So Much For Breakfast To Go

Last Friday, on my day off, I picked up breakfast for a friend who is recovering from a broken leg. 

After all the press I had read about Starbuck's improved breakfast offer, I decided to give the oatmeal a try. The oatmeal sounded like a healthy, safe choice. It comes with dried fruit, brown sugar and nuts, so my friend could customize it. A nice change from the usual bagel or fat-burdened egg/sausage sandwich right?

The barista opened two cardboard bowls, added hot water, put a top on the container and the oatmeal was ready to go before my drinks were.

As I unpacked the bag in my friend's kitchen, we were both excited to give the oatmeal a try. After struggling a bit to open the fruit bits' plastic packaging, we dug in. We were both impressed by the texture of the oatmeal and the add-ons. It was tasty and wholesome and made us feel superior to those poor, unadventurous, uneducated saps chowing down on sugared pastries while commuting or reading the paper back at Starbucks.

Then it happened. Half way through, I discovered a hair in the oatmeal. Human, I assumed, though it didn't match the hair I remembered on my server's head.

Though it's unlikely I'll ever be a victim of oatmeal hair again, I can't say I'll ever buy Starbuck's breakfast again either. Which, with my on-the-go lifestyle, will mean a few hundred dollars of lost sales per year for my local store.

It took 2 seconds to turn a great "I'm getting this every week!" experience into a gag-worthy, tell-my-friends grossfest. -- Barbara Grondin Francella

What Shoppers Want

 

In a recent report by M/A/R/C Research, featuring a rolling monthly survey of 1,000 adults, some 16 percent of consumers polled in June said they did not seek out c-stores as a place to shop. Ouch.

In a market with increasingly blurred retail concepts all vying for the same dollar not being on the consumers' mental map is tough.

Unfortunately, one of the top reasons shoppers avoid c-stores is a characteristic that defines the concept:  limited selection of products, according to M/A/R/C. Nearly half the respondents cited this as one of their top three reasons for not shopping in a c-store.

 

Other reasons shoppers did not stop in a c-store also hit close to home -- perceptions the industry has been fighting to overcome in the more than 20 years I've covered the retail channel. These non-c-store-shopping adults had concerns about safety (30 percent of shoppers), poor-quality staff (29 percent) and an unwelcoming store environment (28 percent).

 

Reading these results, you'd think the industry hasn't' evolved in a quarter decade. But the list of c-store operators who have addressed all of these issues continues to grow. They're offering and expanding quality private label products and foodservice items; improving their recruiting, hiring, training and compensation programs and continuing to invest in store facilities, even as the industry suffers from recessionary customer counts.

 

Perhaps it's a matter of marketing and strong brand identity. Unfortunately, customer perceptions are slow to change and often the weakest operator defines an entire channel in a customer's mind.

 

-- Barbara Grondin Francella

 

Viewpoint Was Too Hasty to Twit Twitter?

Reader says the social networking site is cost-effective to reach consumers.

Kenneth Cosgrove, marketing and operations manager for Piedmont Petroleum in Greenville, S.C., disagreed with my recent Viewpoint column in the August 10, 2009 issue of Convenience Store News, "The Postman Always Rings Twice, or More," http://www.csnews.com/csn/print/article_display.jsp?vnu_content_id=1003998123.

Reacting to an email from a reader who deemed Twitter a "waste of time," I wrote that while I thought some social networks, like Facebook, can be used effectively by business, my feeling is that the so-called "Twitter Revolution" is being fueled by an overeager media.

Ken disagreed:

"Don - I just read your "viewpoint" on why you think twitter is "blown way out of proportion" and that "facebook has more commercial uses."

"Well we have both twitter and facebook. I use our corporate twitter account much more than our facebook. Here's the thing, facebook is a personal social site which makes it harder for companies to effectively market within those social parameters. People who tweet are much more receptive to media messages. However, back to the point: I don't think they are useless and pointless. You see, unlike sheetz and wawa et al, I don't have a huge marketing budget; my marketing budget covers my monthly pump toppers and maybe a few posters in the window. We don't do, nor can we afford big time stuff like billboards and radio. That's just not our business model. So if I have two unique, fun ways to reach my consumers - even if they aren't my primary demo - then cool - let's do it! The ancillary benefit is that no one else in my market is doing this. So I've got a neat little point of differentiation for us and most importantly it costs me nothing. 

"In the midst of this economic slowdown the last thing I'm going to do is abandon a cost-free method of reaching my consumers.

"I enjoy your column and your magazine. See you at NACS."

