Rob Gallo authors article for Kentucky Grocers and Convenience Store Association Magazine Check Us Out! Spring 2017 Edition.
Big name-brand retail stores are closing. Names like The Limited and Sports Authority will soon be forgotten while other stores like American Eagle Outfitters, Macy’s, Office Depot and Sears will continue to shrink their footprint. With a massive consumer shift from store to e-commerce sales, big retailers are challenged with declining foot traffic and bloated, expensive store portfolios.
While this transition may be the death of many retailers, convenience stores shouldn’t be discouraged. Convenience retailing has its own set of challenges — volatile fuel margins, declining cigarette sales and credit card fees, to name a few — but the massive shift from stores to digital channels is not one of them. Convenience stores should be emboldened to continue their focus on growing key traffic drivers, such as foodservice.
Foodservice has been more than a bit of a conundrum. While foodservice has been a focus for c-stores, turtle-like progress has resulted in only a 0.7 gain in share points over the last five years, according to NPD*. With 150,000-plus stores and a steady stream of foodservice news coming out of the convenience channel, you might expect a much stronger performance — even with a growing foodservice pie. This performance suggests many convenience stores remain slow to enter the foodservice fray or are struggling with their existing offerings.
What does foodservice have going for it? Perhaps the most important reason is, relative to many other retail categories, food is still largely a store-based purchase. Location and immediate consumption, long-standing assets for c-stores, are also key components for foodservice sales. Having foodservice offerings drives visits to the store. Having great foodservice offerings can build loyalty and repeat visits even in a crowded space.
Positioned to Win
Competition for foodservice dollars is intense, but c-stores are positioned to win, particularly against fast-food chains. The advantages of variety, convenience and price are significant. C-stores generally offer a broader food assortment along with fuel and other groceries, which creates one-stop convenience. With many fast-food chains eliminating the dollar menu, c-stores are also becoming the price leaders. The average food purchase at a convenience store is $2 less than at fast-food chains, according to Nation’s Restaurant News.
Another positive for convenience stores are the customers they’re attracting, who are generally younger than those who visit fast-food chains. Younger millennials and members of Generation Z are the first- and second-heaviest user groups, according to Nation’s Restaurant News.
The Time Is Now
If c-stores ever needed a final push to step up their foodservice game, here it is. The foodservice outlook for 2017 continues to be strong. The 15th annual Convenience Store News Forecast Study projects per-store foodservice sales to increase 6.8 percent in 2017.
Foodservice is a lever that most c-stores are not using to full potential. Conducting an assessment of your foodservice offering will identify strengths and weaknesses and yield significant opportunities to improve results. Here are some questions to ask as you review:
- Concept and program design – Is your program designed to meet the needs of your customer?
- Distribution supply chain – Is it set up to support your offering efficiently?
- Marketing and merchandising –How well are you driving store traffic and conversion?
- Management standards – Are daily procedures and checklists part of your DNA?
- Training and food safety – Are you following food safety and training best practices?
- Reporting and accountability – Do you have rich and accurate data necessary to manage your foodservice business?
- Product and menu development – Are you giving customers new options and rationalizing slow sellers?
When you identify gaps in the areas above, you can then take action to address them. Periodic assessments will ensure your foodservice strategy and execution is optimized to win.
Rob Gallo is the chief marketing officer for Lexington, Kentucky-based Impact 21, a retail consultancy with extensive experience in convenience stores and foodservice. Gallo has 20 years of experience as a trusted strategist driving real business results for the world’s biggest brands.
*According to NPD, c-stores’ share of quick-service visits rose to 10 percent in the year ended August 2016, from 9.3 percent in 2011.