Big Man on Campus

Students were not the only ones who headed back to college this fall. While they may not be sporting oversized sweatshirts with school logos or backpacks, convenience store retailers are certainly looking to make the Dean?s List.

Among the incoming freshman class are Altoona, Pa.-based Sheetz Inc. and La Crosse, Wis.-based Kwik Trip Inc. In early March, Sheetz revealed plans to open a 15,000-square-foot restaurant and grocery store on the ground floor of University Place, a new student apartment and retail complex at West Virginia University in Morgantown, W.Va. The housing community welcomed students in August and Sheetz is on pace for an early 2015 opening.

The store will be the first of its kind for the Sheetz brand ? triple the size of a typical Sheetz store, with indoor and outdoor seating for more than 100 people. It will feature fresh food options, including the chain?s signature MTO subs and sandwiches, M-T-Go! prepared foods, Shweetz Bakery and Sheetz Bros. Coffeez, a full-service espresso and smoothie bar. In addition, the market will offer a wide variety of traditional grocery items so students and neighborhood residents no longer have to leave the downtown area to purchase groceries.

Kwik Trip, meanwhile, is staying close to its Midwest roots with plans to open a 6,500-square-foot convenience store without a gas station on the first floor of the Varsity Quarters apartment building at the University of Wisconsin ? Madison. Construction on the project, which was announced in May, is still underway.

And c-store retailers aren?t the only ones trying to stake a claim with the college crowd. This fall, the Starbucks mobile truck joined the population of several campuses. The Seattle-based coffee giant has been a familiar face to campus denizens for a while now, but its mobile endeavor hit the streets at Arizona State University in Phoenix, James Madison University in Harrisonburg, Va., and Coastal Carolina University in Conway, S.C., this school year.

According to Starbucks, its mobile trucks can move to various locations on campus throughout the day, making it convenient for students and faculty to grab a snack or beverage. While hours will vary on each campus, the trucks are able to adjust business hours to suit the needs of their customers, in some cases staying open later than a dining hall.

The mobile truck is a licensed store operated through Aramark and is a natural extension of the long-standing partnership between the two companies.

OLD PRO

While Sheetz, Kwik Trip and the Starbucks mobile truck are new to the university scene, Shop24 Global LLC has made going back to college a priority for two years now.

Prior to that, the Westerville, Ohio-based company sold a few Shop24 stores to individuals that are not on college campuses. For example, there?s one in North Dakota in the employee camps near where they are drilling for oil. Shop24 is also trialing a couple of stores at transportation hubs. But its real focus is partnering with colleges and universities, said CEO Matthew McGovern.

Why? The answer, according to McGovern, depends largely on student needs and whether the school is providing amenities and food items where and when the students want them.

?That is absolutely key to the conversation,? he said.

Some colleges and universities have stores on campus, but the convenience factor may not always be there in location or hours. On the other hand, Shop24 is a self-contained, totally automated and refrigerated convenience store designed to enable 24/7 accessible consumer purchasing.

With rising labor rates and talks of raising the minimum wage, profitability is also becoming an issue for schools, which typically fill their inventory of on-campus foodservice providers as part of a much larger relationship with the likes of Aramark, Compass Group and Sodexo.

Expansion also poses a challenge. As institutions open new schools and buildings, additional student housing begins to move to the outer rim of campus, if not off campus.

?We saw an opportunity, because of that sprawl, to move a smaller store that is open 24/7 and automated into those areas,? McGovern explained. ?[A college] can now look and say, ?Well, we only have XX number of hours at our convenience store today and a sort of hub-and-spoke-type concept. But now, we can put a Shop24 closer to the private student housing that was developed but pushed out to the edge of campus, and not near the centers or other places where the convenience store was initially located.??

Having a convenience store located in or near student housing answers the safety worries of many students, their parents and college officials. Without a convenient location to grab something, students have no choice but to go off campus.

There is a push on campuses to keep students on campus. [Many times], it is 11 p.m. and you are not ordering a pizza or other things; you want to grab something to eat but nothing is open. Now, you are getting in the car and going off campus,? McGovern pointed out.

Solving safety concerns frequently comes up in the accolades Shop24 receives.

?We hear from a lot of parents ? which is nice to hear that feedback ? who have a son or daughter on one campus where there is a Shop24 and their other son or daughter is at another school that does not have a Shop24,? McGovern said. ?We get a lot of emails asking if we are planning to put one at other campuses. They really like the convenience of the amenity.?

A Shop24 also works just as well at commuter-geared schools, the chief executive noted, where the standalone stores can be installed near parking lots and class buildings.

A typical Shop24 unit offers about 200 SKUs, or front-facing items, and holds about 4,000 total items depending on the size of the products. In addition to accepting debit and credit cards, the typical unit is fully integrated with the school?s meal plan and accepts flex dollars ? a form of payment used at large institutions, especially universities.

?To us, it is more in line with convenience stores because of what goes in it. We can have fresh-made sandwiches and sushi, and then there is also shampoo and aspirin,? McGovern explained. ?We do look to see what is already on campus in terms of vending, and what is around us. If there are multiple options to get Coke and Pepsi, we will try to work with them to get their items in our stores. But we will also try to get creative and outside the norm and add certain juices, as well as things like flip-top yogurts ? a lot of grab-and-go items.?

