Ideas 2 CITGO

New concept store gets wheels turning with movable gondolas, gourmet grab-and-go foods and high-tech upselling.

Angel Abcede, Senior Editor/Tobacco, CSP

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From shelves on wheels to vaulted ceilings and polyurethane signs on sliding tracks, everything in CITGO’s new concept store exudes motion—the sense that nothing’s set in stone, that everything from floor plan to merchandise mix is influx.

That’s the lab mentality folks with the Houston-based refiner and fuel supplier want its newly opened ,4,500-square-foot facility to have, a vibe of testing and ideation. Touch screen surveys rate customer service. A happy-face scale device puts all aspects of the store up for benchmarking and analysis, from bathroom cleanliness to espresso barista and hot-dog condiments.

“Some of our competitors are stepping away from retail while we’re still focusing on the independent store operator. … They have to differentiate themselves, and we want to help,” says Alan Flagg, general manager of light oils marketing for CITGO. “This store creates sizzle and excitement around the brand.”

CSP magazine took an exclusive, firsthand look at the oil company’s Retail Concept Center just three months after the store’s opening, wanting a better understanding of its intent and ultimately its potential while reconnecting with a company experiencing what some are calling a brand rebirth.

The past three years for CITGO have been exceptional. For example, fuel volume through May of this years up 2.4% compared with the same time last year even as the industry experienced falling demand, Flagg says

With the capacity to produce 17 million gallons of gasoline per day through three U.S. refineries, CITGO, supplier of about 6,000 sites East of the Rockies, posted a record quarterly dividend of $461 million to its parent, Petróleos de Venezuela S.A.(PDVSA), in the first quarter of 2013.

“We keep innovating to fuel our growth smartly,” Flagg says. For CITGO, that means a 27-state distribution footprint, charting southeast Texas, moving north through Chicago and into Wisconsin, jumping to New England and then South again with densities in the Carolinas, Georgia and Florida. Amid that broad landscape, he sees growth with new-to-the-market customers, current marketers seeking to expand, operators ready to switch brands and former customers returning to CITGO.

The Retail Concept Center is a step toward that larger promise. It’s a nod tithe networks of independent retailers that CITGO’s lineup of wholesale marketers must keep vital. It’s an acknowledgment that the c-store channel is changing quickly, leaving no room for the idle or uninspired. It’s an exclamation that for a company leashed exclusively to fuel marketers, this major oil must focus not only on forecourt and marketing programs, but also on backcourt concepts and solutions.

“In the last two to three years, a big part of our message to marketers to take to retailers is that we have to elevate outperformance,” Flagg says. “The industry has done a great job of raising consumer expectations. If we’re going to play, we have to elevate [our locations].”

Sparking Ideas

If elevating an entire network is the goal, CITGO’s hands-off, supply-only model creates a challenge. The oil company can’t force one definitive path, or even push best practices down through the chain. It has to convince distributors who in turn must inspire retailers one, two or three stores at a time.

Put simply, this impressive store in Houston is a true one of a kind, unlikely to be replicated. Unlike ExxonMobil’s On the Run or Chevron’s ExtraMile retail concepts, this store will not be stamped across CITGO’s markets. CITGO is emphatic it will not dictate to its fuel marketers the cloning of its groundbreaking concept.

Rather, the Concept Center is CITGO’s path of least resistance: an unbiased, in-the-trenches laboratory for new and emerging products, concepts and tactics. And that is because, unlike its Big Oil brethren, CITGO has no interest in owning or operating stores, or giving orders to its field of fuel marketers and dealer son how they should run their sites.

With that premise in mind, CITGO project developers, including Jim Cox, manager of retail development and operations, and Jonathan Watson, manager of business services and payment cards, set an agenda of specific concepts to test in the store’s initial incarnation and another set of near-term projects. Here’s a quick rundown based on three store-level functions:

Operations. These include product gondolas on wheels, store tablets for employee applications, Web-based training and Web-hosted time cards.

Merchandising. Finding optimal pricing spreads for retail fuel postings, two-tiered pricing, commissary deli items and white wine sales from the beer and wine cave.

Marketing. A recycle center, hightech upselling and electronic signage setup to drive sales.

Future projects include mobile cash registers, day-part fuel pricing, product vending at the pump, mobile apps and social media.

“We don’t have all the answers,” Watson says. “But we’ve created a forum, a catalyst for discussion and the sharing of lessons learned.”

More than a dozen marketers have toured the facility since its opening in the spring, Watson and Cox say, with the format sparking valuable insights.

Cox freely admits that some of their better ideas were unintentional. For instance, the wheels on all the shelving gondolas were fitted so CITGO could easily move displays—partly to test new merchandising strategies, but also for the simple logistics of easily switching things around. A marketer offered Cox the revelation that the wheels would make cleaning tile floors easier, potentially saving the marketer hundreds in quarterly maintenance. (Indeed, on the day of our visit, CSP editors changed the positioning of the store’s healthy snacks to give the area a stronger facing from the checkout queue.)

The store is also an opportunity for marketers and retailers to test things they couldn’t afford to pilot otherwise. For example, the technology for upselling at the site can cost $2,500 per register.“Here,” Watson says, “we can test it in an unbiased way and offer our opinion, without a retailer having to pay.”

Store Tour

There’s something to be said about having a hands-on environment in which to watch and learn. As ordinary customers casually walk about the store, visiting marketers and retailers can observe behavior, see state-of-the-art technology in action, listen to concept designers and bounce around ideas.

