espite the much-ballyhooed growth of chains like Walgreens, Starbucks, Dunkin’ Donuts and Wal-Mart, it is convenience stores that remain an important daily stop for the nation’s busy consumers.
As a result, convenience stores represent a powerful sales opportunity for product and service supplier companies. CSD set out to find the industry’s top performers as identified by chains that comprise convenience store and petroleum industry. We summoned Hagen Marketing Research Inc. to act as an independent third-party firm to determine which product manufacturers regularly call on convenience store operators and to learn more about how chains feel about the merchandising and promotional programs these manufacturers are making available to them. Hagen’s results, available in CSD’s 2007 Brand Preference Study, serve as the backbone of the Reader’s Choice Awards. In order to keep the content fresh and up-to-date, CSD continues to work with Hagen to refine the 2008 study to account for all of the mergers and acquisitions in the supplier community. CSD has also received a verbal commitment from numerous suppliers that they will encourage retailers to participate in the study in order to make this the most accurate supplier report available in the industry.
The information in this report was obtained via mail survey techniques with buyers and merchandisers of the specific products studied. For example, 43% of respondents held the title of vice president, director of operations or marketing and merchandising manager; 35% were category managers or category buyers; and 22% were president, partner or owner. The 102 chains that participated in the study operate more than 15,200 stores and rang up sales of more than $17.2 billion last year.
Interviews were conducted at both headquarters and regional offices of top convenience store chains, defined as those operating at least 50 stores, as well as with smaller chains, those operating between 10 and 49 stores. Interviews were mailed June 28 and closed out August 3, 2007 with an overall response rate of 11%.
CSD’s Brand Preference Study yielded timely data and sales trends on a plethora of products and services. Among the key findings is that retailers reported they are receiving information on new products and promotions on a timely basis or in enough detail. Retailers want supplier partners to answer their needs and to present innovative and profitable new ideas to help them be more successful in this very competitive industry.
When asked, "Do you get information from manufacturers on new products, promotions and merchandising programs on a timely basis?" only 60% of retailers answered yes. A subsequent question asked, "Do you get information on manufacturers’ products, promotions, merchandising programs in enough detail?" and just 53% answered yes.
"There is work to be done in the supplier community," the report said. "Great opportunities exist for all suppliers to the convenience store market. In the cases where marketers have achieved ‘preferred supplier’ level, the suppliers have demonstrated high levels of sales calls. And, they have a clear understanding of how to meet convenience store customers’ special needs through their services, merchandising, package size, promotional support, distribution and proven sales demand."
The report found that time and motive are heavily influencing customers’ actions. Sales data mirrors that trend. Sales at the nation’s more than 145,100 convenience stores surged 15% to $569.4 billion, according to the 2007 State of the Industry report, the most recent report available at presstime. The one-year $74.1 billion increase in industry sales was the largest yearly increase ever recorded.
In-store sales showed continued growth increasing to $163.6 billion. Per location, in-store sales were $1.13 million. The number one category remains cigarettes at 34.35%. Cigarettes will continue to be the leading category for many years, but retailers are looking at other categories and profit centers for future growth.
Foodservice continued to fuel inside sales. The category grew 5%. Motor fuel revenues jumped to $405.8 billion, up 17.9 % from the previous year.
Not all the news was good, however. Escalating credit card fees had an enormous impact on the drop in industry profits. Surging 22% to reach $6.6 billion in 2006, credit card fees topped industry profits and are now the industry’s second largest expense, second only to total labor expenses.