If you're planning to expand your retail network of sites, current convenience store industry trends can significantly impact your decisions. From consumer preferences and brand affinity to fuel price sensitivity and geographic spread of alternative fuels, certain trends can tip the hat toward or away from the success of your sites, so it's important to stay informed.
Being as prepared as possible for big changes in the industry is essential for effective retail network planning — so today, let's discuss some of the biggest trends in convenience retailing over the last two years, and how these changes can affect your retail network growth planning.
The biggest trend affecting the fuel and convenience retailing market right now is that of increased uncertainty.
There's so much in flux right now, from new retailers entering the industry to the many challenges that alternative fuels and electric vehicles could bring — and added to the complexity is that the impact of these changes depends on the market you're in. In some markets, electric vehicles are booming, while in others, hydrogen fuel is making its play. Moving forward, it's going to be necessary for retail network planners to assess these trends in the context of their own markets in order to make smarter, more informed decisions.
Advanced OS Systems
One significant industry shift is toward new operating systems. For a convenience retailer, this can be terrifying — because human interaction is becoming less and less important. Rather than brand loyalty in the traditional sense, loyalty can become an allegiance to an operating system, and retail network planners are going to have to take this into account when making decisions.
For example, Amazon just launched a convenience store with no cashiers, no registers and no self-checkout machines. It works with computer vision and sensors to detect which items you're taking, and then charges your Amazon account as soon as you leave the store. This is just one dynamic that's affecting the industry, but changes like this can have major implications for the market. If consumers prefer the shopping experience that this kind of system can provide, volume margins at sites with traditional cash registers could plummet. The systems you choose to implement could make or break the brand.
Fuel Brands vs. Convenience Store Brands
Along with advances in technology and their potential outcomes, another factor creating market uncertainty is the importance of convenience store brands over fuel brands. The question, now, is: what truly drives loyalty?
In markets in the early stages of maturity, the fuel brand tends to be more important. Consumers in these earlier, more volatile markets need to develop trust about the quality and quantity of the fuel being delivered, so they go to specific, familiar branded sites to ensure they're buying quality fuel that they trust.
But as markets mature, the fuel brand becomes less and less important. There's an assumption, in later stage markets, that quality is a given. It no longer matters to consumers if they buy from brand X, Y or Z, because fuel is fuel and they can get it from any retail site. Then, loyalty becomes more about the convenience store brand — so retailers must differentiate themselves by their fresh food options, car washes or other individual competitive offerings.
With the new importance placed on operating systems, we could see this happen again with convenience brands. Convenience brands could degrade or flatten in value over time as brand loyalty shifts to new operating systems. Ultimately, this becomes an extremely nuanced discussion that fluctuates market to market. So how do retail network planners respond to these trends?
The retail fuel and convenience industry is increasingly being encroached upon by a myriad of sources. As uncertainty shoots up, retail network planners need to be able to adapt their planning process to ensure success. By developing the seven elements for fuel and convenience retail success and maximizing return from every asset, network planners can squeeze every last drop of fuel profitability from their locations.
But maximizing this return requires careful monitoring and analysis of what's happening in the marketplace. Ultimately, the winners in our industry will be those who not only monitor the market, but also model and update their site, competitor and market data frequently. That's the only way to plan properly and make good decisions in an increasingly volatile industry.
The more often you collect this data, the greater your need will be for the systems that allow you to process that data and run fast, robust models for better decision making. With this, you need to think about automatic allocation and optimization of capital spend. Remember, increased information should help your decisions, not blur them. By gathering extensive market intelligence early and often, you can stay on top of market trends, be proactive about your network planning decisions and stand out from the competition.