Silver Lining Amid Economic Clouds

Innovation continues to thrive in a convenience store industry that is forging ahead despite economic slowdown.

By Don Longo, Editor-in-Chief

I'm tired of writing editorials about the depressed state of the economy and its impact on the convenience store industry. Just recently I had a conversation with a retailer in the Southwest about how the housing bust and tougher state immigration policies were really devastating his business.

But then my day was brightened when a c-store retailer in another part of the country called me and said (as she knocked on wood) her business was up over last year and the economic troubles in her market actually eased what was becoming a critical labor shortage.

So, I think we're ready for a little proud time. Several news stories that broke online last month at CSNews.com reaffirmed to me that innovation is alive and well in the c-store industry.

May 2 -- "Kum & Go to Sell 21 Locations." How can a story about a major c-store chain selling off locations be good news? The reason why the West Des Moines, Iowa-based retailer is selling these units is because they are too small and don't fit Kum & Go's strategy to operate bigger c-stores. And that's a revealing, smart tactic.

Last year, selling space in c-stores increased by more than 7 percent as retailers focused on higher-profit categories like foodservice and expanded room for beer caves and energy drinks, according to the just released Convenience Store News 2008 Industry Report. Kum & Go is opening stores that will range in size from 3,600 to 5,000 square feet, according to COO Dennis Folden.

Top-performing c-stores have seized on the strategy of operating larger stores to optimize sales productivity and profitability.

May 13 -- "Quick Check to Open Prototype in New York." The New Jersey chain that rebranded itself last month with a new logo and tagline -- "Get Fresh. Go Fast." -- opened a new prototype in the upper Hudson River Valley of New York last month. The store, and the new branding treatment, clearly communicates the c-store retailer's commitment to delivering a quality assortment of fresh food products in an elevated foodservice environment.

Foodservice can't save a poorly-run operation. But c-stores that commit totally to a fresh food strategy will reap huge rewards in higher profits and marketplace differentiation. (Be sure to read senior writer Linda Lisanti's first-hand report on the new store in our next issue.)

May 15 -- "Wawa Debuts New Drive-In Store Prototype." It may still be just in the research and development stage, but industry innovator Wawa is testing two new programs: one, a 50s-style, drive-in restaurant and the other, a mobile ordering system.

Both tests bring a new level of convenience to the c-store industry. You have to admire a company like Wawa that is constantly reinventing and redefining convenience.

May 22 -- "7-Eleven to Franchise Florida Stores." Clint Eastwood's character, Dirty Harry, said in one of his films, "A man's gotta know his limitations." Perhaps Harry should have been a retailer, because 7-Eleven CEO Joe DePinto, in an interview with CSNews last month, said essentially the same thing as he explained why the nation's largest c-store retailer was moving to a 100 percent franchise network. "We felt like they [franchisees] were closest to their customers and understood what they wanted," said DePinto, who added the company couldn't remain bifurcated between corporate- and franchise-run stores. 7-Eleven can provide franchisees with many of the critical things they need, such as purchasing scale, infrastructure, daily distribution of fresh items, a pipeline of new innovative products and expertise in merchandising.

Winning companies know what they do best and then focus on that strength with flawless execution.

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