Every year, thousands of new products are introduced into an already crowded marketplace. In fact, a record-breaking 182,000 consumer packaged goods made their debut in 2007, up 17% jump over the previous year, according to Mintel International, a marketing research group. Some were hits, some were misses and some found their way onto convenience store shelves.
Deciding which products have a bona fide reason to take up limited space in a convenience store is not easy. Just ask Bill Tencza, senior category manager for Quick Chek Food Stores Inc.
Twice a year, the Whitehouse Station, N.J.-based retailer, which operates more than 100 stores in New Jersey and New York, invites manufacturers to make presentations showing off their latest and greatest items. If the merchandising staff is impressed, the new products will be included in upcoming planograms–either for the spring/summer or fall/winner season.
"They have six months to perform," Tencza said of the new products. "Then we look at the movement and see how they did."
High-performing products usually get to remain on store shelves after the trial period. Circumstances that might hold them back include a skimpy marketing budget or a not-quite-gelled distribution plan.
Royal Buying Group Inc. (RBG) has established strict qualifications for new products that want a piece of valuable space on convenience store shelves. A merchandising/marketing company headquartered in Illinois, RBG develops relationships between suppliers, manufacturers and retailers. The company accepts new products introduced to the convenience industry and tests them in some of the 5,500 stores that work with RBG as part of a marketing agreement, before introducing it to the whole network.
"A beverage company wants to bring an energy drink to market. We may slot it in at least a dozen stores to see if it moves well," said Michael Zielinski, president and CEO of RBG. "Certain things must fit in order to do a product introduction. The product must be available through normal distribution–we want to be as quick to market as a grocery store channel–and the price has to be good for all parties."
Because store space is valuable, each product must meet certain requirements.
"New product introductions may provide a 20% margin up to 40% or more," said Zielinski. "Of course, more margin is best in the eyes of our retailer membership."
Size Doesn’t Matter
The size of a convenience store chain is not a factor when it comes to introducing new products or even signature items, according to Jack Cushman, Ph.D., executive vice president of food services for the Nice N Easy Grocery Shoppes, headquartered in Canastota, New York.
"Even one store can do it. Whip up a new soup of the day and you’ve got a signature item," he said. "In fact, with one store, you can be more agile. About 60% of c-stores are single-store operations, and they can be extremely creative. When you get bigger, you can’t be as experimental. You have to be more standardized."
Though the 80-store chain develops many of its own foodservice items, manufacturers are constantly bringing Cushman new products to try.
"Even before I taste it, I’ll cost it out and then multiply it by three. If that is a reasonable retail price, we’ll go from there," Cushman said. "Then I research it. It can’t be so wacky that no one will want it."
Cushman’s initial research starts with a single store. If he is looking at a unique, new sandwich, for example, he’ll create it in the store and taste it there. Then he’ll pass out samples to people standing around to get their feedback.
"After that, I do a one-store test and get the store manager to talk to customers," he said. "We may not sell it, but do sampling instead."
By sampling, Cushman isn’t referring to a plate of sliced food sitting on a counter top, but "a friendly person in an apron walking around and talking about the product," he said.
If it is determined that the sandwich is being produced in the right proportions and with the proper equipment, Nice N Easy will do a five-store test to observe customer reaction. The price of the product is never discounted during the test, but if the test is successful, the product will be distributed through the chain and the price may be discounted initially to encourage trial.
Eddie Osman is an independent owner of a WOW convenience store in Wixom, Mich. His store is often used to test new products largely because of his strong location, store volume and his reputation for outstanding customer service. Osman’s employees understand the customers–many of them by name–and never hesitate to ask their opinions or suggest new items.
Listen to the Customer
During the recent test of a new energy drink, Osman’s team created a big display in the front of the store with the product iced down in a barrel. To encourage trial sales, the store offered "buy one, get one free" promotions. When customers came to the counter with other energy drinks, the casher would tell them about the new product and the two-for-one price.
"People will try anything new," said Osman. "But it has to be at the right price."
If the product isn’t good, he adds, you won’t be able to give it away.
Last summer, his store tested a different energy drink, pricing it 50 cents less than any competitor in the cooler. After buying it once, his customers immediately went back to their favorite brand.
"I don’t care if you spend a million dollars promoting it," he said. "If they don’t like it, it’s a done deal. Customers want what they want."
That is proven time and again when customers give retailers advice about new products. According to Tencza, Quick Chek has a hotline that encourages feedback from customers.
"They call in and ask for (particular) new products," he said. "And it’s our goal to get back to them within 24 hours."
Marketing is just as important as the development phase of a new product.
"If customers don’t know about a product, it will fail," said Tencza. "There are so many products out there right now. They need support, so we go with the manufacturers who will support them."
In-store signage and clip-on shelf talkers draw customers’ attention to the new items. Radio and television advertising are always a plus.
"McDonald’s will support a new product with media, radio and television, but we’re not that size," Cushman said. When working with a manufacturer to introduce a new product, he requests assistance in promoting the item.
"I don’t want generic marketing. I want something unique," he said. "I either get them to fund marketing, or I’ll do it myself. For a few hundred dollars I can have a nice marketing package created for a store. With digital images, printing is cheaper and faster than it used to be. And you’ve got to produce marketing materials because you have to communication to your customers somehow."
Moving a product off the shelves when it is no longer in demand is not as difficult as the original launch, but it, too, requires planning.
When introducing new products, RBG prefers working with established manufacturers that can ensure delivery, production to meet demand and a good plan if the product is a bust.
"If the promotion bombs, is there an exit strategy?" asked Zielinski. "Is there a return policy for the retailer?"
This is a key reason why fledgling manufacturers have trouble getting new products off the ground, even if their creation has immense potential.
"Smaller, newer companies introducing a new product have obstacles, specifically no funding, no distribution and no exit strategy," he said. "If there is a strong exit strategy, we might try a product from a small company."
Removing a product that has peaked in popularity is just one more step in the product lifecycle, especially in the fresh food arena.
"What people do wrong in foodservice is try to expand the menu. It gets huge and then they’re not selling a lot of anything," Cushman said. "McDonald’s brings in a product for 71 days and then pulls it. Their research shows that after 71 days, demand drops off."
Cushman believes in giving fresh food items a two-month window and, "if it stands on its own, keep it," he said. "Otherwise, it just creates interest and stimulates a short-term response."
And when that item is history, consider it good news. Now there is space in the store for something that is new and exciting and has tremendous potential.csd