Thursday, June 8, 2023

Food Retailers with YoY Customer Counts Down, Sales Slipping, and Rent Sky Rocketing Need to Evolve


Here is some of what the team at Tacoma, WA based Foodservice Solutions® has heard from clients, at the National Restaurant Show, or read printed in other recent articles.

The simple fact is that rent for food retailers including restaurants, C-Stores, Deli’s etc. are continuing to increase.  In many spots around the country, they are breaking or at a new record high: 54% say they're paying more now than they did six months ago. And 14% say their rent is over 20% higher than it was in December. The 54% figure represents a steady climb in the number of small businesses dealing with higher rent prices each month in 2023 -- up seven percentage points from 47% in January, as this chart indicates. 

The report found what was making matters worse, the average revenues small business owners are earning are dropping, as rents are rising, creating intensifying financial pressure, exacerbated by other economic challenges including still-high inflation, increasing interest rates, and greater recessionary fears. 

Doing the same thing and doing over and over again does not seem to be working for many small food retailers or brand managers waiting for things to go back to the way they were. This pressure is so severe that 
37% of small business owners in the U.S. report they couldn't afford to pay their rent in full and on time this month, according to Alignable's May Small Business Rent Report, which has just been released.

The sample size was not small as this report is based on Alignable's new poll of 4,424 randomly selected small business owners from 5/6/23 to 5/30/23, as well as data from 75,000+ other responses chronicled from surveys over the past 18 months. 
Alignable's Research Center uncovered other trends including that:

1.        44% of restaurants couldn't pay rent this month. While that's a lot, it is an improvement of five percentage points over April, which was 49%.

2.        45% of retailers struggled to make May rent (up 4%)

3.        47% in the travel/lodging arena experienced the same issue -- up 20 percentage points over last month

4.        57% of minority SMB owners couldn't afford May's rent (representing the worst surge of the year so far, up 9 percentage points from 48% just a month ago)

5.        Several states broke 2023 records for rent delinquency rates in May:

6.        IL -- 52% of SMBs could pay May rent (up 11% over Apr.)

7.        NY -- 48% (up 6% vs. Apr.)

8.        MN -- 47% (up 2% vs. Apr.)

9.        CA -- 41% (up 9% compared to last month)

10.     Meanwhile, only 7% of Arizona's small businesses couldn't handle May rent payments, down eight percentage points from Apr. Arizona has the lowest rent delinquency rate among SMBs in the U.S.

11.     While the national average for the U.S. in May was 37%, it was even worse in Canada, with 53% of businesses north of the U.S. border reporting rent delinquency.

Now beyond rent spikes, revenues are also lower in May -- 45% of SMBs say they earned half or less of what they generated monthly prior to COVID. In April, that figure was only 39%. 

Do you have a specific question?  Ask Chuck Casto, Head of Research, Corporate Communications & News,

Regular of this blog know there are solutions to problems here is a example of how one company has found success by evolving and the steps that they took could be the success clues that could help you.

ARKO Corp. President, Chairman and CEO Arie Kotler attributes the continued success of the company's in-store performance to ARKO's refocused investment on resources including people, space and capital.

So, during the company's recent first-quarter 2023 earnings call, Kotler highlighted the three key pillars of ARKO's marketing and store initiatives that have contributed to strong in-store performance. They are:

1. Grow sales in core destination categories through data-driven decisions and strong supplier partnerships.

ARKO invests in the assortment square footage allocated from merchandising and loyalty promotions for the core destination categories of packaged beverages, beer, candy, salty snacks, sweet snacks and alternative snacks.

During Q1, these categories drove 63 percent of same-store sales, excluding cigarettes, and 43 percent of total same-store sales. Year over year, same-store sales for these six categories grew by approximately 10 percent and margin rates grew 110 basis points.

"Our customers expect and deserve for us to have the right assortment, space and value in these categories," Kotler said. "We continue to refine and drive the expansion of these categories across our company-operated stores to ensure that we are offering our customers the right assortment and value proposition."

2. Drive increased frequency and total spend through order-and-delivery, and relevant in-store and in-app personalized deals via the fast REWARDS program.

ARKO implemented new upgrades to the fast REWARDS loyalty app earlier this spring to drive more trips with existing customers, while attracting new loyal customers. The program currently has 1.38 million enrolled members.

Since the launch of the upgraded app, the number of members enrolling each week has increased an average of approximately 30 percent compared to pre-launch enrollment, Kotler shared.

"We know that enrolled marketable members make more trips and spend more in our stores than non-enrolled members. In fact, in Q1 2023, our enrolled members made an average of almost six more trips per month vs. non-enrolled members," the executive said.

In Q1 2023, enrolled members spent on average approximately $68.50 more per month than nonenrolled members. Additionally, the Q1 2023 enrolled members increased their average monthly spend by 8.2 percent when compared to Q1 2022.

"While early, we are encouraged by engagement in the new app, including the redemption of our in-app-only hot deals, as well as use of our new in-app order and delivery functionality," he said.

3. Develop high-margin food programs.

ARKO continues to expand its packaged and fresh food offerings, including pizza, chicken, prepared foods and other options. Same-store franchise sales across all brands increased 24.5 percent in the first quarter of 2023 year over year.

"While we have made great progress with our grab-and-go prepared, frozen foods and franchise partnership with Sbarro and Dunkin', we are still in the early stages of defining this strategy along with assortment and price value proposition for the consumer and our go-to-market strategy," Kotler commented.

"Our goal is to become destination for package, preferred and fresh food, and we look forward to providing further updates. Our objective is to make continuous improvement in each pillar and position our core convenience store business to continue delivering great results and exceeding our customers' expectations," he added.

Foodservice Solutions® specializes in outsourced business development. We can help you identify, quantify and qualify additional food retail segment opportunities or a new menu product segment and brand and menu integration strategy.  Foodservice Solutions® of Tacoma WA is the global leader in the Grocerant niche visit us on our social media sites by clicking one of the following links: Facebook,  LinkedIn, or Twitter

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