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OUTLOOK

richard MEYER

Jo P

Evolution and Opportunity: The Changing Face of Convenience


BY JIM HOOD

| Grab Hold of Technology! |


richard MEYER

In comparison to most of the retail formats with which it competes, the convenience store industry is a youthful one. Most estimate c-stores began to evolve 45-50 years ago and did not become a major force until the 1970s. But the industry has changed dramatically over the years; more and faster changes are predicted in the future.

Richard Meyer, industry consultant of Meyer & Associates, offered a provocative and thoughtful look at the past, present and future at CSP's Outlook '98 Conference.

"The opportunities for convenience stores are bountiful," said Meyer. "There's foodservice, ATMs that are expanding to include money orders and lottery tickets, and category management, still a major buzzword and the biggest opportunity. But the only thing we appear to be good at category management-wise--on a consistent basis--is gasoline." He suggested applying the principles that work for gasoline to other categories in the store.

Players who plan to survive in convenience retailing "need to be opportunists. Chapter 11 was an opportunity for some during the late 80s and early 90s while others took the hard work and discipline approach."

When c-stores began, they followed mostly a traditional approach, gradually adding gasoline which became self-serve in the 70s.

"We put a toe in the water, worked for jobbers and then realized they were laughing all the way to the bank," said Meyer. "So we got into that business ourselves. Then, major oil began to see their through-put decline, so they got into convenience retailing."

In the current decade retailers have embraced higher quality foodservice via partnerships with national brands as well as creating proprietary offerings. There has also been a push toward gasoline branding with major oil companies.

While gasoline sales have soared over the last 20 years, up 290%, c-store merchandise sales have been disappointing, up a mere 28%--not even keeping up with inflation. Inflation also ate into average merchandise sales per customer, which increased from $1.24 to a paltry $2.65.

"This is an area of great opportunity and operators must look hard at traffic counts and average sales per customer. Those are the things that count," noted Meyer.

Today, like yesterday, there are big players like Tosco, UltraMar- Diamond Shamrock, etc. but Meyer reminded his audience that "the people with the most stores went down the tubes 8-10 years ago." The giants seem to be buying smarter today and Wall Street is playing a part in the industry "because we do have good cash flow and smart management."

In the future, times may get tougher for suppliers and distributors, he predicted. The former has a more limited number of brands and "it's going to be harder to reach consumers at conventional outlets." In distribution, "functions will shift to the parties that can perform them most efficiently." Already, the tobacco companies are going direct to tobacco stores and eliminating the middle player.

 

Grab Hold of Technology!

The Internet will play an increasingly more important role, said Meyer. Retailers will look for the aggressive suppliers who embrace the Internet's attributes.

There will be more universal ways of hiring, and training will become more computer-based.

"People, we are in for it," said Meyer. "Change is just going to get faster and the amount of changes is going to get faster. New concepts will hurtle ever more quickly to maturity," he said, citing the rise of tobacco stores as an example.

Retailers must try to exceed customer expectations because customers will spend less time shopping. Electronic shopping will escalate and delivery depots "promise to capture as much as 10% of the retail market."

Convenience operators need to market their stores as convenience centers and educate the public that c-stores are just that.

Tomorrow belongs to those players with the best sites, the best marketing and the best funding. He encouraged operators to look at new forms of funding and not just the traditional banks "who sometimes want your first-born son."

The problems for the industry that escalated in the late 80s and early 90s were "management, management, management. They did not have a grasp on it but had more of a grasp on their egos...buying stores without looking at the price, not paying attention to the basics. That's where smaller companies can be stronger" than the big players.

Meyer mentioned the element of "virgin companies" playing an important role in the future. Less than 40 years ago, there was no Wal-Mart, no Federal Express, no Subway and no MicroSoft. NACS wasn't around because "we weren't even an industry." There was no voice mail, no Internet, no cellular phones. More will come and change the way business is done.

What will become most important for success are leadership, education, information and intelligence.

"I used to say you needed data," said Meyer. "No, you need information from that data and the intelligence to interpret that data to make conscious, strategic decisions. You will not succeed in a vacuum. Those having and using these tools will be the new leaders."



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For Meyer's handout related to the CSP November, 1997 Outlook conference see 20 Years of Observations in 20 Minutes
For biographical information on Dick Meyer
Article orginally appeared in CSP, vol 9 no.1, January, 1998
Copyright © 1997 Meyer & Associates All Rights Reserved