The total share of available fuel gallons will likely forever decline as internal combustion engines adapt efficiency improvements alongside the growth of electric vehicles. Compound that with the ongoing decline of the tobacco category, and it makes sense that many convenience retailers have a knot in their stomachs when they think about the long game, even despite favorable fuel margins for the past several years.
Many times, we try to look for the next best thing, and often that answer can be found with a step south of the border or a trip across the pond, which can inspire us with how our industry colleagues abroad in many ways have faced equal or far stronger challenges, and yet have developed their resiliency to headwinds and competitive threats.
Banking on Mexico
On Jan. 15, for example, Mexico set forth one of the world’s strictest antitobacco laws by enacting a total ban on smoking in public places (including e-cigarettes). This means that while convenience stores can still sell tobacco, it must be completely hidden with no advertisement. This challenge is on top of the fact that in Mexico, oil is controlled by Pemex, a state-owned oil company.
Despite these challenges, convenience-store operators in Mexico have been absolutely resilient in diversifying revenue streams and setting a new standard of convenience. In the U.S. market, the “other income” line on a financial statement is typically ATM commission, lottery commission, air pump and perhaps a crypto-currency ATM. However, Mexico convenience retailer Oxxo has taken this opportunity to a whole new level.
Oxxo, which operates over 20,000 stores in Mexico alone, created Spin by Oxxo, which is essentially a bank with a fee structure highly competitive to alternate financial institutions. With Spin by Oxxo, a customer can transfer money from person to person, deposit money, withdrawal money, and even earn Oxxo rewards points on transactions. Oxxo already had an industry-leading c-store offer, and its innovation in financial services essentially has it competing with banks, Western Union and crypto currency.
Driving Sales in Spain
Across the pond throughout Europe, it is not uncommon for convenience stores and travel centers to feature high quality restaurants, cafes and gourmet goods that complement convenience essentials. While large-scale operations are impressive, the company I find most inspiring is Repsol, which operates 4,700 global convenience stores.
I recently stopped at a Repsol in Algeciras, Spain, where in a store of less than 2,000 square feet, I couldn’t help but appreciate how the retailer mastered the art of both space planning and foodservice in a small space. There were seven customers in the store, yet with a labor model of just one team member working, I paid for my petrol and ordered both a premium espresso and a sandwich, while the transaction size grew larger than expected when my 3-year-old son picked up a toy truck for sale, perfectly placed at his height next to the candy aisle. The aroma of fresh baguettes being baked filled the air, and the experience was welcoming and quick.
A foodservice program can be large and complex or a franchise, either of which could be highly successful and the right choice for your business. Lessons from Repsol however teach us that you can do foodservice in a small space, without over investment, in a beautiful way.
Financial services doesn’t have to just be things that come top of mind in convenience stores like check-cashing and ATMs. Oxxo developed a financial services system so strong that it competes with banks, is tied into the store rewards program, and even better, is a category that never has out-of-stocks, unlike merchandise.
Sometimes, however, your next big thing can be modest, simple initiatives that drive incremental gross profit for low effort. My son now refers to Repsol as the “toy store,” so it goes without saying that he will drive more share of my wallet there.
Peter Rasmussen is an industry advocate, convenience and energy veteran, and CEO and founder of Convenience and Energy Advisors, Boston. He can be reached at peter@convenienceandenergyadvisors.com.