NEW YORK — To succeed in today’s environment, convenience store retailers need to focus on four winning strategies, according to a new report, "What Convenience Stores Should Know — and Do — in 2017," from consulting firm AlixPartners.
"The competitive landscape is growing more complex, presenting both challenges and opportunities for some c-store chains," according to the report from the New York-based firm. "C-stores are well-positioned to operate effectively in this landscape. After all, many have prime real estate locations, and their offerings cover multiple dayparts as well as other major categories such as fuel, which can add value even as a potential loss leader. But to succeed in the future, they’ll have to build on those advantages and adapt to the trends shaping their industry.”
The four winning strategies identified in the report are:
1. Enhanced execution of foodservice programs;
2. Improving the customer experience;
3. Pursuing organic and acquisition-based growth strategies; and
4. Developing comprehensive enterprise productivity programs.
In Part 1 of this series, we examined the first strategy: enhanced execution of foodservice programs. In Part 2, we delved into the second strategy: improving the customer experience. Now, we turn our attention to the third strategy: building scale to support growth.
"To drive growth and achieve cost efficiencies, operators must build scale. The continued favorability of capital markets and the low cost of capital may provide tailwinds for those efforts. Some operators have scaled by inking M&A [merger and acquisition] deals, with an eye toward achieving revenue and cost synergies," according to the report.
Consolidation is the watchword for the highly fragmented and oversaturated North American c-store industry, said Eric Dzwonczyk, co-head of AlixPartners' restaurant, hospitality and leisure practice, and a managing director of the firm. Although as much as 63 percent of industry locations are still considered independent, despite years of aggressive M&A activity, factors like rising healthcare and labor costs are making it difficult for independents and small chains to compete.
"Building scale is a great strategy if you do it right," Dzwonczyk added. "It’s a learned skill, though, and it’s not a c-store specific discipline."
The report also points to potential growth through acquisitions in international markets. Japan and South Korea, in particular, represent attractive markets for domestic operators.
In Part 4 of this special four-part series, we'll look at AlixPartners' advice on developing comprehensive enterprise productivity programs.
To view the full AlixPartners' c-store study, click here.