Ken makes a great point about Twitter being a fun, unqiue way to reach consumers -- as well as providing a unique bit of differentiation. Was I hasty in my slam of Twitter? What do you think?

-- Don Longo

Energy Up!

I could use a major energy boost to get through the "First Day Back From Vacation." (In truth, more like Second Day Back -- does anyone leave for a week anymore without checking e-mail or at least putting in a couple hours the night before you plunge back in? But I digress...)

After seven days of bike riding, swimming, eating seafood and breathing the salt air on Cape Cod, the last thing I want to do is grab a caffeine-spiked, sugar- or Nutrasweet-filled drink that will forcefully throw me back into the "stay at my desk and crank out the copy while stress eating" rut.

On Cape Cod, the words "energy drink" didn't cross my mind. Indeed, I didn't feel right ordering the couple diet sodas I had. The rest of the family drank water at nearly every meal. I felt I was undoing what the broiled fish, sun and exercise were accomplishing.

The point of this ramble? I just wrote up a news report on Mintel's analysis of the newest energy drinks. The upshot: Energy drinks still aren't heavy on nutritional value, unless you count their  healthy profit margins.

I wonder if more natural ingredient, vitamin enhanced (but not calorie packed) choices would rejuvenate energy drink sales. Category sales are expected to grow a scant 1.5 percent this year, according to Mintel.  Could such choices also resurrect the dormant soda category?

 We've already seen some inching away from corn syrup (sugar-based Pepsi Throwback tastes good. Period.) and the soda giants are moving toward much greater use of  natural sweeteners, like stevia.

I'm not health nut, but I'll drink (an enhanced bottled water for now) to that.

-- Barb Grondin Francella

Fuel Cards Provide Road to Higher Fuel Margins

A fuel card-based price protection program is a "Cadillac" way to achieve higher fuel margins and sales -- and increase customer loyalty.  A detailed document on this approach may be downloaded here.  This is an overview of such an approach program. http://wtlinc.net/fuelcard.aspx

In a fuel card-based price protection program, price lock and price cap fuel cards may be obtained by consumers and used at participating company stations in a particular region or state until the fixed-price or capped-price gallons on the fuel card are used up or until the expiration date (if any) on the card. Following are images of what the fuel cards might look like: http://wtlinc.net/f3pway.aspx

If price lock cards have expiration dates and expire before all the gallons are used, card owners may be reimbursed an expiration value. Price cap cards always have expiration dates, but no expiration value.
Responses by over 140 consumers to a survey on a fuel card-based price protection program indicate strong consumer interest in a fuel card-based price protection program.  Responses are summarized graphically here. http://wtlinc.net/f3psurveyresults.aspx

Next … Storage – the Classic Way

-- Tom Langan

Free Mobile Marketing, Part 2: For Your Customers

If you don't know what Twitter is, you may have been living under a rock for the past three months. From "Tweeples" to "Tweeting," it seems there are more words created daily based on the social networking service. But beyond its cutesy jargon, Twitter has proven to be a valuable mobile marketing resource for convenience store retailers, including Kum & Go and Sheetz.

Last month, we offered a step-by-step, illustrated directions for free mobile marketing, created by our friends and colleagues at Progressive Grocer, a sister publication of CSNews. Now, here's the second half of that guide, meant to be offered to your customers, so they can find and connect with you online.

After you've created your account, be sure to come back here and share your first experiences in the wide world of mobile marketing!

-- Mehgan Belanger

After you've created your account, be sure to come back here and share your first experiences in the wide world of mobile marketing!

-- Mehgan Belanger

Consumers Shrug Off Loyalty Program Messages

Retailers are spending increasing amounts of time and money creating mailings, e-mails, Web site messages and Facebook posts, touting their loyalty reward programs, but according to a recent study, too many of those messages are totally missing the mark.

According to results of a consumer survey released recently by Direct Antidote, a LoyaltyOne company, only one-third of U.S. consumers rated reward program communications eight or higher on a one to 10 scale measuring relevancy to their personal needs. (One being "not at all" and 10 being "extremely relevant").  Nearly 70 percent rated them a score of seven or below.

Despite marketers devotion to customized messaging, consumers across all demographics gave messages about annual points balance reports, special earning offers and other program information  just average relevance scores. Seniors reported the lowest perceived relevance, with a 5.7 mean score. Young adults and Hispanics ranked them the highest: each group giving the messages a 6.9 rating. 

The Direct Antidote research, based on 2,152 completed surveys from consumers nationwide, looked at loyalty rewards communications.

Loyalty programs can be very effective. But retailers and marketers need to step up their efforts.

