MIAMI BEACH, Fla. – Top executives for two of the largest convenience store chains in the nation presented their visions of the c-store industry's future during the first day of the 2013 NACS Leadership Forum.
Igal Zamir, president of Tennessee-based MAPCO Express, and Chris Baldwin, senior vice president of New Jersey-based Hess Corp., both stressed the need for change if c-stores are to remain successful in today’s rapidly changing business and technology landscape.
Zamir, whose company operates 372 c-stores in seven states, said the industry faces numerous challenges such as channel blurring, the reinvention of drugstores as a convenience destination for women, flat fuel consumption and declining cigarette profits. In addition, he noted that c-stores must react to shifts in consumer tastes, including the change from soft drinks to energy and healthy drink solutions.
MAPCO has been busy over the past few years, having remodeled 184 stores and divested 111. New stores are being built to its "mega store" model, which has had "a huge positive impact on sales," said Zamir. The company also has made a big commitment to private label, which now stands at 5.6 percent of sales.
Additionally, the convenience retailer recently launched a customer loyalty program that has been very successful at increasing check averages, introduced its first mobile application (app) and signed an agreement with PayPal to accept mobile payments at its stores.
Yet for all these positive changes, Zamir still sees challenges ahead for MAPCO and the entire convenience industry. "The reality is that the trends are going against us. We still don’t see the customer we want in our stores," he said, referring to the fact that c-store customers still skew more male and lower income than those of other retail channels.
He cited Duane Reade, a division of drugstore giant Walgreen Co., as the c-store industry's biggest competitor. "Are we fighting each other, or are we fighting these guys? We need to become a destination for a new customer – females and Millennials," concluded Zamir, who believes that c-stores need to look right, feel right and be relevant to attract a new customer base.
Baldwin agreed with most of Zamir's sentiments. Hess, which operates 1,300 sites mostly along the Interstate 95 corridor on the East Coast, is noted for value-priced fuel and terrific real estate. It is also one of the few oil companies whose retail stores are mostly company operated (93 percent).
During his speech, Baldwin focused on three big changes that c-stores must cope with: how we eat, how we get information and how we move.
For instance, people don’t eat three square meals a day anymore. "Snacking has become a fourth meal," he said. Food eaten by Americans on the run has doubled in recent years, according to Baldwin, and "we are eating more – more calories, more fat and more snacks." The implications this has on the nation’s obesity problem are enormous and c-stores "need to be part of the solution" to this problem.
"McDonald’s value has doubled over the past 10 years, largely as a result of selling better food," Baldwin claimed. "They used to be known for their burnt coffee. Now, they arguably sell the best-tasting coffee in the world."
Baldwin also discussed how Americans get their information has changed tremendously. "Remember when newspapers were delivered, when the telephone was in the kitchen and watching TV was a family event?" he asked. "Today, communication is dominated by social media."
To dramatize this development, he pointed to the fact that it took 38 years for radio to reach 50 million listeners. For television, it took 13 years to reach this milestone for viewers. For the Internet, it took just four years. For Facebook, two years. And for Angry Birds, just 35 days.
"The 1990 invasion of Kuwait was kept quiet for nine days. Today, with Twitter, it would have been known within five minutes," he said.
Hess offers a mobile app through Gas Buddy. The company’s small investment in social media paid for itself many times over just from its use during Superstorm Sandy. When consumers were panicked trying to find gas stations with fuel, Hess was able to post all of its fuel inventories on the app. The company experienced 18,000 downloads in just six hours because of this. The company took a similar approach during the recent Northeast snowstorm.
"Communication with customers through social media is a game changer," stated Baldwin.
Finally, addressing how we move, he noted that gasoline consumption in the United States has peaked and will continue to decline as the fuel efficiency of the American auto fleet gets better. Even beyond that, he said a cultural change is impacting driving habits. "Car ownership and usage are declining for younger generations. Younger people don’t see car ownership as indispensible as older generations have," he explained.
This means c-stores must figure out how to stay relevant as trips to the pumps decline and car ownership is transformed. "These are disruptive changes to our business," Baldwin concluded.
The 2013 NACS Leadership Forum continues through Feb. 13 at the Fontainebleau Miami Beach.