future-focused · available at gas stations in the next five years. variety in tobacco competition...

© 2014 Technomic Inc.

PREPARED EXCLUSIVELY FOR:

OCTOBER 2014 | Project #15989

Future-Focused:Next-Level

Convenience

Retailing

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© 2014 Technomic Inc. 2

Contents

Executive Summary & Methodology

Summary of Specific Opportunities

Appendix: Consumer Demographics

1

2

3


Executive Summary & Methodology

3


Introduction & Methodology

OBJECTIVE: The primary objective of this study was to examine consumer convenience-store behavior and attitudes, and develop c-store consumer segmentation to support the development of retail strategies for the convenience store of the future.

METHODOLOGY: An online nationally representative survey of 1,500 U.S. convenience-store customers ages 16 and older was conducted in August 2014.C-store User groups were developed based on frequency, day part and products. See Appendix for information on User Groups and survey respondent demographics.


Executive Summary

FUTURE FOCUSED:

Next Level Convenience Retailing

Although a mature industry, convenience retailing is evolving rapidly, prompted by changing consumer demands, product innovation and competitive intensity not only from within the channel, but from other retailers and foodservice providers.

Conducted exclusively for CSP Magazine, Technomic’s study of consumer preferences, habits and future intentions regarding convenience retail visits and purchases, combined with our ongoing monitoring of consumer lifestyles and behaviors, yielded key insights into “next-level” convenience retailing. The voice of the consumer helped to identify the requirements for sustainable growth and success in a marketplace that is increasingly competitive and challenging, yet rife with opportunities for proactive operators willing to evolve.

Technomic has identified six key learnings to inform the strategic development of the successful convenience store of the future.


Next-Level Convenience Retailing

Lifestyles Needstates Dayparts

Preferences Occasions

Relevance requires sharp understanding of consumers’ attitudes, preferences and behaviors, and forward-thinking retailers will need to insure that understanding involves the “big picture” of evolving consumer trends, but is also specific to their target consumer base. Projections regarding population and demographic trends indicate the core and target consumer for convenience stores is increasingly diverse in terms of generational cohorts, income levels, ethnicity, life stages and mindset. In addition, consumers have a dearth of options ranging from mass merchandisers to supermarkets to drugstores and restaurants striving to satisfy their needs and indulge their whims.

While the temptation in today’s environment is to be all things to all people, next-level convenience stores will identify and articulate what is relevant to their target consumers, and filter all aspects of their operations, marketing, product sets, service and features through that relevance filter. Doing so also enables the operator to differentiate from other retailers both within and beyond the convenience channel.

RELEVANT



User Groups

Super-heavy

Heavy

Moderate

Light

Daypart Groups

Morning

Afternoon

Evening & Late Night

Determining which consumers c-store operators wish to attract and engage beyond demographics is crucial. Through this study, Technomic has identified convenience customer segmentations to assist c-store operators in developing strategies that insure relevancy. Descriptions of each group appears in the Appendix.

Users by Product

Gasoline

Retail food & beverage

Foodservice

Tobacco

RELEVANT



Gasoline remains a primary draw to convenience locations, but foodservice is increasingly important. Many convenience retailers are already implementing aggressive foodservice initiatives, with varying results.

Nearly half of consumers say convenience stores are

capable of delivering restaurant-quality fresh food, pointing

to an expectation and interest in being able to source such

items from convenience stores.

The mandate from the consumer is to raise the bar on variety, taste and healthfulness of prepared food and beverages, as well as made-to-order and grab-and-go offerings, to the level of quick-service and even fast-casual restaurants. Including branded restaurants in the store’s features also holds strong appeal. The consumer message is that such amenities will prompt visits and sales, particularly among younger shoppers. Next-level convenience retailers will transform their organizations and infrastructures around fresh food delivery and adopt a foodservice culture.

FRESH-FOOD FIRST



Evolving Fuel Offerings

Automotive technology advancements, economic conditions, environmental concerns and a more socially-conscious consumer all point to an increase in alternative fuel usage. Convenience operators currently rely on gasoline to draw traffic to their locations, generate loyalty and repeat visits. The next-level retailer’s fuel program is engineered to be proactive and ahead of changing consumer needs and demands.

