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The Best of Convenience Retail

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The Best of Convenience Retail
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The year in convenience store news was grouped in three themed areas:

Growth & Scale

While major chains such as Sheetz and RaceTrac have announced plans to continue expansion plans through the opening of new stores, the most significant shifts in the market have and will continue to come from acquisition. Not only has there been acquisition among players as a fragmented market sees additional consolidation, but a shift in operating philosophy by the major fuel retailers (ExxonMobil and others) has opened the door for players such as 7-Eleven to expand their footprint.

Business Model Evolution

Convenience retail is “growing up”, meaning operators are sincerely embracing the need to raise standards in stores in order to make them more visitor friendly. As convenience retail takes on the enhanced  image of a “convenience restaurant”, operators intend to establish their store locations as gathering places and effectively serve as quick service restaurants, maybe even a place to pick up a take-out pizza. Imagine making a pit stop during a busy day to catch up on email as well as enjoy a quality coffee or sandwich and you see the future of convenience retail. More Starbucks and Dunkin’ Donuts, less “cokes and smokes”.

Regulatory Issues

Convenience stores were at the center of the fight over merchant interchange rates and the legislative reform know as the Durbin Amendement during 2011. They also sometimes fall into the crosshairs of controversies over sales of products that tempt the under-age and generally risk-averse population. Many states outlawed the sale of bath salts and “spice” during the past year as they dealt with “Four Loco” and similar beverages in the year prior. Electronic cigarettes, the hottest new product around, could draw similar attention in the year ahead.

The Future?

Look for more aggressive co-branding of food and desert brands with convenience retail in the year ahead. Valero has partnered with Dunkin’ Donuts in some locations and I would not be surprised to see a national pizza franchise co-located in C-stores soon.

With a continually shifting competitive set and more product innovation beyond the “cokes and smokes” legacy model, convenience retailers will adopt a fresh approach to customer loyalty, using location based promotions and mobile channels to engage customers on the go.

One key issue that cannot be overlooked is the overall image of the business. If convenience retailers wish to successfully compete against the likes of Starbucks, Pizza Hut, and Dairy Queen (just examples that are top of mind), it behooves management to get ahead of the curve on sensitive social issues to avoid unnecessary regulatory oversight as well as public smudging of the reputation.

Take the high road now, partner with the right brands, and engage more “contextual” loyalty and growth and profitability should be plentiful in the national chains in 2013.

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