Disruptive

Amazon Go Convenience

Amazon revealed their new convenience store format built from the ground up in their traditional secrecy.  Featuring extensive use of cameras and microphone systems (similar to the technology that allows driverless cars), products being bought are identified and charged to the consumer’s account.  These sensors combined with machine learning and artificial intelligence, allow it to distinguish when two people are reaching for the same item based on their skin colour.  In other words, WOW technology.

The company has not indicated how many stores they intend to build but they have patented the technology and are famous for taking big risks.

Company founder, Bezos once commented “I’ve made billions of dollars of failures at Amazon.com. Literally,”. “What matters is companies that don’t continue to experiment or embrace failure eventually get in the position where the only thing they can do is make a Hail Mary bet at the end of their corporate existence. I don’t believe in bet-the-company bets.”

There are plenty of examples of incremental improvements in businesses, but Amazon takes a different approach.  They define the customer experience first and work backward.  Given the strength of the customer with social media tools at their fingertips – maybe it is time to rethink the experience and then define the offer.

One can’t help but wonder if their strategy into small convenience locations has something to do with expanding their pickup and go parcel business at these locations.  Seeking means to increase customer convenience while reducing delivery costs are high priorities in their business plan.

News

Soda Sugar Tax Growing In US

Voters in San Francisco, Oakland and Albany – California and Boulder – Colorado have all approved a measure that taxes sugar-sweetened beverages.

The California cities approved a penny-per-ounce ( 591 ml = ~20 ounces) – hence a 20 cent tax increase per bottle to be imposed at the distributor level.  The tax affects everything from soft drinks, sports drinks, ice-tea, and energy drinks.

In Boulder, Colorado – they approved a 2 cent per ounce tax (a 40 cent increase per 591 ml).

The American Beverage Association commented that it will continue to work cutting calories from beverages:

“We respect the decision of voters in these cities. Our energy remains squarely focused on reducing the sugar consumed from beverages—engaging with prominent public health and community organizations to change behavior,”.

Food

Search Beyond The Obvious

New culinary trends rooted in nutrition sciences and customers’ rapidly changing tastes are forcing the food business to expand their search for new edibles.

Consumers are reading labels more often seeking simple words that they can pronounce.  Long science or chemical names are being frowned upon and are often assumed as being “bad for you”.  Beyond commonly held notions that fat is bad, what about carbs and gluten?  As more products appear gluten-free, one has to be thinking what has gluten been replaced with.  Customers are seeking better understanding of the ingredients on the label and some have taken interest on where the ingredient or food item is sourced from (or grown).  Some are concerned with the degree of food processing and whether the supplier followed good-for-the-environment standards.  Consumers in short, are becoming more picky about what they want – and are willing to consume it in less quantity if it is better tasting and better-for-you.

Jack Link’s new beef jerkey line is a good example of suppliers focusing on better-for-you ingredients that is clearly labelled on their packaging.

Chocolate bar companies are using more organic and better-for-you products.  This is not a fad – but a revolution that retailers need to embrace – and maybe create a section in their store for these premium priced products with great margins – a little display help showing customers you carry these items will result in incremental sales.

Views

Business Leader Is The New President

Without getting involved in what happened and why – the fact is there is a new president in the United States that has substantial business experience (and is not a career politician).

In his election platform, he promised a lot of change to big issues (immigration, free-trade, health care) to name a few.

Will he tackle banking and credit card/debit card fees that have hurt small business? – perhaps the single biggest issue that NACS and the CCSA have been challenged with.

What will his view be of childhood obesity that continues to rise? – will his wife take on the baton from the former First Lady?

Will he move ahead with the north-south pipeline that has enormous job potential for western Canada as well as environmental risks.

While style and comments have raised eyebrows with everyone – will he put his passion into fixing things he talked about during his campaign?  What will become of the NAFTA agreement and how will the Canadian economy be affected?

Like in all businesses, new presidents typically come in and make changes.  He is certainly not short of passion or quick-razor views – but he is a billionaire obviously by making some good decisions.   If he surrounds himself with the best men and women on his team – after the chatter of late is gone – I think this could be very positive for Canada.

