LONDON – Tobacco, foodservice, mobile payments, Millennials, last-mile delivery and labor costs were all put under the spotlight in a Retailer Issues Roundtable at the NACS Insight Convenience Summit – Europe.
Hosted by NACS President and CEO Henry Armour, the panel featured Mike Greene, CEO of My Local; Gary Harris of head of brand, Spar International; and Patrick Steppe, CSO of Lekkerland.
Traditionally, tobacco has been a huge category for Spar across its convenience store estate, both as a sales and footfall driver, said Harris. However, in recent years, sales have been on a downward trend, following the implementation of new legislation. At city center stores in Ireland, tobacco participation now stands at about 25% of sales, for example, and 30% at locations with fuel. But margins have been maintained largely due to taxation, Harris said.
Spar has introduced e-cigarettes and vaping to the tobacco mix but more work is needed to understand the market trends, said Harris. “We don’t drill down enough to know which products are selling,” he told attendees.
But the key to overcoming future declines in tobacco lies in developing higher margin, food and foodservice options, said Harris. “That’s the direction we need to go to counter the problem of tobacco,” he said.
It’s a contrasting picture in Germany, where tobacco accounts for 60% to 70% of total convenience store sales and is very much a destination product, said Steppe of Lekkerland. “The category is developing and growing well,” he said, adding that one of the biggest challenges lies in managing tobacco presentation as stores evolve more toward foodservice. “As we give more of a focus to healthy and organic products, we need to consider how we present tobacco alongside it and make the store look attractive.”
When it comes to foodservice development, German forecourts are conservative and currently behind the times, said Steppe. “Lubricants and confectionery are what consumers see when they enter a forecourt—we need to change that,” he said. Other [store] channels are developing well, he added, but stressed convenience was not a channel but a way of buying.
For Greene, foodservice needs to balance the fresh and healthy with the indulgent. “People often talk healthy but eat ‘fat,’” he explained. Fresh is needed to attract indulgent sales and vice versa, he added. “There’s peripheral credibility in having a broad range.”
Payments are in a transition period in c-stores but consumers will morph to where they can make quicker transactions, according to Greene. Self-scan—with cash or card payments—will lead the way, however. My Local inherited a number of stores with self-checkout units when it bought sites from Morrisons. “The convenience sector thinks it’s not for them but, where we have self-scan, 42% of shoppers want to use it,” he said.
Harris agreed the sector has been slow to pick up on self-scan but reported six Spar stores in the Netherlands, all based at university locations, offered self-scan and appealed to a captive, younger audience. The units have reconfigured the store too, freeing up space for other activities. “It also transforms the perception of brand,” Harris said.
Younger shoppers and millennials in particular, are an increasing focus for retailers, the panel agreed. Steppe said millennials make multiple connections with food across social media, on Instagram and Facebook, for example. “They can appreciate food-to-go but it’s also about the experience and individualizing their choices,” he said. Millennials are also very demanding customers with different shopper missions. “It’s not about price but the value which you offer,” he advised attendees.
For Greene, millennials seek out both indulgent—alcohol and burgers—and healthy options. My Local operates 18 stores based near university locations and they are the best performers for self-serve salad, Greene reported.
Spar is getting to grips with millennials via customer focus groups and understanding what they like and dislike about stores, said Harris. “Getting information first hand is important,” he said. “Millennials are also very honest about what they don’t like, which is great.”
Last-mile deliveries could be disruptive to convenience retailing but the opportunity lies in replicating them, said Harris. In the Netherlands, Spar has created a central office/Internet portal for online shopping but has given “the face” of each location’s webpage to an independent retailer, linking to a shopper’s local store, which picks and then delivers the products and has the capability to accept doorstep payments.
For My Local, there is an opportunity to build a community around the concept of “last mile” since 80% of its shoppers come from within one mile of a convenience store. Greene said each My Local store has picked a charity local to their individual stores, rather than a national one, for example. “Then, with any fundraising activity, we are able to say to shoppers that the charity is just down the road,” he said. It’s a similar scenario with food waste, which is redistributed to local organizations for the poor and homeless. Store managers also manage their own Twitter accounts, reinforcing local dialects, for example. “It gives a focus to a one mile radius versus corporate intent. It just transforms where and how we trade,” said Greene.
Despite rising labor costs the panel agreed employees should be paid a proper wage. For Steppe, convenience should not be the only channel that pays people the lowest wage. Operational excellence requires good, well-trained people who can deliver the right customer experience, he said.
For Greene, the key to affording a living wage lies in developing fresh foods and foodservice—higher margin categories that will support higher staff costs. It’s also critical to treat employees as an investment and ensure the business earns a return on that investment, he concluded.
Day two of the London portion of the event takes place Thursday with discussions on the last mile (with a presentation from DoorDash’s Prahar Shah) and the future of mobility. The day’s learnings will commence with an evening reception and the awarding of the International Convenience Retailer of the Year Award.
Fiona Briggs is a retail business journalist. She can be reached at fionalbriggs@gmail.com.