Walmart Express

Convenience Stores Broadening Their Appeal

Convenience stores are upping their game to compete with fast-food sellers and grocery stores. At the same time, they are cleaning up both their customer-service act and their restrooms, in hopes of attracting a broader demographic, particularly women. “There’s been a huge change in recent years. [Convenience] stores are better-lit, safer and cleaner, with healthier food options, plus we’re even seeing some cosmetics,” said Deborah Weinswig, chief customer officer of Profitect, a Waltham, Mass.–based retail analytics firm. “The average c-store is the antithesis of Amazon — it’s three minutes from home and is taking on the unique role of the neighborhood store,” said Weinswig. “Plus, it appeals to everyone.”

In the U.S., where there is one convenience store per 2,000 people, larger chains like QuikTrip are building more and more regional commissaries to prep fresh food for daily store delivery. “All of a sudden, they have become big competitors to fast food,” said Clay Mote, a partner at Dallas-based Venture Commercial who has represented both QuikTrip and convenience chain RaceTrac.

Convenience stores now generate some $250,000 each per year in food-service sales, according to the National Association of Convenience Stores.

While typical U.S. gas station convenience stores measure about 2,800 square feet, stores are now being built at roughly 3,600 square feet, the association says. But RaceTrac’s newest stores, like QuikTrip’s latest, exceed that — at some 6,000 square feet. QuikTrip is fast approaching the opening of its 700th U.S. store, and RaceTrac is expected to reach the 400-store mark this year.

Convenience-store real estate strategies are changing along with the product mix. “It used to be when theExxons and Chevrons were doing c-store deals, they had to have the hard corners,” Mote said. Today’s stores do not need those more expensive hard corners, as long as they can gain approval from the city to build a median break, he says. Such midblock lots are typically twice the size of the one-acre, hard-corner sites, says Darren Pitts, executive vice president of Phoenix-based Velocity Retail Group, “and have less traffic congestion, with easier ingress and egress.” Moreover, land prices for midblock parcels are roughly 30 percent cheaper than hard corners and give chains benefits that include fewer old leases to wait out and more-accommodating land sellers; a midblock site can be acquired, entitled and built in 12 to 18 months, he says.

Internationally, 7-Eleven remains the convenience-store leader, with nearly 52,000 units across 16 countries, and is the most heavily patronized for food-service items, studies show. CEO Toshifumi Suzuki said in December that 7-Eleven was in talks with online retailers to introduce another major service: online-purchase point-of-pickup services at the nearly 16,000 7-Eleven stores in Japan. Meanwhile, Québec-basedAlimentation Couche-Tard, which ranks third behind 7-Eleven and FamilyMart in worldwide store numbers, is swallowing up chains around the world. Its network of 13,000 stores includes 6,200 North American units and 2,300 European units, plus 4,200 Circle K stores in 10 other countries.

CST Brands, spun off from Valero Energy Corp. last May, seeks a bigger piece of the c-store pie. It is launching large-format Valero convenience stores around the U.S. and also pursuing acquisition opportunities. And in December Marathon Petroleum said it would invest nearly $1 billion over the next three years to expand its Speedway chain.

The industry is facing numerous challenges, however, including shrinking margins on such staples as cigarettes and gas. At numerous U.S. locations, 7-Eleven has even removed fuel pumps. Increasingly, credit card fees are eating into profits and represent the second-largest store-level expense next to labor, according to experts.

But there is still plenty of upside. As most retailers wrestle with online competitors, “c-stores don’t have that distraction,” said Mote. “They really have a niche and not a lot of competitors.”

Source: ICSC January 2013
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