By David Bishop
“The Jetsons,” the animated TV series of the 1960s, represented a space-dwelling futuristic world, free of fossil fuels emissions and full of modern conveniences. Life with George Jetson and family consisted of handy futuristic-looking gadgets and toys as well as a galaxy full of flying cars.
In particular, the Jetson’s “food-a-rac-a-cycle,” a cool device resembling a microwave that instantly dispenses about any type of food you could imagine, fed the family every day and epitomized convenience in the year 2062. With the press of a button — voila! — an instant steak dinner. Of course, the darn thing was always breaking down or spitting out the wrong meals.
While the reality of a “food-a-rac-a-cycle” still seems an unlikely scenario for our near future, other unheard-of conveniences and more convenient service might not be so far off. And with the promise of convenience being one key driver of progress, how will our industry play a part in the years to come?
When we think of the future of convenience retailing, motor fuels, tobacco and foodservice bubble quickly to the surface for discussion. And, while it’s important to understand these vital profit centers, less visible conventional wisdom exists below the surface that influences more subtle areas, such as how to reposition our business in a changing environment.
If current times have reinforced anything, it’s that change is a predicable part of the evolutionary process. Over the last few decades, convenience stores have evolved from gas stations with convenience-oriented products to convenience stores that also offer motor fuels. This evolution has helped the industry reposition its food and consumables offering, but the deeply ingrained association with motor fuels for many consumers has made for a slow shift and at times a challenging progression toward building a fresh foods program.
Understanding how the changing environment influences those long-held beliefs helps us understand how it may change our operating principles in the future.
When we refer to communicating with consumers in convenience stores today, onsite or in-store activities typically come to mind first. The prevailing thinking has been that onsite communications trigger impulse purchases with customers who are already inside the store or at the pump.
As convenience retailers continue to invest in building a fresh-food program, which we call foodservice today, there will be a growing need to reach other consumers in the marketplace who aren’t existing customers of the store, and who may not have even stepped foot on the site before. The off-site communication needed to attract these customers, depending on the size of the retailer, may take many forms, which could include billboards located in close proximity to the store, radio spots during key drive times, or direct mail campaigns within specific zip codes. Consider that McDonald’s advertising budget increased more than 7 percent in 2007 versus the previous year. It’s built awareness for new offerings like its premium quality coffee, iced coffee, and sweet tea, for example.
We’re beginning to see some progressive retailers make this shift to foodservice already. A recent survey, conducted by Balvor, examined foodservice practices within convenience retail. What was revealed: Convenience retailers that reported the highest volume sales per outlet for hot dispensed beverages had also increased their use of direct mail to promote their programs, whereas others hadn’t done much at all.
These successful retailers indicated that this tactic helped to broaden their reach and motivate product trial with non-customers. And, the customers believed that the product quality was good enough to satisfy their needs better than other available competitive alternatives.
This practice of reaching non-customers will spread slowly. Many retailers still have room to grow with existing customers by better serving their underserved needs with an improved offering. And as retailers expand into other segments or enhance current segments further, the need for off-site communications will increase.
Successful convenience retailers in the future will be even more adept at appealing to our senses. Sensory cues can reinforce freshness and quality, especially as convenience retailers expand their foodservice offering.
Visual cues will manifest themselves in colorful, back-lit menu boards that leverage product images along with descriptive language explaining items. These menu boards will rotate featured items based on time of day, which will increase the impact of the visual display while not reminding customers of what’s unavailable. Retailers will increase the use of large digital product images or high-quality murals to demarcate various sections of the store, with focus on foodservice areas and other fresh areas, such as dairy.
“Made on” dates, as opposed to a “sell-by” or an expiration date, will become de rigueur. The “made on” date focuses on a product attribute that consumers associate with freshness and quality; whereas, the other dates, in their minds, can be extended by any number of means to maintain freshness, such as nitrogen-flushed packaging.
Butcher-wrap paper, wicker baskets, accent lighting and faux wood flooring are just a few other visual cues that convenience retailers will employ to build an image of fresh and quality by creating subtle associations with farmer’s markets or local bakeries. These cues will extend beyond store merchandising and be visible in collateral materials like menus and even Web sites, where some consumers may get their first look at a retailer’s offering.
Widespread recognition that all visual cues need to reinforce the store’s freshness and quality image means that retailers will develop an absolute adherence to strict sanitation practices. A clean store becomes a cost of doing business, which includes both store personnel as well as store facilities such as the restroom.
Interestingly, this emphasis on cleanliness may even affect where retailers locate the entrance for restrooms, since some consumers perceive that a restroom with an exterior entrance is harder for employees to keep clean.
When it comes to future fresh-food programs, many convenience stores will build their offerings based on the principle of “simplicity with versatility” — measuring simplicity by the breadth of the core assortment and the steps of service, and versatility by the number of potential options or degree of customization available to customers.
This focus will help minimize product waste by increasing the use of ingredients across menu items, streamline staff training with more consistent production steps, and improve service times due to a more intuitive ordering process and efficient workflow design and layout.
In coming years, the food offering will be different from market to market for convenience stores, but Chipotle Mexican Grill illustrates this principle in action today. The chain features five menu items — burrito, fajita, burrito bowl, tacos and salad — that a customer can personalize based on one of five ingredient options (chicken, steak, carnitas, barbacaoa or vegetarian). Interestingly, this design has enabled the creation of a more efficient ordering process: The customer first indicates the menu item (burrito), then selects the core ingredient (chicken), and finishes by choosing the secondary options list on the menu (pinto or black beans and so on), which helps balance ease of ordering and personal customization.
