Adding Versatility To In Store Convenience
When it comes to retail, it’s a pretty crowded marketplace.
If brick-and-mortar competition weren’t enough, stores also have to vie for consumer attention—and dollars—from online retailers who don’t have the same worries about leasing costs or location as physical stores. Add to that increasingly short attention spans from novelty-seeking customers, and it creates quite the conundrum.
So what’s a business to do?
Some of the fastest-growing retailers are rethinking their model and seeing profitable results.
“That’s just the nature of the business—just like with restaurants, which have to keep introducing new dishes or they lose interest,” says Stuart Thain, a partner with CBC Advisors. “You need to keep changing the experience for the people coming in.”
That innovation has led retailers to experiment with store formats and products—exploding the lines between traditional retail categories.
Salt Lake City-based Maverik is a convenience store chain that operates more than 270 locations in 10 Western states. But the chain has been expanding beyond gas pumps and fountain drinks to build a brand targeting customers’ palates, as well as their wallets.
“Over the last couple of years, we’ve experienced significant growth as we’ve emphasized and expanded our food line to where we attract as many people to our locations for food and for our store offerings as we do our fuel. We no longer look at ourselves as just a gas station,” says Tom Welch, president and CEO of Maverik.
Maverik stores still carry bags of chips and hot dogs on heated rollers, but the chain has been beefing up its menus with fresher food options like an expanded breakfast menu, hot and cold sandwiches and wraps, burgers and pizza, all in varieties that range from standard to fusion fare. In newer stores, there’s even an area for sit-down dining for customers.
“We’ll have the regular sausage and pepperoni pizzas but we also have the Asian pizza, the barbecue chicken. We try to be different. We try to give a culinary experience to Maverik customers,” Welch says.
That culinary experience starts with a chef and test kitchen at Maverik headquarters for the store’s offerings, which get final preparation onsite by food-certified staff. The goal, Welch says, is to give customers dining options that are as good as or better than food they could get at a fast-food restaurant, with the additional convenience of it being the same place they filled up before embarking on whatever their day or night has for them.
“We want to feed their adventures when they’re filling their gas tanks to go on a trip or an outing, and we want to fill their craving for food and try to carve out a niche just like other restaurants do,” he says. “We really have tried to develop products that are unique and different to Maverik.”
Changing up the product offerings requires more than re-arranging shelves. The fresh food options and seating areas call for a bigger store footprint. Maverik’s new stores are built larger to accommodate the grill for the hot food options—5,000 square feet in urban areas and 4,000 square feet in smaller communities. Lots now have to be around an acre and a half to fit the store, parking lot and pumps, which can sometimes be tough to find in the locations they want to build, Welch says.
The chain’s innovative approach seems to be fueling rapid growth. Maverik plans to build 24 new stores by the end of 2016 and rebuild another 10, as well as remodeling another 25 across its 10-state footprint.
A BIGGER MARKETPLACE
Maverik’s venture into more complete food options mirrors a similar trend happening with grocery stores, says Tim Simonson, executive vice president and partner of CBC Advisors. Grocery stores want to be the go-to place for ready-to-eat food, he says, both for retired people who may not want to cook a whole meal for one or two and for young families with hectic schedules.
“What we see grocery stores doing is becoming a meal replacement service in ready-to-eat food,” Simonson says. “The grocery segment has to become more specialized to be able to cater to people.”
Even retailers as big and expansive as Costco have take-home meal options, he says, and many neighborhood grocers have altered their model from a basic grocery store to selling more unique, upscale products and having many different meal options customers can quickly grab and take home.
Smith’s Food & Drug—and its parent company, Kroger—have also developed their Smith’s Marketplace model to give customers more ready-made food options, such as buffet-style take-home meals and sushi. Rob Moore, vice president and retail specialist with CBC Advisors, says besides expanding its meal options, Smith’s Marketplace has ventured deeper into general merchandise territory, including apparel, fine jewelry and home goods. New stores also include a drive-up pharmacy and a pick-up lane for customers who purchased groceries online.
Moore says the marketplace model reflects consumer demands for convenience, economy and flexibility.
“That’s responding to the needs of customers who are busier and want to go online to make their purchases. That’s just one example of how they’re responding to a younger, newer kind of customer base. That and the ability to go to one store and buy your groceries and your soft goods and other departments in one location is a great advantage. It saves time, it saves having to shop multiple kinds of stores at the same time, and that’s what the customer wants today,” he says. “Smith’s has in particular done a fantastic job of expanding their product lines to meet the needs of the customer and doing it at a competitive price compared to other grocers.”
Thain says Costco is another chain that has done a good job of keeping its brand fresh, new and convenient. A solid 30 percent of its floor space is dedicated to “seasonal” items, which change constantly, he says. The frequent shift in offerings—and uncertainty of how long those goods will stick around—creates an effect on customers that drives them to the store more often and to buy more when they’re there.
“If you don’t buy it when you’re there, you may not get it. That makes people come more often—instead of once a month, they come once a week—and if they don’t buy it then, it might be gone,” Thain says.
Stores like Ross and TJ Maxx, which get new shipments of new, diverse merchandise weekly, have found success under the same model, he says. Some customers go so far as to learn when new shipments arrive and shop as soon as the goods are on the shelf to get first crack at the new offerings, he says.
A stronger economy has helped bolster consumer and retailer confidence, and that confidence allows retailers to be more creative while they try to figure out just how to tailor their brand to the rising generation—there are few magic bullets that hit both baby boomers and millennials.
“We hope that happens, because then that re-energizes shopping centers and re-energizes the consumer and shopper,” Thain says. “We hope they create some new stuff when they come out. It benefits all of us from the developers to the consumer, which is the most important.”
As many companies look to expand their footprint, finding just where to build new stores can be tricky.
Like Maverik, Smith’s requires bigger lots for its Marketplace stores, which need 40 to 50 acres of space, Moore says, and it’s difficult to find undeveloped lots of that size in metro areas.
Thain acknowledges the real estate problem as a challenge that will need to be addressed, but notes that redevelopment of existing sites and shopping centers can be transformative for an area. Aging shopping centers can see a surge in popularity and profitability with some retail shuffling and reinvestment. Particularly in highly developed metro areas, much of the change is going to come through redevelopment.
“Some of these older shopping centers are going to get stronger and stronger as stores like Smith’s Marketplace come in and get bigger,” says Thain.
Another trend for retailers and consumers to keep tabs on? Convenience in ordering and delivery. Much like being able to call in grocery orders at Smith’s Marketplace, or Amazon and FedEx’s experiments in drone delivery, Simonson says stores and restaurants are looking for more ways to connect with their customers digitally. The trend is both to increase convenience for customers, but also to stay up with the growing novelty and ubiquity of technology.
“We’re all interested in technology and changes we see on that front. I go back far enough in my real estate career that the fax machine was an incredible invention. The fascination with technology and being able to do things faster and more conveniently will always intrigue people,” he says. “If people fail to look for a better way to do every facet of their business they’ll fall behind. Instantaneous marketing is going to be, I think, a big change over the next five years.”