Pennsylvania Snapshot

Sheetz, GetGo, Wawa are "franchisee-owned convenience store's worst nightmare"

Published in CSP Daily News

PITTSBURGH -- Giant Eagle's new GetGo store in South Fayette, Pa., bakes bread for its made-to-order subs. It sells 30 varieties of coffee, cappuccino and tea, frozen drinks in eight flavors and milkshakes from a self-serve blending machine with a touchscreen. Motorists can fill up their vehicles at 16 pumps and clean them at the WetGo car wash. Customers seem impressed, but competitors with older, smaller convenience stores are worried, reported The Pittsburgh Tribune-Review.

Modern c-stores with gasoline pumps bear little resemblance to converted garage bays and [image-nocss] other small stores that sell drinks, hot dogs and windshield-wiper fluid, said the report. The newest Sheetz, GetGo and Wawa locations in Pennsylvania and nearby states, for example, "are the franchisee-owned convenience store's worst nightmare," retail expert Burt P. Flickinger III told the newspaper.

"The meals-to-go program Sheetz has is one of the finest anywhere in the world" including high-end convenience stores in Japan, Beijing and Europe, said Flickinger, managing director of Strategic Resource Group, New York. "The GetGo program is superb, and the brilliance of the food and fuel frequent shopper card overlay makes it that much tougher to compete against."

New c-stores tend to be double or more the size of those built a few decades ago. They feature wider selections of foods prepared on site, drinks stacked in wall-long "cold vaults" and better decor and lighting.

In a continued tough economy, sales at a typical Sheetz store rose 7% last year and customer count was up by 3%, CEO Stan Sheetz told the paper. He added that cold beverage sales "didn't go down, but the rate of growth slowed" as gasoline prices rose by more than 40 cents during the past three months.

Sheetz stores always have sold fresh food to go, starting with a sitdown counter at the first store Sheetz's father, Bob, opened in 1952 in Altoona, Pa. Now, "We focus on trying to allow the customer on the go to multitask when they visit," Sheetz said. "That can be any combination of filling up the car, getting a beverage or getting enough food to take home to the whole family. They can do that 24 hours a day."

Altoona-based Sheetz Inc. has 390 stores in six states, and plans to open 30 more this year. Newer stores are 5,000 square feet or more in size.

C-stores "are maturing into a relatively sophisticated retail channel with a pretty well-developed fresh prepared foods offering that's inexpensive, yet still quick," David Portalatin, executive director of industry analysis for market research firm NPD Group, told the Tribune-Review. "The consumer today is still squeezed economically. Yet we have to find ways to eat."

NPD's monthly surveys conclude that traffic to the stores is up 9% from a year ago.

O'Hara, Pa.-based Giant Eagle started selling gasoline in 1995 from an attendant's booth and four pumps outside a Youngstown, Ohio, supermarket. Its store network got going eight years ago, said the report. The grocery chain started the GetGo concept as a joint venture with fuel supplier Guttman Enterprises, Belle Vernon, Pa., to run about 20 former Crossroads marts. Guttman Oil Co. continues to fill tanks at GetGo filling stations. GetGo now has 162 stores, including 75 in the Pittsburgh area.

(Mid-Atlantic Convenience Stores [MACS] has just announced the appointment of former Giant Eagle/GetGo executive Dan Pastor as CEO. Click here for CSP Daily News coverage.)The South Fayette location that opened in November "is our platform for new stores, going forward," Dave Daniel, vice president for GetGo operations, told the paper.

The 5,500-square-foot store is the first to sell Old Fashioned Subs pioneered at the company's Giant Eagle Express concept store in Harmarville, Pa. A seating area has wi-fi service, and a circular "cash wrap" counter has several checkout points.

Flickinger called Sheetz, GetGo and Wawa, which has stores in the Philadelphia area, "three of the most formidable, well-capitalized and most capable competitors anywhere in the world."

Their highest-volume stores may ring up $350,000 a week in sales, half inside and the rest at the pump.

Sales at an average c-store range from $15,000 to $25,000 a week, he said, and some chains make a disproportionate amount of income from high franchise fees and are not investing in store improvements.

One standout has been new promotions at Sunoco Inc.'s APlus stores, Flickinger added. Every month, APlus promotes different breakfast sandwiches and other items tied to gasoline rewards under a sales growth program that started last year, Joe McGinn, spokesperson for the Philadelphia-based company, told the paper.

Customers have visited more often: Monthly same-store sales at Sunoco-owned APlus locations were 21% higher last year than in 2008, McGinn said. Sunoco also partners with Pittsburgh-area Shop 'n Save supermarkets to offer fuel rewards, a program that started after Giant Eagle kicked off its gasoline discounts.

The company will demolish an APlus convenience store occasionally to replace it with a bigger store, and has such a project set for this summer in Kittanning, Pa., McGinn said. Sunoco has 150 stations in southwestern Pennsylvania, and about 30 close to Pittsburgh have corporate- or franchisee-owned APlus stores.

Superior Petroleum Group's Fueland stores run Rollback Rewards, which knocks a penny off gasoline for every $5 spent at the store or at a Foodland supermarket. The program has helped to keep sales stable at the stores, which sell fuel under the BP, Valero or CITGO brands, Don Bowers, manager of petroleum and transportation for Ross, Pa.-based Superior Petroleum, told the paper.

"But in some areas, it's still down because of the Giant Eagles," he said. Running c-stores "is a tough business. You don't make money selling gas, so you try to make up for it on Twinkies."

Rewards programs are key in the industry, Flickinger said. Consumers can save $500 a year or more on fuel and other purchases, and when they are prevalent in a market, such as in Pittsburgh, they help to keep prices lower overall.

Wheeling, W.Va.-based Tri-State Petroleum Corp. is working with Elias/Savion Advertising of Downtown on a marketing campaign for about 50 stores in western Pennsylvania and nearby parts of Ohio and West Virginia, said the Tribune-Review. Changes should start to appear in a couple months, Tri-State CEO Colleen C. McGlinn told the paper.

Tri-State owns and operates more than 30 of the sites, and dealers with franchises run the rest. BP, Exxon, Mobil and other petroleum brand signs mark the pump areas, but the stores are unnamed.

McGlinn would not discuss the campaign, but said the company wants to offer more fresh, healthy and affordable foods. "Everyone is so busy these days that they expect and demand new and different products. Retailers are trying to meet their needs," she said.