News

Staying At Home

Americans increasingly don’t want to leave their homes – not even for food and are relying more and more on food delivery services. The research found that over half of the U.S. adults interviewed chose to stay home to avoid venturing out in the world. Forty-one percent indicated that they stay home to catch up on tv shows and movies and twenty-five percent indicated that they like eating alone.

The research also found that food delivery was most popular among millennial men in urban areas, with 69 percent of them having ordered in during the past three months, compared with 58 percent of women aged 18 to 34. Overall, 45 percent of Americans of all ages had ordered restaurant delivery of some kind.

Grubhub, Amazon, Uber and Google have created solutions for restaurant-delivery services. Grubhub processed 271,000 deliveries per day, more than double what it did three years ago.

News

Working Backwards

In the era where consumers have taken power away from brands because of the ease of sharing in social media, the phrase “customer-centric” dominates in conversation.

Design schools, product development, research and development groups have altered their thinking and are first starting with the customer. Referred to as working backwards, every business should be examining this new approach. Hank Armor, CEO of NACS gave his annual address this week in Atlanta where his primary topic was the concept of “working backwards”. He stated that this simply meant “the defined benefits to the end user [customer] are defined before any project can be initiated”. He suggested the first step is to write a press release announcing what success looks like.

Last week, media was buzzing with the rumor that Amazon was opening up convenience stores. Stores that would carry traditional convenience items as well as customer orders (because same day and next day service is expensive, among other factors). Amazon is famous for “working backwards” and their success speaks for this approach itself.

The thinking “working backwards” helps in two ways. First, it creates a razor focus on customer benefit. If there is no defined customer benefit then the initiative should be rethought or canned. The second benefit is it makes you think of the customer story including the journey to get the goods. Having this clear narrative is helpful to all stakeholders including employees and partners where everyone becomes connected to the vision, purpose and expected outcome.

Convenience stores have many new retail competitors that are especially trying to solve impulse needs. W hether the customer is on a “planned purchase” or is seeking a quick fix, convenience stores and all retail for that matter, have to stop thinking about which format they prefer to shop – and focus on how to be relevant to their local consumer needs and wants. Working backwards, customers don’t think retail format first – they think of how to solve and satisfy their needs.

News

NACS Chairman thoughts 2016

The chairman of NACS and the president of California-based convenience store operator J&T Management, Jack Kofdarali, stated yesterday he believes that “food is our future,” though he conceded that c-stores will “have to fight for customers in an already crowded marketplace.”

That fight, he said, will include having “to tell our story and correct misperceptions about our offer. And we’re going to have to address an increasingly long list of regulations that stand in our way—whether related to food or our other products.”  Kofdarali said that retailers that have adopted this approach have found success. “Their focus is not just on food made fast, but on food that is really good—both in taste and in quality,” he said. “And here’s the most important thing: It’s making them money.”

The annual NACS conference ends today in Atlanta.

News

Younger Customers Love Cstores

NACS – research-wealthy has released a national consumer study with great findings!
 
Nearly three in four (71%) Americans say that convenience stores are a good fit with their community’s values, and an even higher percentage (77%) say they would be “very” or “somewhat” favorable toward a new convenience store being opened in their area.
 
Younger consumers (ages 18-34) are overwhelmingly more favorable toward convenience stores than other age groups. More than eight in 10 (82%) consumers between the ages of 18 and 34 say that convenience stores are a good fit with their community’s values. Fully 90% say they are favorable to a new convenience store, and more than one in three (37%) say they would be “very favorable.” Consumers with children are also more favorable to new convenience stores than consumers without children—85% of consumers who have at least one child under the age of 18 living at home say they would be favorable to a new convenience store opening in their area and 36% say they would be “very favorable.”
 
Jeff Lenard, NACS vice president of strategic industry initiatives stated “Convenience stores are more closely tied to their local communities than any other retail channel and that’s something that consumers increasingly recognize—and reward”.
 
Consumers favorable to new stores cited positive economic effects, such as more competition for local businesses and more jobs, while others say they could use another store closer to their homes for greater convenience. Those unfavorable to new stores say that stores “offering competition on local gas prices” (28%) and “becoming an outlet for fresh and healthy products” (19%) would help to make them more favorable to a new store opening in their area.
 
