Swimming Upstream

Government gridlock, consumer frugality temper retailers’ 2014 expectations in latest Outlook Survey.

By
Samantha Oller, Senior Editor/Special Projects Coordinator

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Mathias of Outback Run Thru is one of those feeling threatened by the dollar channel. A dollar store opened just down the street from her site, and its aggressive pricing on packaged beverages—carbonated soft drinks in particular—has proven tough to match, let alone beat.

“They can sell 12-packs there at three for $10, four for $11,” she says. “They’re selling it for cheaper than I can pull it off the truck.” The dollar store is also now selling propane, cigarettes and beer, although Mathias believes her store can compete because the beer is sold only in warm packs and rounded up from the state minimum.

The retailer quoted anonymously echoes Mathias’ frustration. “With the advent of Dollar General exploring fuel, that can only further put a crimp in our customer count,” he says. 

Profit Centers

More than 65% of Outlook Survey participants are planning to change their business model in 2014—about the same compared to previous years. The most popular move: remodeling and refreshing the c-store, followed by adding or expanding profit centers.

Fewer than one-third plan to grow by acquisition. That said, “The current environment is good to both buy and sell,” says the anonymous retailer. “It has become increasingly difficult for the midsize chain to make the economies of scale work in their favor,” especially for family-owned businesses. His company is looking for the right fit, but is also “long overdue” for its own rationalization, he says. About 14% of participants in the survey plan to sell some stores.

“We need to cull the bottom percentage of our sites,” he says, with the top candidates facing changing customer demographics, land constraints, increasing market value for a new lease or being better suited for another use. 

For added profit centers, foodservice again takes the top slot, although alcohol beverages rank second. “What I had success with is getting into a better-quality assortment of wine, craft beer and e-cigarettes,” says 7-Eleven franchisee Keane. “It’s all incremental sales for me.”

Foodservice

Nearly 35% of Outlook Survey participants plan to add to their foodservice offer in 2014, with expanding the coffee bar and fountain the most popular moves. The retailer requesting anonymity says his chain has moved from glass pots to urns, and stores now have dedicated coffee islands. The chain is also upgrading its fountain to 24 heads. 

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