairings and chefs walking around the tables teaching and demonstrating to participants how the dishes were prepared.
He also mentioned department-store retailer Bloomingdale's, which started serving alcohol in the men’s department. “How do you get men to shop for clothes?” Portalatin said. “You include a bar.”
While it would be impractical for most c-stores to host an educational dinner or turn a section of their shop into a bar, Portalatin encouraged session attendees to consider what experience they could offer customers to lure them in for reasons other than simply shopping for stuff or filling their tank.