Nearly three in five (58%) Americans say there are “about the right amount” of convenience stores in their community, with the remainder evenly split between “too many stores” (21%) and “not enough stores” (21%). Consumers in suburban areas are least likely to say there are “not enough” stores in their area (16%) compared to urban consumers (21%). Rural consumers are most likely to say there are “not enough” stores (31%).
 
Overall, a majority of consumers say that they would be more likely to shop at a convenience store if that store participated in local community projects or donated to charitable causes (56%), up from the 51% who said the same in September 2015. Two in three (67%) consumers with children say they would be more likely to shop at a convenience store that contributed to local community or charitable causes.
 
Consumers are also more aware of the convenience store industry’s efforts to provide fresh, healthy food. Six in 10 Americans (60%) agree that “convenience stores are responding to consumer demand, and are offering healthier, nutritious products and serving sizes.” Even higher percentages of consumers between the ages of 18 and 34 (71%) and those with children (72%) agree that convenience stores are offering healthier choices.
 
More than one in three (35%) consumers say they have purchased more snacks considered “healthy choices” in the past year, but there is a significant difference between genders in what they think about food at convenience stores. Women are more likely than men to say they have purchased more “healthy choices” in the past year (39% versus 31%). However, more than two in three men (69%) agree that convenience stores “offer food I feel comfortable eating,” compared with three in five women (58%).

Source: NACS online

Facts & Figures

Investment In Store Builds

NACS recently released some interesting 2015 facts on new store builds and renovations in the convenience store industry.
The average cost of a store remodel was $409,582 with store remodeling taking place every 10 years.
The cost to build a new rural convenience store was $4.36 million. Rural lots average 80,052 square feet with 4,938 square feet of retail.
The cost to build a new urban convenience store was $4.87 million. Urban lots average 71,525 square feet with 4,594 square feet of retail.
The cost of the building itself was 37% of the cost of a new store build. Equipment costs (for foodservice, motor fuel and technology, in particular) were also 37% of overall costs. The remainder of the costs were for land (22%) and inventory (4%).
NACS Vice President of Strategic Industry Initiatives Jeff Lenard said “Convenience stores don’t just serve communities—they invest in them. With this large investment, they have a stake in the community’s success and seek to enhance it.”  Stores continue to invest in new services and foodservice programs.
Source: NACS online

Opinion

How Can We Be Different?

One of the greatest criticisms of convenience stores is that they all look the same – carry the same products – are simply winning by being in convenient locations.   Differentiation occurs primarily through friendship with local customers (know them by name) and or location.  I remember 15 years ago, when Tim Horton’s exclusive quick serve offer delivered 1,000 plus customers daily looking for their java fix – a serious point of differentiation – but much of that is gone now with their expanded own-locations.

So the question is – what would your customers say to the question ” what makes you different?”.

I bet it is not the grocery staples that occupy two aisles – or the main brands of chips and beverage that occupy the majority of other space.  So what is it?

It is interesting to see the explosive growth of “private-label” offerings at Macs and 7-Eleven – their products are found in every aisle and almost every category.  Is it working?  It is private-label strategy designed to keep main-line brands competitive or is it “customer-centric” focused meeting the needs of customers seeking quality and or value of money.

There is an interesting success story behind private-label with Netflix.  They recently reported 50% growth in their last quarter of subscribers – paying $10/month approximately to get what they want when they want to see it.  Their form of private label is original content that they are paying to produce.  Shows like “House of Cards”, “Orange in the New Black” are giving them a differential advantage when they compete with broadcast networks, Amazon, HBO and Showtime.  They spent $5 billion last year on private-label content – which is a big bet on being successfully different.

Companies compete on being different and not on “being the same”.  Slow traditional products that line valuable shelf-space could be replaced with exciting new innovations – where less is more – but the world of convenience is either moving too slow to change or too focused on listing allowances that preserve the status quo.

Amazon’s announcement last week that they are getting into convenience stores should open retailers “eyes”.  If anything I have learned in 25 years of business is the fact that change is constant and if you are standing still, you are losing ground.

For independents – ask yourself and ask your customers – what should be removed from your store and what should be added?  This is a great conversation to start to lean forward into change.