Convergence of store concepts, a focus on fresh foods and the impact of changing regulations.
By Mark Dunson, President, Retail Solutions, Emerson Climate Technologies
The convenience store space is continuing to evolve to keep up with industry trends and consumer demands. Today, some retailers are expanding their footprints, others are narrowing to niche markets, and some may even be doing both. It’s clear that all are adapting to new competition and increasing expectations around freshness, convenience and transparency.
We see three industry trends as important for leading convenience store operators to consider in 2016 and beyond:
Convergence driven by convenience and differentiation
The conventional big sellers in convenience stores — gas and cigarettes — continue to face declining margins, and the traditional competitive advantages of longer hours and quick access to high-demand products erode as other retail formats make significant updates to also offer the “convenience” consumers expect.
Food retail concepts are converging. Shoppers are no longer surprised to see convenience stores that look more like restaurants or smaller format grocery stores that specialize in on-the-go offerings. More quick-serve restaurants are integrating refrigerated cases into their facilities, similar to those traditionally found in supermarkets. And the addition of new click-and-collect options, online retailers and grocery delivery methods are also pushing food retailers to rethink their business approach.
Flexible infrastructures are needed as retailers adapt to changing store concepts, and there is a greater need for improved equipment operation and maintenance. Integrated facility technology can help control HVAC, refrigeration, lighting and foodservice equipment. Leading convenience store chains will use the data from these systems to extract meaningful insights that will help reduce costs, improve efficiency and provide a consistent experience across all stores.
Increasing importance on freshness and food quality
Many convenience stores have responded to market conditions with investments in foodservice. The concept of convenience stores offering fresh, prepared foods is not new, but the trend has accelerated over the past few years, and we anticipate it will continue to grow. Time-starved consumers want quick, convenient meal solutions, and retailers have seen that foodservice can deliver new customers inside their stores and at a higher profit margin than their traditional products.
Freshness is at the forefront for all food retailers, as convenience stores and grocers not only increase their fresh food offerings but place more importance on how they display those products. As food plays a more prominent role in the success of their business, convenience store operators will continue to focus integral efforts on foodservice.
The future now leads to an increasing importance on authenticating freshness and food quality. Retailers will soon begin to use available and new data to transparently tell — and validate — their fresh foods story. To create a competitive advantage and build their brand authenticity, convenience stores can use intelligent facility systems data to substantiate how their foods remain fresh “from farm to fork.” With heightened focus on transparency, leading retailers will transform this data into a compelling marketing message to fuel customer trust.
Effect of changing regulations on operations
As retailers look at regulations that will impact their business in the coming years, they should be familiar with expectations around these three issues.
The Food Safety Modernization Act (FSMA) changes will result in an increasing importance on collecting and utilizing data related to the safety and integrity of fresh foods. This will apply to more than just monitoring food temperature during shipping. Retailers should consider engaging with their suppliers and partners more in order to ensure data integrity throughout the chain of custody for food. FSMA may also help the retail industry with reducing food waste.
As the EPA and DOE announce regulation changes, retailers will need to focus on refrigerants and energy efficiency. With refrigeration equipment manufacturers, convenience store operators will be challenged to adopt a new class of approved refrigerants. None of the emerging or new alternatives are “drop-in” substitutes for retrofitting, so equipment must be specifically designed, evaluated and tested. Retailers and their manufacturers will need to work closely before any retrofit to fulfill all guidelines.
Convenience store operators will also address workforce regulation changes. Increasing labor costs will lead retailers to look to additional technology and automation for solutions to these issues. New technologies can be leveraged to simplify repetitive tasks, reduce labor in store and minimize the need for highly skilled training. Leading convenience stores will then use their associates to focus on customer service, shopper satisfaction and brand loyalty.
Mark Dunson, president of Emerson Climate Technologies Retail Solutions, has led the global retail business since 2009. Emerson Climate Technologies specializes in developing energy saving techniques and devices for chain supermarkets, convenience stores and restaurants. To learn more, visit EmersonClimate.com/RetailSolutions.