Emerging Retail Trends

Convenience store owners should expect to embrace new technology and a fresh set of rules for communicating with today’s consumers as 2011 approaches.

A  year that witnessed a whirlwind of technological advancements proved that retail is all about change. The best retailers are embracing that change and  diversifying their technology investments in order to stay competitive.

From the way consumers connect to the Internet, get daily information and pay for products, the future is here. Convenience store retailers that fail to accept these emerging trends will find themselves looking up at their competition.

The global recession is one deciding factor determining how and where consumers shop. For example, a study by Chicago-based research group Mintel showed one-third of U.S. consumers are watching their dollars and using debit instead of credit. More than ever customers are seeking discounts, with even wealthier customers cutting corners by dabbling in discount retail channels.

Mintel found 35% of U.S. consumers decide which store to shop at based on special offers or discounts. The reason? In an increasingly online world, customers can find a better price with the click of a mouse, and can have the product delivered right to their doorstep be it a grocery order or a fresh sandwich, which means competing on price alone is no longer the competitive advantage it once was. Expect store experience and service to play a bigger role as customers decide where to shop.

Embracing a High-Tech World
Mobile technology continues to be a growing tool to reach customers. According to Mintel, sales of smartphones in the U.S. grew 82% from 2008 to 2010. Progressive retailers like Rutter’s Farm Stores are coming out with smartphone applications that allow them to send coupons to customers that can be scanned right from the cell phone. But that’s not all phones can do. In 2011 customers are expected to take more of an interest in where they are—just look at social networking sites where customers can “check-in” such as on Foursquare when they arrive somewhere. Mintel predicts that geography and status can be redefined through retail, and there will be an opportunity for increased location based services, promotions and solutions.

QR codes, the matrix bar code or two-dimensional code that is readable by QR scanners, mobile phones with a camera and smartphones, has the potential to reinvigorate customer relationships with brands and retailers. “QR codes aren’t new technology, but it’s reaching that tipping point where it’s becoming more than just a novelty,” said Alexandra Smith, global trends analyst at Mintel. “In Europe we’re starting to see several grocery stores putting QR codes on fruit—so instead of a sticker which doesn’t tell you much, you can scan a piece of fruit and it will tell you how long ago it was picked and where it is from and how far it traveled.”

In convenience stores, where customers have expressed concerns over foodservice freshness, this technology can offer them instant peace of mind by providing the exact time a sandwich or other foodservice item was prepared.

Mobile payments in U.S. convenience stores, considered by retail experts to be a crucial distinguishing factor for retailers, likely won’t arrive in 2011, but aren’t as far off as we might think. Aite Group noted that over the past 12-18 months, the U.S. has started moving closer to a tipping point that will lead to the popularization of mobile payments.

Offering mobile payment technology, combined with an inclusive loyalty program, offers retailers a way to gain more information about the customers they serve and market to them in a more effective way, which will expedite the movement toward mobile payments in the years to come. But they also predict it won’t erase traditional methods of paying, such as credit or cash.

Sign of the Times
One technology trend sure to see wider distribution in U.S. stores over the next 12 months is a shift to more digital signage.

“Signage can get expensive to change as the promotions change each month, so we’re looking at making all that digital, so that we can just go into a file to change the promotion,” said Bryan Zeiger, category manager for The Spinx Cos., which has close to 70 stores in the Carolinas. “We’ve got flat screen TVs in the majority of our stores and we constantly rotate ads, so we’re also looking at using that technology to do our signage which will be a little bit cheaper than using physical signage.”

What’s more, the digital signage of 2011 is much more advanced than when it first debuted with soundless loops of preprogrammed, static ads. In 2011, look for digital signage to be integrated systems connected with the point-of-sale (POS) in order to offer upsell and cross-sell options. Expect promotions on customer facing screens and digital signs with sound and real time news and weather reports. Companies like Intel and Hewlett Packard are entering the market allowing for more interactive mobility in signage.

Uppy’s Convenience Stores, a division of Southside Oil Inc., saw firsthand how digital technology in the forecourt can do wonders in attracting customers. Uppy’s already had Applause TV at nine locations in the Richmond, Va., market area when it opted to embark on a pilot program at five of those stores that combined Outcast Media with Applause TV. In the past, the chain ran still animation videos and static ad marketing without sound, later adding sound capabilities at its stores. Seeing how well sound helped draw customer attention, the chain decided to go one step further.

“Outcast Media brought in content—news and current events, as well as national ads, and they arrange all that and mix in our own content with it, where before we were having to control all the content and set up the ads and we didn’t have weather or current events before,” said Marshall Hare, director of facilities for Uppy’s, which operates and franchises 70 stores in Virginia and Maryland.

