By Bill Bishop, founder and president of Willard Bishop, and Martha Russell, founder and managing partner of Clickin Research
One of the most compelling things about teen shopping at convenience stores is that teens have spending power. In fact, some teen shoppers have very high customer value. Not only do they spend generously, they also come often.
As might be expected, beverages, candy and snacks are regularly purchased by virtually all teens. But beyond fuel and the top three in-store categories (cigarettes, packaged beverages and foodservice), some segments of convenience teens purchase many other categories as well. And the teens who purchase from more categories are the teens who visit regularly and spend more. This means there’s a significant upside sales-building opportunity if retailers can increase the number of teen shoppers who purchase a wider category variety from their c-stores.
The recent study, “Building Loyalty with the Next Generation,” conducted for the NACS/Coca-Cola Leadership Council, documented for the first time the economic importance of teen shoppers to convenience retailers, both in terms of their spending today and their foundation for the business in the future. The study examines the 14- to 20-year-old demographic, which is a growing and significant share of the market, by surveying 600 teenagers in 119 stores. One of the key takeaways from the study is that convenience stores have an opportunity to grow their business with convenience teens by alerting young shoppers to what’s actually available in their stores.
Teenage shoppers and selling opportunities
The study identifies the product categories teens routinely buy in their convenience stores, not necessarily on every trip, but regularly. Teen shoppers were segmented into three groups based on how many categories of products they purchase at c-stores.
Two-thirds of convenience teens, ages 16 to 20, purchase from 10 or more categories and are considered high variety shoppers. These teens have strong potential for current, as well as future, sales. The products purchased by the low variety teens come from one to four categories. Low variety teens may shop occasionally or they may visit daily; buying one or more products in one visit.
The study also divides teen shoppers into four segments that represent meaningful differences: timekeepers, carefrees, independents and materialists. Understanding the motivations of these segments can help retailers make their businesses more valuable to the teen market.
Timekeepers, representing 33% of teen shoppers, are busy teens who are regulars at c-stores, and during a store visit are likely to be rushed, but decidedly in control of themselves, their time and their money. Carefree teens (24%) don’t feel rushed. They usually buy a single item in the store, and when it’s not too busy they enjoy talking to the cstore operator. Independents (22%) often spend less and feel rushed, but they have the highest retail visit frequency. Materialists are born shoppers who do more than half their shopping at c-stores, but also frequent grocery stores, drug stores and mass merchandisers. They are completely at home with instant messaging and wireless Internet access, the study says.
Candy, fountain beverages and packaged carbonated beverages are top categories purchased by more than 20% of all shoppers, even the low variety teen shoppers. Of particular interest, however, are all the other categories that are purchased by over 20% of the high variety teen shoppers. Fillin groceries, for example, are part of the c-store category profile of 30% of the high variety teens. Other categories, such as ready to drink coffees and flavored milk, are purchased by a significant proportion of high variety teen shoppers.
In fact, high variety teens have wider variety in their market baskets than many older shoppers. And customers of all ages want to buy gas, and many customers would like toon occasionfeel comfortable in using the restroom at convenience stores.
Teens who buy a wider variety of product categories visit stores more often and spend more. This translates to higher customer value, which is the business reason for striving to increase category variety with these shoppers. Retailers have an opportunity to put plans into place that will encourage teens to buy a broader range of categories from their convenience store. This will be good for today’s business, and teens have a purchasing lifetime ahead of them. The plan should be to get them now and keep them.
Convenience teens spread their spending around and, therefore, represent a strong upside sales potential for any retailer who can encourage them to move their business. This is true even for the teen shoppers who only purchase a low variety of categories in the convenience store. The good news is that this shows that while teens have a lot of shopping choice, some have found their convenience store is the place where they do most of their purchasing.
Since we know that refueling in terms of gas purchases is important to convenience teens, we wanted to see if there were any relationship between the extent of category variety purchased and where they purchased gasoline. It turns out that those teens most likely to purchase gas at convenience stores are those who have higher category purchase variety. As is evident from the NACS/Coca-Cola study, we know that teens shop differently for gas than older convenience shoppers. So, any store operator who wants to increase category variety for teens also wants to be sure that they’re positioning gasoline purchases to be appealing to younger shoppers who may buy smaller quantities of gas.
Recognizing the growing importance of ready-to-eat foods, we also wanted to determine if there was a relationship between foodservice purchasing and category variety in the market basket.
The market basket of a teen shopper is more likely to include branded fast food or food prepared at the c-store than for older shoppers. Teens who purchase food prepared onsite are almost four times more likely to purchase-a variety of categories.
