Thank Goodness for Good News

By  Paul Reuter, Chairman emeritus and contributing editor

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The Wall Street Journal recently reported that storms “put a damper on retail in January.” Overall sales rose 0.3 % that month, the smallest gain since last June.

“If you take the numbers literally, they imply a slowing of consumption [growth], but I think inevitably the numbers reflected snowstorm effects,” said MF Global economist Jim O’Sullivan. For instance, sales at restaurants and bars fell nearly 1%. Are these numbers mainly weather-related, or are we seeing a slowdown in consumption? The February and March numbers should provide the answers.

No doubt the year ahead is going to be a wait-and-see situation as we continue to deal with a number of economic factors. And as 7-Eleven CEO Joe DePinto reminded us during his presentation at the NACS Leadership Forum last month, the single most important issue for our industry is the high unemployment rate.

Yet at the same time, at CSP’s Convenience Retailing University in Phoenix last month, David Portalatin, director of industry analysis for The NPD Group, gave us some really good news and consumer insights to consider.

First off, it’s important to point out that NPD has over the past year really stepped up its focus on and tracking of the convenience-store shopper. David provided us with an update of NPD metrics and some priority research NPD conducted just for the CRU audience. NPD measures how often and how much the c-store shopper spends.

All key metrics and the results were good news for our industry. In fact, David told us that after a difficult and declining past two years, 2010 showed a healthy rebound in overall channel penetration, shopper frequency and an increase in spend. His numbers tracked the past four quarters; what was particularly encouraging was his timely look at the fourth quarter, in which he saw a 12% increase vs. the year before!

These numbers are good news, but the key question is: Why? NPD looked at how the top performers perform and how others can perform above the average. There seem to be a few clear lessons from them:

They deliver great deals at the pump and inside and have established a clear value message to the customer.

They are great at the old-fashioned in-store basics.

They have a clear, differentiated offer for which they can be best in class. Data suggests most often that the offer is in fountain, coffee and/or prepared foods.

They are good at exploiting the morning and lunch day-parts, and the afternoon snacking occasion. Consumers today need a quick, economical foodservice offer, and the top performers are providing it—and winning as a result.

So it’s good to hear where we have come from over the past year, but more important are the factors NPD outlined that will influence traffic this year and next. Gasoline prices—namely gallons $3 and higher—began to affect people’s behavior, and in January the national average was $3.10. We also see a consumer who’s using less revolving credit. These consumers have changed the way they spend; many are unemployed, but many are just changing their overall economic lifestyle.

To illustrate the point, NPD concluded that consumers today are still more pessimistic about their personal situation than the overall economy.

And finally, the big takeaway, what I call the triple F: The future is in food and fuel rewards. Discounts at the pump are dramatically influencing behavior more than anything NPD has seen in the past 30 years. Discounts at the pump and quality food at a value price inside the store are the winning combination; they provide us with a growth formula and a significant competitive advantage.

David and NPD, thanks for the information and work you provided to us all. If you would like access to NPD’s presentation, e-mail me at preuter@cspnet.com

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