5 Growth Opportunities in a Soft Traffic Environment

SCOTTSDALE, Ariz. -- Besides disruption, one topic has been on many convenience-store retailers’ minds in 2017: softer foot traffic.

C-store foot traffic is off 2.4% in 2017 compared to the prior year, according to the Coca-Cola Retailing Research Council. To examine the challenged growth environment and how to respond, Mitch Morrison, vice president of retailer relations for Winsight, led a panel of three c-store retailers at the recent Outlook Leadership Conference in Scottsdale, Ariz., in a wide-ranging discussion that touched on everything from industry disruptors such as Amazon to opportunities such as foodservice.

Here are five strategies retailers are embracing to counter the soft-traffic trend and position themselves for 2018 ...

The first opportunity to staunching the decline in foot traffic comes in simply nailing and increasing tried-and-true tactics.

“It just speaks to the need to be more proficient with promotional activity,” said Trey Powell, director of marketing for Alimentation Couche-Tard’s Circle K Gulf Coast division, Pensacola, Fla. “You need to have some urgency around soliciting that second item or upselling to a larger package.”

He said that some manufacturers have a fixed idea of which package sizes are best for the c-store consumer. “We try to preach that if that customer is buying same packaging in another channel, no reason we can’t capture that sell when we have the customer in our box,” he said, citing 12-packs vs. suitcases of beer as an example.

“You have to work really hard, be cognizant of your product mix, and understand that once they’re inside the box, that’s your best chance to sell something incremental,” said Powell.

At AU Energy’s Loop Neighborhood c-stores, healthful snacks are a key focus, especially considering the company’s participation in the Partnership for a Healthier America (PHA). The chain has been experimenting for the past four years with everything from salad bars to fresh juice machines, said Varish Goyal, president of Vintners Distributors Inc./AU Energy, Fremont, Calif.

“Not everything is going to work,” he said. However, if the retail offer hits the right notes, it gives Loop room to continue to experiment.

“Having a nice box that’s welcoming to the consumer, that is inviting, well-lit, clean and has that real modern look gives you the flexibility to be open and try different things, and consumers are more willing to approach it,” said Goyal.

The Spinx Co. Inc., Greenville, S.C., takes foodservice seriously. Consider its large stores with commercial kitchens and plenty of seating to encourage customers to stay awhile and enjoy the chain’s famous fried chicken, sandwiches, salads and wraps.

For retailers still finding their foodservice voice, it pays to be patient, said Stan Storti, president of the 81-store chain.

“You do have to be disciplined, and it’s going to require you to stick with something that is going to look like a failure for a while,” he said. “We’re not used to that in our industry. We reset our stores twice a year. … You can’t have that mentality with food, especially when you decide what’s going to be your ‘hero’ food item.”

Circle K is continuing to develop its foodservice offer but is working to not get distracted from the rest of the store.

“Sometimes it’s easy to take your eye off the ball when you’re chasing the food carrot,” said Powell. It can be a costly error, especially with the blurring of retail channels. He pointed to increasing competition from dollar stores on categories such as ice cream.

“It’s easy to chase the food thing, but there are opportunities beyond that in the core of what we sell,” he said.

Circle K is also looking for opportunities to improve by comparing its practices with those of the c-store brands that Couche-Tard acquires, including the July purchase of Holiday Stationstores.

“It forces you every time, whether [acquiring] one or 1,000 stores, to gut check what you’re doing when you’re seeing someone doing something differently,” said Powell. “That introspection is healthy. A big part of it is truly understanding what these operators do well, and how to leverage and scale beyond that.”

For Loop Neighborhood stores, the No. 1 goal moving forward is to continue to grow the brand beyond its current 25-store footprint. To do that, it is razing and rebuilding existing sites, focusing on growing its loyalty program and continuing to experiment with its product mix. But along the way, it must battle some major headwinds, beginning with escalating labor costs.

“We’ve seen year-over-year labor-cost increases [that] I’ve never seen in any two-year cycle,” said Goyal, adding that the retailer also is trying to manage retention and turnover, which has hit a high. This includes re-examining and improving its compensation and benefit packages, allowing more flexible scheduling and even small gestures such as allowing employees to wear jeans.

For Spinx, higher retention begins with finding employees whose belief system aligns with the company core values. “Without finding people who are value-aligned, you’re going to be in the continuing death spiral of turnover that we are in today,” said Storti. Much of that turnover is a function of low unemployment and wage inflation—issues that he argued retailers must grapple with today before they tackle potential disruptors of tomorrow.

“I worry more about that than Amazon parachuting someone a coffee into their office,” said Storti of turnover pressures. “The challenge is finding the right people.”