Di Cullen, president of Direct Antidote, offered these tips:

-- Create offers that appeal to the trends and values of the times, such as the green movement or recession-stoked consumer frugality;

-- Leverage partnerships with other brands to share data, drive down costs and drive up the value proposition to the consumer and explore alternative sources for information that is compelling to customers.

When trying to drive traffic, no one wants to spin their wheels.

-- Barb Grondin Francella

I'm Easily Impressed

It's been a while since I've been truly impressed as a consumer. If  selection and value is great, customer service or ambiance is often lacking. Or, customer service may be helpful and friendly, but out-of-stocks or retail prices are off-putting.

It doesn't take much to make me happy, whether I'm spending $5 or $5,000. A few stand-out experiences: During a once-in-a-lifetime vacation to Maui's Four Seasons hotel, my then-7-year-old daughter was welcomed with her name spelled out in letter sponges on the side of the tub. The hotel's kid's camp sent her a birthday card for the next five years. (I'm hoping to show my appreciation in a couple years by making this trip a twice-in-a-lifetime experience.)

On the other end of the scale, my local bagel shop always offers my kindergartener a free mini bagel with any purchase, which could be two bagels or a class-party-sized order.  None of these extras break the bank in terms of  building  customer loyalty.

More than half of all shoppers say they have experienced truly outstanding shopping experiences, according to “Discovering WOW – A Study of Great Retail Shopping Experiences in North America,” a look at  loyalty dynamics of  positive shopping interactions.

But the study, by the Jay H. Baker Retail Initiative at the Wharton School, the Verde Group and the Retail Council of Canada, found that not all great experiences translate to shopper loyalty.  It highlighted five components of great shopping experiences: Engagement, where customer service is polite, genuinely caring and interested in helping; Brand Experience, which offers customers exciting store design and atmosphere, consistently great product quality and good deals;  Executional Excellence, when customer service reps patiently explain and advise, check  stock, help find products and have product knowledge;  Expediting Service, where the retailer is sensitive to customers’ time and long check-out lines and are  proactive in helping speed up the process and Problem Recovery, when associates help resolve and compensate for problems and ensure complete satisfaction.

While customers who have enjoyed a “Wow" experience are more than 75 percent more loyal to a given store than customers who have not enjoyed that type of shopping, only Engagement and Brand Experience measurably build shopper loyalty, the study said. Ultimately, Brand Experience is the most critical quality, nearly 40 percent more important than the next closest factor.

While many retailers, especially c-store operators and employees who have nearly daily contact with regular customers, excel at the "engagement" part of the equation , the study showed fewer deliver  on the "Brand Experience" elements.

Have any of you delivered or experienced a" Wow!" brand experience?

-- Barb Grondin Francella

 

How Fuel Retailers Can Make Money on the Money Margin

As discussed in my previous Spare Change blog post, fuel gross margin must exceed 10 cents per gallon for a retailer to profit on fuel sales. Given that, history shows retailers actually lose money on gasoline sales 25 percent of the time (to view chart, go to http://wtlf3p.wordpress.com/). Weak and unprofitable margins are likely to continue given increased competition and other market pressures.
Fuel retailers leave themselves at the mercy of the market for fuel margins. They react to the most volatile component of fuel cost (i.e. the rack price), their own sales volumes, and what the competition is doing. Is that any way to run a business? Retailers try to make up for low fuel margins with high margin c-store sales. But that “strategy” just masks the problem; it doesn’t solve it. Is the primary business of gas stations to sell gas or store items? Is the reason most people stop at gas stations to get gas, or something in the store?
How can retailers directly solve the problem of low fuel margins; i.e. how do they make money on the money margin? As discussed in my first post, retailers need to be proactive about their fuel margins. Essentially, that just means retailers need to control their rack prices. The easiest and most effective way to control rack prices is to control futures.  Futures prices set spot prices that, in turn, set rack prices -- Futures prices  Spot prices  Rack prices
Returning to the equation for fuel gross margin:
FGM = Retail price – Futures – Basis – (Rack/Spot differential) – Transportation – Taxes
If the Futures price is locked or limited, the retailer controls the most volatile and heaviest potential drag on fuel margins. The futures price may be locked with futures contracts or commodity funds; it may be limited with futures or commodity fund call options. On balance, locking the futures price with a commodity fund (UGA for gasoline, UHN for diesel fuel) is the simplest and most economic choice (e.g., six shares of UGA is equivalent to 100 gallons of gasoline futures). A commodity fund may be held indefinitely (like a stock) without the need for “rolling” the position like a futures contract. The fuel retailer may then easily hold the commodity fund until an advantageous time to sell. (More on that “advantageous time” in a future post.)
The Basis is an important component but less volatile and less of a potential drag on fuel margins. For example, since 2005, the Basis for U.S. gasoline has averaged 4.1 cents per gallon with a standard deviation of 8.2 cents per gallon. Over the same period, gasoline futures have averaged 195.2 cents per gallon with a standard deviation of 56.3 cents per gallon.
The Rack/Spot differential is a relatively stable and predictable 1 to 3 cents per gallon.  It reflects the cost of moving product from spot locations to rack locations, plus the cost of operating a rack.
Transportation is the cost of trucking product from a rack to a retail station. It is also stable and predictable and averages 2 cents per gallon.
Lastly, Taxes are a combination of federal and state taxes and are stable enough (though too high!). Taxes by state and product are shown here http://www.api.org/statistics/fueltaxes/.
What’s the bottom line? Control futures and you control the money margin. Control the money margin and you make money selling fuel – consistently and predictably. Even better, control futures and you may increase sales and customer loyalty, and achieve other benefits.  That’s called a Fuel Price Protection Program.
Next … The Roads to Higher Margins: Fuel Card or Storage

