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Hess C-Store Spin-Off will lead to Marketing Renewal

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Hess C-Store Spin-Off will lead to Marketing Renewal
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As marketers debate the future of convenience retailing, conversations center on co-location with other foods brands, “machine to machine” marketing which will heavily automate the store footprint, and more basic tactics like cleaning up locations and adding consistency of delivery to drive brand value. My friends at Retail Wire sponsored a good debate of the possibilities at their site this week which you’ll find interesting reading here.

C-Stores (a/k/a the places most people stop to buy a quick drink and a snack in the midst or a road trip or just a busy day) are big business and a highly underutilized asset in the the battle for consumer attention. Decisions being made today will either evolve the industry through reinvention, turning C-Stores into hubs for daily business activity, or allow big retail chains to regress into the shadows as someplace you only stop for gas while keeping the motor running.

As the debate continues, the big oil companies are playing out a hand that will have the most significant impact on the future of the industry. Today Hess Corp. made the announcement that it will separate the company into three divisions, placing all 1,361 of its C-Stores in a separate group. This effectively sets up for a spinoff of the retail convenience and gas station locations at a future date.

The logic behind the breakup is similar to that which drove ExxonMobil, Conoco Phillips and Murphy Oil to do the same. The business of exploration and production of natural resources requires different disciplines than retail store operation, and the big oil companies are moving to a model some call “branded distributor”. In other words, the oil company chooses to supply fuel and oil products to the stations, while leaving ownership of real estate and store management to third party owners.

This business model sparks two areas of influence that draw on customer loyalty for success:

  1. Big oil will continue to invest in marketing programs that drive brand value in order to entice third party owners to fly the brand flag over their stations. This includes mass media support, payment card product development, alliances with grocers, and other tactics that will create a perception of value by stopping at a convenience / gas location operating under an individual brand.
  2. Third party store owners will have more independence to build on the marketing programs and products supplied by big oil and will be more aggressive in local and regional marketing efforts to drive business within the stores they own and operate.

Investors in big oil understand development and exploration and have a sharp eye towards future energy strategies. Those that invest in the bricks and mortar of convenience and gasoline retail will be thinking less about “cokes and smokes” and more about customer relationship and loyalty marketing. They’re operating in the deep pool of competitive retail, and have to start behaving like their cousins in quick-serve restaurant (QSR) and other retail sectors if they want to survive.

I’ve always believed that wide market penetration, an acceptance network if you prefer that card-related term, is a big key to success in retail. Convenience retailers can take advantage of regional coverage to become viable competitors with other QSR chains, but they must quickly shed their oil “roots” and begin to market from the customer point of view.

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