To meet student needs, Shop24 works with Advantage Sales & Marketing, a major player in planogramming and SKU optimization. ?We really look hard at that. We really want to make sure every single space in a Shop24 is something that a student wants,? he said.

As for how the products actually get into the automated stores, Aramark, Sodexo, Compass, some vending companies and those schools that self-operate are the ones physically doing the stocking. High-performing Shop24 stores are restocked daily, seven days a week, which takes about an hour a day to complete. If a store is not performing to the company?s expectation level, it may be restocked three days a week.

?If it?s two days a week, we have a different problem ? maybe the assortment is wrong or we are not in the right location,? McGovern acknowledged.

Aside from having convenient grab-and-go items, Shop24 locations feature outlets and USB power connectors on the outside so students can come by and plug in, making them a destination point. Some schools will add to the atmosphere by installing benches around the units. Students can go there on a nice day and meet up with other students to study or just chat.

?It has become more of a destination and we foster that concept,? McGovern said. ?As with most convenience stores, the [Shop24] store is not only an impulse buy, it is also a destination buy.?

GROWING FOOTPRINT

As of this summer, there were a total of 26 Shop24 stores in the United States. An additional 13 stores are slated to be installed by the end of the year.

?We are still hoping the schools that make the most sense will come around to the concept and say, ?Let?s put three of these on the campus,?? McGovern said. ?We do know multiple locations do better than single locations. Students see them here and over there, and know what it is.?

Part of Shop24?s strategy is to focus on smaller schools with approximately 3,000 to 4,000 students. However, the company is expanding its reach through a newly formed partnership. In February, Shop24 entered into a non-exclusive agreement with Memphis, Tenn.-based EdR, a real estate investment trust specializing in student housing.

EdR has approximately 70 properties in its portfolio of owned and managed sites. Its sites are typically at Tier 1 schools and either on campus or within less than a half-mile of campus.

So far, the two have teamed up on several Shop24 locations. The first two stores opened at EdR?s East Edge at the University of Alabama in Tuscaloosa and the Commons on Kinnear at The Ohio State University. Stores at Purdue University in Lafayette, Ind., and at University Towers at North Carolina State in Raleigh, N.C., were slated to open in mid-September.

EdR is hoping to have a Shop24 at its University of Texas at Austin location by the end of the year, too. In all, the developer and manager of student housing hopes to have ?somewhere between six and eight stores up and running? by the end of 2014, according to Scott Casey, EdR?s chief technology officer and senior vice president of strategic business development.

EdR apartments come fully furnished and the communities? common areas feature amenities such as pools, theaters, tanning beds, golf simulators and study rooms. The only thing missing seemed to be a store. The developer had talked about adding little stores with a few items on the shelves, drinks in the cooler and some toiletries to its properties ? similar to what is found in some hotels. Yet, it couldn?t figure out how to make the concept work ? until now.

?It?s great. We?ve wanted to apply this to our properties, but we would have had to man it 24/7 and locate it inside, [which means] your clubhouse or common area would also have to be open 24/7,? Casey explained. ?We just could never make sense of it. [Shop24] stores came to our attention and we realized this is it; this is what we?ve been trying to do for a few years. It?s perfect. We supply the land, we supply the electricity and then, we don?t have to do anything.?

Opening a convenience store on-site was a welcome idea to the students as well. ?We talk to our residents as much as possible, soliciting their feedback. We?ve been very insistent about talking with our residents to find out what they think and what they want. When we presented this idea to them, they thought it was an awesome concept,? he said.

Having a c-store on-site is also a great tool to bring in potential residents.

?For us, real estate is all about location. We can overcome that by being adjacent to campus. The next piece is we are competing with a lot of different owners and the university for putting heads in beds. It?s all about the amenities and the marketing,? Casey said. ?If you know anything about 18- to 22-year-olds, they do their best work at 2 a.m. They?re hungry, they?re thirsty, they need something. Now, they can just walk out their door ? in their pajamas ? and go to the Shop24 store located on our property that has 200 items to choose from.?

EdR?s Shop24 stores are stocked with everything from frozen food to paper products to laundry detergent. Surprisingly, its biggest seller are rolls of cookie dough. ?The students buy it and eat it raw. It sells like crazy? he noted.

It?s been seven months since the companies joined forces and Casey already gives high marks to the partnership with Shop24.

?It?s been a great experience so far. They have an aggressive growth model but they are also very conservative. They want to make sure they are doing the right thing? he said. ?They do a lot of research to decide what to put in a store and where to locate it. They adjust based on what sells and what doesn?t sell in other locations. They try to accommodate the region and the market they are in and the university. Shop24 has a lot of data and a lot of history to determine what makes sense to populate a store.?

?If you know anything about 18- to 22-year-olds, they do their best work at 2 a.m. They?re hungry, they?re thirsty, they need something. Now, they can just walk out their door ? in their pajamas ? and go to the Shop24 store located on our property that has 200 items to choose from.?
? Scott Casey, EdR