Details From SOI Summit’s Closing Day

Fuel forecasts, shopper research and the mobile age capture retailer attention on the last day of the NACS State of the Industry conference.

The NACS State of the Industry (SOI) Summit held at the Intercontinental Hotel in Rosemont, Ill., concluded on April 3 after a number of sessions on the convenience store landscape ahead for 2014.

Tom Kloza. chief oil analyst for GasBuddy, kicked off the morning sessions with a motor fuels overview, outlining what’s ahead with gas supply, demand and pricing.

“Regional wholesale pricing is more diverse than it’s ever been,” Kloza noted.

He added, “While most of us have lived against the background of the uncertainty of supply, in the next few years we’ll be dealing with the uncertainty of demand—from local suppliers and customers.

Crude oil production is in excess of three million barrels per day (bpd).  When price suffers, it’s because of logistics—not because of production. Forecasters anticipate this production to grow to nine million bpd by late 2014-early 2015 and 9-10 million bpd by 2016-2020. U.S. crude output is already at highest level since spring 1988, and booming energy growth from North Dakota to Texas is now driving U.S. economic growth, he explained.

While refineries are not performing, according to Wall Street, Kloza said, they’re not in trouble. “The flurry of refinery troubles in 2012 was a statistical cluster, but voluntary cuts are always possible,” he said. “When there is a lot of gas sloshing around in the U.S., there is a lot of discounting—less in the Eastern part but more in the Western side. So retailers might be doing better than numbers seem to show, but refiners are doing a little worse,” Kloza said.

“We’re finding that we are really behind last year in how much gasoline is moving,” Kloza said, noting OPIS numbers disagree with EIA numbers. “They’re measuring volume on how much is leaving terminals vs what is being sold at retail,” he said. Refiners are still on an uptick by gasoline productions, but demand is challenged.

The demand challenges are occurring and will continue to occur for numerous reasons. The age group that drives the most miles—those between 35-54—is aging, and at the same time, the number of registered light duty vehicles per house is dropping. Over the next seven years the number of drivers 35-54 will continue to decline by 3.8 million as the population ages.  The generation below them, by contrast aren’t big drivers. Vehicles are also getting better gas mileage.

Retailers can expect that 2014 will not be nearly as robust as last year when it comes to gas margins.

Shopper Research
Following a networking break, Bill Bishop, chief architect, Brick Meets Click, and Dae Kim, vice president research, for the National Convenience Store Association (NACS), presented the findings of a study called “Finding the Way Forward,” a practical roadmap for capturing emerging opportunities in convenience retail.  The study comes out of the continued work of the Coca-Cola Retailing Research Council (CCRRC).

The way to grow sales is to pay more attention to what’s important to your shoppers, noted Bishop. Before c-stores can be great, they need to master the basics in terms of shopper needs: Hospitality, cleanliness, safety, etc.  And while most in the industry often say they know this or they are already mastering these areas, research begs to differ. “When we did the research, we saw that while the industry may know they need to be mastering these basics, they do not do a good job based on 10,000 or so interviews,” Bishop said.

Once you’ve got the basics down, then it’s important to differentiate yourself by going after the other things your customers need.

Kim noted it’s necessary to speak to customers to learn what they actually need—which might be different from what you’re offering.  “While important, delivering on a safe, clean, hospitable store, is not enough of a differentiator especially with pressure from other channels,” noted Kim.

Growth involves delivering on core shopper needs, defending your turf against the competition and  attracting new business. But if you have dirty bathrooms, until you clean them, your free Wi-Fi isn’t going to have the desired impact, Kim pointed out. It’s important to master the basics before going higher or the impact of new programs or features won’t be as desired.

“We suggested in the CCRRC report that retailers approach 100-200 shoppers and say ‘based on your experience on a scale to 1-10 how would you rate your experience,’” Kim noted. Then stores can enter that information into an equation to see how they are doing on each of the basics. If they’re below 40% on any given basic, that’s the place to start in improving the store before growing in other areas.

Retailers can get more information here:  www.ccrrc.org.

Commerce In The Mobile Age
Gray Taylor executive director of PCATS, closed out the day with a presentation on commerce in the mobile age and capturing the embedded consumer.

“We are an industry that touches every consumer in society, and those consumers are going to tell us what we’re going to do,” he said. And those customers have cell phones. In other words, mobile is set to change the way you do business.  

There are more mobile devices on earth than people, and the number is growing.  Today, 56% of adults in us have cell phones and that number is set to grow to 80% by 2015, and 66% of those cell phone holders will be between 24-35 years old, Taylor pointed out.

If you doubt how mobile might change the landscape, you need only look to how much society has changed since the first Website was introduced 21 years ago, Taylor noted.

This growing mobile focus means engagement is more important than location and brand. “You’re not competing on four corners anymore—it’s 50 corners,” Taylor noted, referencing how customers are now searching for locations online. If you have a special offering like a beer growler program, your customers might come from miles away just for that.  Selling is also becoming more “in the moment” as a result with coupons sent to mobile devices, and transacting is expecting to become more complex, consumer-centric and safer going forward.  C-stores need to be present across all forums, with well-constructed social media and a high ranking in search engines.

Meanwhile data security continues as a concern, with breaches such as at Target and Texas-based liquor store Spec in the news. “We’re so connected now there is no way we’re going to lock down our stores. All of our personal information is moving to very accessible places. (As a society), we’re moving more stuff to the cloud, protecting it less and less,” Taylor noted.  “We need to figure out how to do clean transactions, with strong identification.”

The old banking systems are set to experience great change over the next 10 years. The younger generation doesn’t even visit banks. Instead virtual banking is growing. Currency is also expanding, for example, flier miles and loyalty points are increasingly used for payment in certain venues, and c-stores have an opportunity here.

Most importantly, as Millennials continue to come of age, mobile device in hand, c-stores need to be flexible enough to meet their needs.

 

 

 

 

 

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