-- Tom Langan

Channel Competition: Are Convenience Stores Feeling the Heat?

A recent blog on the Nielsen Wire, http://blog.nielsen.com/nielsenwire/consumer/channel-competition-convenience-stores-feeling-the-heat/ provides some insightful commentary about the state of the convenience industry:
“If, when walking or driving around town, you’ve thought to yourself that it seems like there are a lot of new convenience stores that have sprouted up over the last few years, you’d be right.  Since December 2001, more than 20,000 new locations have opened, bringing the total to almost 145,000 such stores in the U.S.  But facing high gas prices last year as well as competition from groceries and mass merchandisers and the effects of the economy, C-stores have actually been pulling back.  Since the end of 2007, more than 1,400 c-stores have closed.
“Chain stores, such as 7-Eleven and BP, account for more than 52 percent of c-stores, while independently owned stores make up the balance.  That said, only 14 percent of c-stores are from chains with more than 500 stores; the rest of the chain stores are part of local or regional companies such as WaWa, Get Go and Nice N Easy.
“So what makes one store more successful than another? Execution.  “According to Nielsen research, consumers want convenience, obviously, but they also want a clean, organized store and the ability to check-out quickly,” said Tom Pirovano, Director of Industry Insights at Nielsen.
“C-stores dominate a number of high-volume categories such as tobacco (85% share of all channels), ice (57%) and beer (56%) and they outsell food, drug and mass merchandisers (including Walmart) combined in these categories.  C-store sales of tobacco and beverages generate more than $90 billion annually.
“A Convenience Store News/Nielsen survey found that customers want their stores to offer gas, snacks and prepared food, a category that has shown growth as the quality of those food service items has improved.  Doughnuts and muffins are the top prepared food category, followed by sandwiches and hot dogs.
“Stores that offer prepared food that looks fresh and smells good and cross merchandise those with other items are likely to hit a homerun,” continued Pirovano.
“Despite their seeming ubiquity, the challenges facing the c-store channel are numerous: rising credit card fees, competition from small format groceries, a desire for healthier foods and competition from club and mass retailers selling gas are just a few of the issues c-store owners face.
“The key to success is innovation.  C-store retailers need to constantly fine-tune their offerings in the face of increased competition from other channels while never taking their eyes off the basics of cleanliness and efficiency,” said Pirovano.
“Other c-Store Facts:
• Texas leads the nation with more than 14,000 stores, followed by California and Florida
• Nevada showed the most growth in the last year, with 31 new stores coming online
• C-stores skew to African Americans, smaller households without kids, lower-income households and single males.
• Seattle, Dallas/Ft. Worth and San Francisco lead metro areas with the most c-store growth, while Miami, Houston and Tampa showed the steepest declines.”
I think Tom Pirovano is correct in pointing out the many challenges faced by convenience store retailers, particularly credit fees, as well as rising taxes on tobacco and a leveling off of growth in fuel consumption rates as Americans drive less. But, despite all that — and the recession, c-stores are doing better than most other forms of retailing. Low ticket products like candy and snacks, as well as other tobacco products drove c-store sales during the first half of this year, and I suspect foodservice sales at convenience are up as well. A recent story on csnews.com, based on Nielsen research, seems to bear this out. See “At ‘09 Halfway Point, Candy, Snacks and OTP Drive C-store Sales” at http://www.csnews.com/csn/search/article_display.jsp?vnu_content_id=1003998033.

-- Don Longo