Two-thirds of consumers expect alternative fuel offerings to be

available at gas stations in the next five years.

Variety in Tobacco

Competition for Tobacco Purchasers is changing as other retailers and channels evaluate their participation in the category. Tobacco Purchasers comprise one-quarter of convenience patrons, and are a loyal group that skews young, pointing to opportunity for continued engagement of a frequent shopper. These consumers value the availability of their preferred brand, seek variety of formats (traditional and smokeless) and flavors. Next-level stores will present targeted and tightly managed sets involving a range of tobacco and smokeless products.

DIVERSITY IN FUEL & TOBACCO



Key consumer groups—younger consumers and Foodservice Patrons—are intrigued by the concept of larger-store formats for convenience locations. A bigger footprint can convey commitment to fresh foods, variety and service that will drive visits and sales.

While consumers indicate strong likelihood of patronizing larger-format convenience stores, they caution that the format must be designed to facilitate ease of navigation and speed of put-through. The next-level retailer choosing to increase store footprints will implement store designs with efficient traffic patterns, clear and concise signage and technologies designed to speed activities such as foodservice ordering and checkout.

LARGER STORE FORMATS



The primary appeal of the channel remains its very name—convenience. As the lines continue to blur between channels, the temptation is to incorporate elements of other retailers and foodservice concepts in the quest for share of wallet, stomach and throat. Consumers, however, are vocal on the importance of convenience in determining what location they will visit.

Traditionally defined primarily by location, several elements will factor into the “convenient” positioning of the next-level offering, including hours of operation, parking, ease of getting in and out, in-store navigation and variety.

An emerging element of convenience is technology. From

self-service foodservice ordering kiosks in-store or at the fuel

island to touchscreen payment to available Wi-Fi, consumers

expect tech-driven amenities at convenience stores.

A key finding of this report is that consumers value and expect these convenience elements. Operators who abandon convenience as a priority risk traffic and sales.

CONVENIENCE



Second only to convenience in driving traffic is cleanliness. The level of cleanliness influences likelihood to visit and loyalty. The juxtaposition of gasoline and food at convenience stores is a barrier to patronage for some consumers, particularly women, so presenting a clean, well-lit forecourt and well-maintained fuel island will be paramount. As in restaurants, bathrooms are a priority area for cleanliness, and consumers value amenities that contribute to a sanitary environment.

Next-level convenience retailers will create a culture of cleanliness, prioritizing best practices for cleanliness from the forecourt into all areas the store, whether visible to the shopper or not.

CLEAN



13



C-store patronage is high, but room exists to boost traffic and sales

Large-format stores resonate, especially among younger patrons

Loyalty programs can help drive repeat traffic and increase loyalty

Convenience, cleanliness and cost/value primarily drive traffic

Technology-based amenities appeal

Strong interest exists in alternative vehicles and fuels

Brand is important for gas and tobacco purchases

Consumers call for more variety of tobacco products and flavors

Food and beverage amenities can increase foodservice sales

Improving food offerings can help c-stores compete with fast food



Appendix: Consumer Demographics

15

© 2014 Technomic Inc. 16Base: 1,500 consumers aged 16+

16–172%

18–2413%

25–34, 17%

35–4416%45–54

17%

55+35%

Age

Consumer Demographics


Gen Z, 6%

Millennial29%

Gen X, 17%

Boomer36%

Mature9%

Generation



Male, 49%Female

51% Gender



Caucasian, 65%

Hispanic16%

Black/AA 13%

Asian4%

Other2%

Ethnicity



Base: 1,500 consumers aged 16+Percentages do not equal 100% due to rounding

South, 38%

Midwest20%

Northeast20%

West21%

Region



Under $25K, 14%

$25K–$34.9K12%

$35K–$49.9K15%

$50K–$74.9K25%

$75K–$99.9K15%

$100K–$149.9K

10%

$150K+4%

21Base: 1,500 consumers aged 16+; 6% of consumers preferred not to answer or were unsure.

Income



Suburb40%

City26%

Rural area20%

Small city13%

Location

Where

Live


future-focused · available at gas stations in the next five years. variety in tobacco competition...

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