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    CSNews Exclusive: New Products Changing the Way C-stores Do Business

    CSNews New Products Scorecard: Retailers adding more new products; packaged beverages, candy and gum, and salty snacks see most activity.

    NEW YORK -- New products are the lifeblood of convenience stores, growing in importance and changing the way c-stores do business, according to industry players participating in the Convenience Store News "Best New Products in Convenience Store Retailing" Webinar, held yesterday.

    "Retailers say there's a definite competitive edge that comes from being the first on the street with a new product," noted CSNews Senior Editor Linda Lisanti. "New products create opportunities for impulse sales -- and if the customer likes that new item, there's the potential for repeat sales and increased store visits."

    As new products come and go at a more rapid pace than they did in the past, the lifecycle of a product is now measured in months, not years, she noted. "Retailers are evaluating their sets more often. Not too long ago, c-stores would make planogram changes once per year. Now, every three to four months, they're pulling products that aren't performing and replacing them with new items that have moved well."

    She added: "And retailers are getting much choosier in which products get a permanent home. New products have to prove their worth quickly if they want to earn a spot on the shelf."

    According to the 2009 CSNews New Product Scorecard -- a study that included responses from 122 c-store executives based on their experiences in the last 12 months -- two-thirds of retailers said they added more new items to their stores last year. Only 13 percent reduced their number of new products year over year.

    On average, convenience retailers added 43 new items to their store mix, up from 34 new items the year before. "The 10 to 49 range appears to be the sweet spot," Lisanti said. "More than half of respondents say they add this amount each year."

    The packaged beverages, candy and gum, and salty snacks categories saw the most new-product activity, according to the New Product Scorecard.

    Packaged beverages had the largest number of new UPC-coded products at more than 2,400, according to Nielsen Scantrack, but candy and gum was the category in which new products made up the largest percentage of total SKUs, at 19.3 percent.

    Salty snacks saw 1,963 new UPCs, with 19.1 percent of the category's total SKUs being new.

    When asked how they judge new products, nearly 82 percent of the retailers surveyed by CSNews said gross profit dollars is their top criteria, compared to 78 percent of retailers who named "sales volume," which was the No. 1 criteria in the 2008 New Product Scorecard. And 66 percent of retailers also cited the "buzz or excitement created at the store level" as an important factor.

    Other criteria retailers said they use: comments from customers, repeat visits to the store for the item, the speed with which the first shipment sells through, and whether or not sales associates talk up the product to customers.

    Not all new product introductions are successful, of course. New health and beauty care products had the highest success rate, Lisanti noted. More than half of the new HBC items reviewed by c-store retailers were still being sold six months after introduction. "Keep in mind that NACS and Nielsen classify energy shots as HBC category," she said.

    The next most successful category for new products was candy and gum with 46 percent of its new products still being sold after six months. This category was followed by tobacco and salty snacks, both with 41 percent of new products succeeding.

    In general, new items must prove their worth within the first three months. Almost 90 percent of retailers said they give a new product up to three months to succeed before deciding whether to move forward with it. Not one retailer surveyed said they give new products more than six months to achieve success. A significant 8 percent give new items less than a month to prove their worthiness.

    While new products bring many benefits, they also present some challenges for convenience retailers: finding space for new products is still retailers' No. 1 challenge. More than three-quarters of respondents cited "space" as their top problem, Lisanti noted. However, in the past year, "creating customer awareness" and "in-store execution" were the fastest-growing concerns.

    More than half of retailers cited creating customer awareness as their biggest challenge bringing in new products, while more than a third cited in-store execution.

    Retailers putting together new product promotions named price discounts as their favorite promotional methods. This year, however, signage moved ahead of shippers and in & out displays as the second most-effective promotional technique.

    Phil Lempert, a.k.a. "The Supermarket Guru," offered Webinar attendees two cautions: Not every new product is a good one -- nor does it last.

    "It starts and ends with the consumer," he said, adding consumers are bored with their foods. "They want new concepts, they want new flavors," he said.

    It's a terrific time to introduce new products, but they have to be unique, add value and tie in to what the consumer is looking for, he said. "There is no question that prior to 20 months ago, health and wellness was the No. 1 trend consumers were looking for," he noted, adding now, that has been transcended by value.

    "The most important thing we can do to get someone to try a new product is to give them a sample, so that they are not questioning whether or not it is worth the money," he said.

    During the Webinar, Lance Smith, category manager at McLane Co., stressed the need for speed. "By getting new product offerings to the shelf faster, [retailers] will capitalize on the initial sales lift created by timing product availability with marketing and advertising initiatives. This opportunity alone in the convenience channel reaches into the hundreds of millions of dollars," he said.

    When making new product decisions, he said, retailers should ask themselves the following:
    -- How does this align with my category management approach?
    -- What sets me apart from my competition?
    -- Which item or items do I remove from my sets to replace with said new item?
    -- What exactly makes this new item unique?

    The convenience channel is much more complex than the supermarket, mass merchandising and drug channels, Smith said. "With the large number of store locations in our channel and many independent operators serviced by a great number of wholesalers, there are more decision-makers in the convenience supply chain. As a result, it generally takes more time to get new items into distribution," he noted.

    In the drug channel -- an increasingly competitive channel to c-store operators -- a new product launch is much simpler for manufacturers because there are fewer touch points in the supply chain, he said.

    For one new gum SKU tracked by Nielsen Quad data and presented by Smith, the drug channel achieved a distribution level of 75 percent during the first 12 weeks of distribution, compared to only 21 percent in c-stores. "The 12-month incremental opportunity on this one SKU alone was an estimated $7 million," he noted.

    The drug class of trade also has better execution and efficiency than the convenience channel when bringing in new products early and moving out slower-moving products. "Not only do we forego sales during those crucial first few weeks, we are also taking up warehouse slots and very valuable retail shelf space by not having an effective exit strategy," Smith said. "Typically, drug stores will aggressively cut product prices for quick sale, which only makes room for that next best new item."

    View a replay of the Webinar for free.

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