Given that the ability to get in and out of a store is a strong consideration when purchasing in convenience stores, retailers should recognize the value of this principle to enhance speed of service. Some Chipotle locations have been able to serve more than 300 customers in one hour.
The concept of convenience will expand beyond the notion of getting customers in and out as quickly as possible to also encompass the principle of “accessibility,” or the ability to present an offer in such a way that improves consumer perception of the ease of shopping. The carwash is a good example of this. Today, many customers pay twice as much or more for the same basic carwash at a niche retailer. They do so for a variety of reasons related to accessibility.
First, many customers are uncomfortable navigating their car into the carwash bay, which is why they value the service of an experienced person to do this task. Second, many customers like to see their car being washed, but don’t like the sensation of being trapped in the car as it goes through the wash, which is why they like to watch and wait inside the store. Lastly, given that customers are already out of the car and haven’t paid yet, it’s easier to purchase ancillary automobile products like air fresheners while they wait.
To become more accessible, convenience will move up-market with limited service and program upgrades, which will also help elevate their retail price points to cover additional operating expenses. Incremental forms of innovation will include staffing the carwash with an attendant during certain times of the day, to adjusting the order-payment process to allow for additional purchases, to designing new merchandising solutions to sell complementary products adjacent to the carwash. And, in some cases, the store design may adjust, with the carwash facility attached to the main building, thus allowing the customer to exit the car and complete the transaction as they do today with the niche retailers.
Another example of increasing the accessibility of convenience stores: drive-thru windows. The senior citizen demographic would welcome not having to leave their car. And in the next 15 years consumers age 65 and older are growing at annual rates three times faster than the overall population, so this crowd will be a big consumer group in the future.
Moms are another customer segment that would welcome drive thrus. Quite often, moms forgo a store visit after filling the gas tank simply to avoid a battle with kids begging for this or that item. (See NACS Magazine January 2009 for more on drive thrus.)
These types of innovation will help to simplify our customers’ lives, which should be a strategic component of any convenience retailer’s value proposition.
Advances in technology — touch-screen kiosks and mobile texting — have features developed from older generation ordering-solutions like phone-in or fax ordering. Customers have already embraced some of these new service options in convenience retail. And, as the technology continues to develop, additional service solutions will become more commonplace and shorten service times even further, which is important as stores move toward more time-intensive food production.
Another principle that will influence our view of “convenience” in the future is suitability, or the introduction of products or services that consumers perceive as acceptable alternatives that help satisfy their needs more effectively.
The next level of innovation will likely expand to include payment components very similar to what consumers experience when ordering products online from catalog companies. A key difference however, is that the order is not delivered to the customer, but rather the customer goes directly to a store where the order is ready and waiting.
These technologies will have the ability to direct a customer’s order to the right store and integrate with the store’s point-of-sale system. As a result, retailers will help customers save even more time by reducing the actual amount of waiting time inside the store to virtually zero.
And, given the growing prevalence of obesity as well as the aging of U.S. consumers, convenience retailers may make their store more acceptable to more consumers by expanding their offering to include other types of better-for-you items.
A clear and growing recognition, especially among larger retailers, is that there’s a benefit to embracing localization as a core operating principle. At the heart of localization lies a belief that performance will improve if a store’s products and services better align with the local market’s needs and wants.
One aspect of localization involves leveraging advanced analytics to better align what a store offers with what the local market wants. This approach enables retailers to understand how stores just a few blocks away could perform in dramatically different ways. By moving beyond shopper demographics toward analyzing the shopping mission, retailers are now able to adjust assortment and reconfigure the set size on a store-by-store basis. In some cases, where the differences are great, the retailer may relocate a category within the store to better align with the predominant trips occurring in a particular store.
Another aspect of localization is building stronger relationships within the community in order to build a more loyal following within the local market. This focus helps to extend the reach of the store’s communication beyond the site to build goodwill and positive word-of-mouth, while also providing additional opportunities to gain trial with non-customers.
An example of this beginning to surface today: Some leading convenience retailers, who are investing in their foodservice programs, are actively sampling signature products, distributing special deal coupons and talking with residents at local events about what their store offers. And, whether it’s through advance analytics or relationship building, both techniques will become effective ways for retailers to better understand the localized needs of their stores.
So, what does the future have in store for convenience retailing?
We can expect more of a marketing-driven orientation that helps build a brand beyond the existing, core customer. A visually appealing experience, emphasizing freshness, as well as a simple but versatile offering that still provides customization, will become a necessity for consumers and successful retailers. New services that make products more accessible and an expansion of assortment will increase the acceptability of convenience stores as a viable alternative to other retail channels. Finally, a store better positioned to support local communities will build stronger relationships as retailers learn to satisfy their customers’ needs on a new level.
While the “food-a-rac-a-cycle” of Jetsons fame is not showing up in anyone’s store anytime soon, the fast and efficient service it offers will indeed be mandatory in our future.
David Bishop specializes in convenience retail and is the managing partner at Balvor LLC, a sales and marketing consulting firm located in Barrington, Illinois.