When customers pump gas at these stores, an ad appears on a screen attached to the gas pump. “If the ad is for a 99-cent Coke, the screen says to push this button for a coupon, and they push the button and it prints a coupon they can take inside for the discount,” Hare said. “We already had the couponing, but what Outcast did was make it more noticeable and interactive for the customer, and that drives new business.”

The Outcast pilot lasted five weeks during which time more than 1,400 coupons were printed and redeemed. “It was a pretty good response. If a customer makes a decision to print the coupon, they’re probably going to go in and use it. Now that the pilot is over we continue to use it,” Hare said.

Catering to a Captive Audience
Technology in the forecourt is becoming a trend the industry is sure to see more of in 2011. WilcoHess collaborated with Allied Electronics, a provider of service station automation systems, Pinnacle Corp. and Vendgogh, a provider of integrated gas island vending solutions, to develop a fuel island vending solution that captures gas customers not coming into the store.

The vending machine was tested in two stores, then rolled out to a third test store in September.

“We were intrigued that it tied into the pump, and that customers can make the purchase decision right there,” said Larry Lytle, vice president of marketing for WilcoHess, which operates 380 travel plazas and c- stores in seven Southeastern states. “The stores we selected for the test had a heavy concentration of credit card usage, so it made sense to us to invest in a new system that can increase the ticket ring.”

When customers use their credit or debit card to purchase gas, an offer for a cold beverage appears on the screen. If the customer selects “yes,” it asks how many beverages they’d like and sends a signal to the adjacent vending machine for that number of drinks to be removed.

During the trial, the chain made modifications including adding sound to inform the customer of the offering. “This made a big difference—sales improved at the machines by 20%,” Lytle said.  The biggest concern was that the outdoor vending would detract from inside store sales, but, so far, in-store sales have not been affected. “We feel like we’re attracting the customer that wasn’t going into the store anyway, so from that aspect we’re very encouraged that this is strictly incremental business,” Lytle said.  Other technology that could be headed for U.S. gas pumps in the near future is the ability to detect and automatically recognize license plates. Technology currently is being used in the UK that senses and runs license plate numbers the minute a car pulls up to the pump. If the plate is on the hot list, the pump is shut off, and does not allow the person to pump gas.

The Changing Face of Customers
Women are now increasingly earning more than men, resulting in new gender roles in business and consumerism. “With more women in the workforce, we see a big opportunity to speak more directly to men,” said Smith, of Mintel. “If you have more women who are the breadwinners, you’re going to have more men who are the bread buyers. You’ll have more dads doing the shopping or husbands doing household cleaning.”

This offers an increased opportunity for c-stores, whose base consumer is the male consumer. “C-stores need to start recognizing that the male consumer might not be just looking for soda or beef jerky, now he might actually be looking to buy diapers or medicine,” Smith said.

At the same time, more women in the workforce means more women looking to grab-and-go on the way to or from work, and c-stores can benefit from featuring more healthful products that are more likely to capture her attention.

Spinx stores has observed this consumer shift and is remerchandising its stores and product mix based on these changing consumers’ needs.

“We’re trying to provide a better shopping experience for the customers,” Zeiger said. Across the convenience store industry he sees larger chains looking to clear clutter at the counter, as well as in the stores as a whole, giving stores a cleaner look.

The chain is making its store environment more attractive to customers by breaking up its aisles—instead of the usual 12-foot gondolas it’s opting for 12 eight-foot sections, which breaks up the long aisle look and makes it easier to shop. “Instead of losing space in the middle of the aisle, it allows us to better merchandise products in an area that can really catch a customer’s eye,” Zeiger said.

Heading into 2011, retailers have more of an opportunity to be selective in merchandising the promotions they’re running as customers get more comfortable with shopping.

In line with this trend, Spinx is looking to follow a more defined promotion strategy over the next 10-12 months. “We look at promotions as an effective way to drive sales, but they have to be the right promotions,” Zeiger said. “Instead of 10 good promotions, we want 2-3 great promotions that really wow the customers and really give them the perception that we’re a good buy.”

Identifying Selling Occasions
While a lot of focus has been spent on understanding the different consumer demographics, new research suggests focusing on life stage rather than age when reaching consumers with promotions. Many people of the same age are in vastly different stages of their lives. This makes marketing to certain age groups more difficult than ever. For example, data from the U.S. Census Bureau shows people are waiting longer to marry, while divorce is also on the rise. The result is more single person households, which  is impacting what customers want at retail. C-stores can cater to this trend with single-serve frozen meals, and items geared toward smaller or one-person households.

Another generational shift is that people today are working beyond the usual retirement age. Mintel reported the number of customers over 65 working will reach nearly 20% by 2014. “So while some retailers might feel they don’t need to market to anyone over a certain age—like 55 or 65—these consumers represent significant sales opportunities on a daily basis that they should be thinking about,” Smith concluded.