This point becomes more important when it’s recognized that teens also visit an incredibly broad range of other retailersbetween 12 and 13 times in a two-week period. Some of these visits could potentially be captured by convenience retailers with the right offering.
To win this business from these teens, it’s necessary to raise the bar in ready-to-eat foods to compete with the quality of food offered at grocery stores, the service offered by casual food restaurants and the variety offered in specialty food shops. Some convenience operators have already become more effective at competing for the demanding, upscale ready-to-eat market and have enjoyed increased sales in doing so.
Retailers will want to keep in mind that for many of these convenience teens, expanding the range of categories purchased goes beyond building awareness. C-stores also need to merchandise and sell these products in a way that makes it easy for them to find and purchase them since more than 50% of the teen shoppers that purchase a wide variety of categories come from the timekeeper segment where smooth and easy shopping is particularly important.
There are a lot of reasons to increase the number of teen shoppers who purchase a wide variety of categories in your stores, and one way to do this is to offer more of what these teens want (see chart above).
Putting these ideas to work
What can a convenience store operator do to encourage teens to buy greater category variety in their stores? One way to do t
his is to use the data gleaned from the NACS/Coca-Cola Leadership Council study to build marketing and merchandising plans that incorporate the retailer’s own strategies and appeal to their target teen customers. Here’s a summary of some of the key findings that can be built into those key strategies.
- There’s a significant upside sales-building opportunity if retailers can increase the number of teen shoppers who purchase-a wider category variety from their c-stores. Teens have the spending power; the challenge is to attract it to your stores.
- Several general merchandise categories can play a role in helping drive greater market basket category variety among convenience teens. By showcasing items like health products, consumer electronic supplies and gifts/novelties to convenience teens can help expand category variety.
- Convenience teens want to have things set up for them. Teens are still learning what’s available in different stores, and convenience store operators can serve these shoppers better by letting them know that they sell the products these shoppers want and with store layouts that make the products easy to grab and go.
- Convenience teens place a lot of emphasis on refueling, in terms of both gas for their car and ready-to-eat foods for their own personal energy. Convenience operators who do a particularly good job in satisfying these refueling needs will find it easier to attract more convenience teens who tend to buy a wider variety of categories.
|Where else do convenience teens go for ready-to-eat foods? (% of share)|
|Low variety teens||Moderate variety teens||High variety teens|
|Specialty food store||15%||13%||14%|
Making the connection
Clean restrooms are key to teenagers; some indicated they’d be reluctant to purchase food at a store with unkempt facilities. Others said they’d likely not patronize a store if denied use of the restroom altogether. These were key findings of the NACS/Coca-Cola Leadership Council study, said Michael Davis, NACS’ vice president of retailer services.
Also key among those surveyed was social interaction in the c-store but, surprisingly, Davis contends that this does not mean teenagers shop at a certain location because their friends do as well. It means that store employees greet them by name, and go out of their way to make young adults feel welcome in the store.
“Teens do have a strong sense of belonging,” said Davis, during a presentation at the Western Petroleum Marketers Association conference in Las Vegas. “And it’s your employees, not their friends, offering that social atmosphere.”
Results of the study indicate that while teens spend 12% less per visit than shoppers 30 and over, they stop in a store 14% more frequently. The study also found that teenagers shop the rest of the store more than older customers do. They purchase nonfood items, such as electronics, prepaid phone minutes and beauty products in higher proportions than older shoppers, and are more brand conscious as well.
“Asked why a particular store was chosen over other options, one said, ‘It’s close, and I needed gas and a Hershey Bar and a Coke,’” Davis said. “Notice the description wasn’t a “candy bar and a drink.”
The bottom line on teenagers, the study found, was they generate a lot of sales and profits and will generate even more in the future. Davis, a former convenience store owner, said his wife would often ask teen customers why they shopped there. Their response: “Mrs. Davis, because you don’t look at me like I’m a shoplifter, you’re nice to me and you let me you use the bathroom.”
|Product categories teens would like to buy from their convenience stores (% of convenience teens)|
|Use ATM||Cash Checks||Prepaid phone card||Get phone minutes||Prepaid giftcard||Make photocopies||Print photos||Make/ Recieve faxes||Use Wi-Fi Internet||Download music|
|High Variety Teens||58%||29%||19%||17%||11%||26%||20%||17%||14%||10%|
|Moderate Variety Teens||40%||13%||6%||5%||4%||11%||8%||6%||4%||3%|
|Low Variety Teens||22%||5%||2%||2%||1%||5%||4%||3%||3%||2%|