The
convenience store sector continues to outperform other retail sectors, in large
part driven by ever-increasing sales of fresh prepared food. In fact, fresh
prepared food sales are the root cause of the undercurrents of disruption
changing the price, value and service equilibrium within the retail food sector
today.
Companies the ilk of Wawa Inc., Sheetz
Inc., Rutter’s Farm Stores, Casey’s General Stores Inc. and 7-Eleven Inc. are
all expanding year-over-year sales while building new units. Differentiation
with quality ready-to-eat and heat-and-eat fresh prepared food is one way to
created marketing buzz and customer trial. However, that model is changing and
changing fast, driven by evolving demographics, technology and virtual
convenient concepts.
Five
years ago, many leading convenience store operators were worried about other
c-stores stealing their ideas. Then, they began to think they should only worry
about the day when they stop stealing ideas. Well, that day may have arrived.
The current convenience store business model is under attack.
Even after seven successful years of
seeing convenience stores’ retail fresh food sales leading the food industry in
growth, c-store operators cannot rest on their laurels. I’ve seen how
“footprint malaise” can be a leading contributor to consumer discontent and
migration to other channels. Although fresh food continues to be the driver of
customer frequency, retailers have seen gasoline volume tapering off with
improved gas efficiencies taking a toll.
Youth-Targeted
C-stores
A recent study found that Americans
aged 16 to 24 who have driver’s licenses fell to 67 percent in 2011, the lowest
level in roughly a half-century. This same segment of consumers would rather
have a smartphone than a driver’s license.
The consumer is dynamic, not static;
business models must be as well. Are you building or remodeling stores for
yesterday’s customers or tomorrow’s?
While smartphones and technology are
driving disruption in seemingly every sector of the economy, new technology and
startups led by 20-something CEOs are now taking aim at the convenience store
sector and all fresh-food retailers. Burger King’s purchase/merger with Tim
Horton’s is just one example of a legacy food retailer trying to mitigate
customer migration with daypart expansion, but that may not be enough.
Who’s
Competing In Convenient Convenience?
E?
In an omnichannel/cross-channel retail
world, simply doing what you have always done and doing it the same way does
not work.
Back in 2011, when Scott
Stanford and Shervin Pishevar led separate investments in Uber’s
$37-million Series B round, fellow investors and friends scoffed. “Why are you
guys investing in a limo company?” the naysayers asked. Today, Uber is
operating in 128 cities and valued at $18 billion.
Today, Uber also is offering a free
delivery service called Uber Corner Store as a means to garner more customers.
Yes, the company is serving young customers that don’t drive, aging customers
who are too old to drive and lower-income customers who can’t afford a car
full-time to drive. Since Uber’s store is a virtual location, the return on
investment is much less than a brick-and-mortar store.
Stanford and Pishevar did not stop
there, though. They formed a venture capital firm called Sherpa Ventures.
One of their first big bets was a $28-million Series B investment in a San
Francisco-based food delivery startup called Munchery, which makes meals
and delivers them within one hour.
Munchery and Uber are putting the
“convenient” in convenience. Now, you may be thinking that technology-based
food companies will not affect your business. Tell that to Waldon Books, Barnes
& Noble, Crown Books and maybe your favorite local bookstore.
Are you building a convenient brand
beyond your four walls?
Technology:
Once A Friend, Now a Foe
Sherpa
Ventures co-founder Stanford said, “When you introduce something like Uber or
Munchery, you change the paradigm with not only how that service or product is
consumed, but how it is provided … If you can change the underlying economics of
that delivery platform or that value chain, it puts you in a really interesting
position from a financial perspective.”
When
Red Lobster opens a new restaurant these days, it does it very much the same
way it did 46 years ago. Sure, it will have an updated menu, décor and
messaging, but the business model has not been changed. Red Lobster and maybe
your company’s business model might just look more like yesterday’s business
model than tomorrow’s business model.
There
is a growing trend of companies that, thanks to smartphone technology, are
providing efficient and innovative on-demand services. They can make your
business look outdated. Consumer expectation has changed as a result of greater
connectivity. From brick-and-mortar locations, consumers are fast looking to
“point, click and eat” solutions for immediate consumption — no gas required.
The Migration of Legacy Grocery Stores
Legacy
grocery stores are migrating into the "convenient convenience" space
as well.
Sharon
Price, grab-and-go food guru for the Fresh & Easy Neighborhood Market chain
(formerly owned by Tesco plc), recently said: “We set out to develop more
breakfast options that are delicious but not overloaded with calories, perfect
for the customer looking for healthier options on the go.”
These
grab-and-go breakfast items are priced to compete with c-stores and
quick-service restaurants. They will complement the lunch and dinner
fresh-prepared, ready-to-eat and heat-and-eat offerings.
Whole
Foods, meanwhile, not only offers fresh prepared food for breakfast, lunch and
dinner, but it also has entered the catering and holiday meal business, as well
creating a whole concept around family food and fun that continues to drive
sales and bottom-line profits.
From Handheld Food to Hand Held Food
Ordering
Every retail food sector has noticed a
discontinuity in consumer food shopping behavior, and all are fighting
for share of stomach. Contributing
to this displacement is technology and demographics. Where once the family
dinner was the bastion of American household, today 32 percent of dinner
occasions are eaten alone.
Are you trapped doing what you have
always done and doing it the same way? How long before virtual location
startups garner 5 percent, 10 percent or even 20 percent of your market share?
Outside
eyes can deliver top sales and bottom line profits. Invite www.FoodserviceSolutions.us to provide brand and product positioning
assistance or a grocerant program assessment. Have you completed a Grocerant
Scorecard? Contact: 253-759-7869 or Steve@FoodserviceSolutions.us
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