CHICAGO - Innovation is the key that drives convenience store performance, concluded NACS Vice President of Research Dae Kim last Thursday at the NACS State of the Industry Summit.
While previous Summit attendees looked forward to the much anticipated quartile performance metrics, Kim promised more this year, noting that even within the top quartile, the top decile shows that innovative retailers are pulling away from the rest of the pack.
Kim and the NACS research team dug deeper this year, extracting performance metrics for the industry€™s top decile performers. Whereas top quartile performers (top 25%) generated $25,611 per month in store operating profit €" the base metric for NACS €" top decile performers (top 10%) recorded $32,628, a 27.4% lift in 2011.
The performance jump was noticeable among nearly all categories, and Kim said this played out irrespective of store count and store size (square footage). While the top performers generally had a larger square footage footprint, he said this reflected the breadth of offers, and was not by itself a driver of success.
Foodservice stood out as a key component of top decile performers, contributing 25% to sales, a sizable opportunity for growth among the other deciles.
After laying out the numbers, Kim turned to strategies, emphasizing that the winning firms are those at the high and low ends, the ones focusing on either low cost or high differentiation. Top decile performers, he noted, are following a variation of one or both of these strategies, but the objective is the same - high profits. But how they reach this objective is radically different.
"Operators should continually assess operations, ensuring that 10 years of experience is not the same year repeated10 times. In addition, to become top performers, they must test assumptions, think of alternatives, and plot choices. Doing so elevates one€™s chance both to become a top decile performer, as well as remain one," Kim said.
Kim closed his number-intensive session with a caveat: "In order to innovate, you must trust your gut and not follow data too closely," otherwise you€™ll risk becoming redundant.
To illustrate, he laid out the "tale of the tape" between two anonymous personnel profiles, ones nearly identical in physical and educational attributes. The photo reveal showed New York Knicks star Jeremy Lin as one candidate, and Kim as the other.