And unlike the myriad retail formats major oil companies, CITGO has no incentive to push anything a CITGO brandedmarketer or retailer would resist.

In its current iteration, the store tour starts with a “superhero wall” for recycling, visually and literally designed to praise and encourage everyone to put paper and plastic refuse into specified slots. The design is elegant and seamlessly ties to a white-sheen counter where customers can eat, chill and/or recharge their smart phones or laptops.

Opposite that wall is another graphically thought-out wall featuring CITGO’s

“Fueling Good” campaign. Companies today have to stand for something meaningful, says Jennifer Moos, general manager of brand development for CITGO. As an oil company that works with independent marketers and retailers, focusing on serving local communities is a natural fit. In its fifth year, the Fueling Good campaign promotes local heroes and how they are doing good in their neighborhoods through events, social media and commercials.“Fueling Good is more than our tagline,” Moos says. “It’s the philosophy at the heart of our brand.”

Past the Fueling Good seating area are the restrooms, which feature touch-free sinks and hand dryers. Fixtures are bolted to the wall and raised so staff can easily clean floors. Cox says initial customer surveys averaged cleanliness ratings in the high 70s, which wasn’t good enough. Using reports from Happy or Not SurveyInc.’s devices, CITGO identified day-parts and specific c employees to target for additional training. The effort led to today’s ratings of more than 90%.

Back to the front of the store, point of-sale (POS) registers have LIFT technology from VeriFone, San Jose, Calif., that features customer-facing touch screens as well as screens for cashiers. As cashiers scan items, a promotion or upsell opportunity appears on the customer screens. At the same time, a scripted message appears before the cashier. If a customer agrees, the up sell gets added to the transaction. The solution also asks customers to rate the service, allowing for feedback on employees.

Past the snacks-and-candy set on modular racks are more than a dozen cooler doors showcased with LED lighting. Watson says people ask him how they “get their bottles to shine,” which he attributes to that technology.

Above the coolers, 4-foot-by-5-foot polyurethane panels set on movable tracks in the ceiling call attention to various-store categories, alongside blank colored panels that add visual appeal. The idea is to eventually sell the blank spaces to vendors.

Many categories feature a mix of both value-priced and higher-end options, from ice cream in the coolers to chips and a special modular gondola for gourmet grab-and-go sandwiches. The trick, depending on the category, is to provide the right local brand, whether that product is on the higher or lowered, Cox says.

Even its popular roller-grill station offers high-end Ball Park sausages alongside regular hot-dog selection, with a special condiment presentation on par with dine-in restaurants. The condiments, says Cox, reflect a Southwestern flavor profile, determined through local consumer studies.

The tour ends with a “gold” standard coffee offer from vendor Distant Lands, which features both richer and lighter blends but at a price point much lower than that of high-end coffee shops; it is backed by a story via flat-screen TV of how the beans were picked, roasted and distributed. Again, the idea is to raise the quality of the c-store offer and engage the consumer, while not alienating the regular coffee drinker.

That brings the tour back to the register, where a trained barista mans the store’s espresso area. Cox readily admits that its separation from the coffee bar created a communication gap, because some customers don’t know the espresso option exists until they walk up to it. But for logistical purposes, the barista is also cashier. Cox insists the format can eventually work, because espresso customers are not necessarily coffee-bar patrons.“The overlap is very small,” he says.

Real World?

For all the study and effort, findings from the Concept Center still represent one store, in one demographic in Houston—specifically, a mixed, middle-income area with commuters from more affluent suburbs driving to the Energy Corridor’s corporate complexes.

Other factors question how the Concept transfers to real life. For instance, the Fort Myers, Fla.-based distributor of the store’s fresh Gourmet Classics packaged sandwiches could probably reach stores in CITGO’s Southern region, but not farther out. Who solves the problem beyond that perimeter?

Nor do concrete details exist on how marketers and eventually independent retailers access specific programs; there are only generalities about the potential discounts they may receive by choosing a Concept Center vendor. So exactly how CITGO’s influence or potential buying power would affect retailers is still in development.

Flagg agrees that retailers must consider the many steps necessary for taking ideas from concept to reality, but he believes that the larger message of facilitating change is critical. “There’s going to be winners and losers, survivors and those who don’t survive as consolidation continues and demands and expectations rise,” he says.

“The challenge if you’re in a growing area or a depressed area is that you become one of the winners. What do you have to dote put yourself in that category?”

For Mark Maddox, vice president of branded marketing for distributor Cary Oil Co., Cary, N.C., the Concept Center is a message of partnership, that a fuel supplier is willing to put the time and resources into developing a full-blown learning facility. CITGO declined to discuss how much it invested, but creating a research and showroom facility meant the final price tag was more than what a typical store of that size would cost, officials say.

Maddox says it means Cary, a multibranded distributor supplying about 500 branded stores, is ready to invest in its retailers, hinting at potential financial support and having created an in-house consultant position to facilitate retail improvement and change.

Any facility sitting on the right real-estate, having the right ingress and egress, square footage and other minimal features can be successful, Maddox believes. “We’re willing to bet on retailers who want to invest the time, energy and capital,” he says. Lending has freed up since the tightfisted days of the late 2000s, and new faces are coming into the retail ranks with capital, be it bank-borrowed, family-backed or independently financed, Maddox says.“If you can identify people who are willing and able, many of them just want a trusted adviser,” he says. “If you have a fuel supplier saying, ‘We’ll build a concept store and we’ll help you,’ that’s a powerful message.”


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