Economy of Need

Convenience retailers should capitalize on one of the most basic consumer needs: food

Published in CSP Daily News

By
Abbey Lewis, Executive Editor

CHICAGO -- Before he began his presentation at the NACS State of the Industry Summit in partnership with CSP, David Portalatin, industry analyst for The NPD Group, joked about returning to his native Texas and waiting for the economic apocalypse. Indeed, based on rather dreary economic forecasts also presented at the two-day event in Chicago, Portalatin had a point. But he said that he would remain committed to his message which is that the current economic environment offers great opportunity and potential growth for the c-store industry.

He began by outlining the consumer [image-nocss] mindset: when asked, consumers generally expect the economic downturn to last more than a year. The majority of respondents (39%) to a study NPD performed in October 2008 expect the recession to last between one and two years. As a result, 53% of consumers say they're spending less, 32.6% spend the same and only 6.5% are spending more.

This would make sense considering the unemployment rate continues to rise in the United States, coupled with the temporarily inflated price of gasoline and the rising cost of commodities. In fact, 56.9% of consumers polled indicated that they simply don't have as much money to spend. More and more consumers are hunting for a good deal; 76% of respondents indicated that they will only make a purchase if it is on sale or promotion.

Too, consumers are looking to consolidate shopping trips; 67% of respondents said they are more willing to choose stores that enable them to make all purchases in one trip. This, Portalatin said, is why it seems more and more necessary to diversify product selection. And on that front, 67% of respondents said they'd be more likely to buy private-label store brands, while 40.8% said they'd only purchase well-known national brands. He stressed that he doesn't advocate that retailers take all product private label. Rather, he thinks c-stores need to concentrate on both private label and power brands.

"Focus on the need," he said. "You guys are in the need business."

To that point, by focusing on consumer need, convenience retailers can capitalize on one of the most basic: food. Consumers are eating out less, yet, as it has been for the past 30 years, they don't want to cook. "Who's on the front line of meeting that value proposition? A lot of you guys are," he said.

Even though few consumers (8%) consider food purchased at convenience stores to be fresh, c-store foodservice growth outpaces the restaurant industry by 1.1%. Restaurants enjoyed a meager .2% growth while convenience outlets saw 1.3% growth.

"Convenience stores are the fastest growing segment of the restaurant industry," he said.

The challenge lies in overcoming the perception that convenience stores lack quality and freshness. But, he said, foodservice programs that are executed effectively can be a major competitive advantage.

"We're going to come out on the other side of this [downturn] and some of you will be bigger, stronger and have more market share," he said.