The Changing Face of Convenience
C-stores have long gotten a bad rap for selling outdated snacks and greasy fried food, but new retail outlets are bringing fresher, healthier, and more premium offerings to busy shoppers on the go.
A new breed of micro-grocers and urban neighborhood markets are cropping up to put an updated spin on the convenience store. From corner stores serving up fresh produce and gourmet grab-and-go meals to large mainstream retailers launching smaller outlets with better accessibility, the convenience store is being reimagined and transformed to cater to ever-changing consumer preferences.
Consumers Crave Speed and Ease
Today’s consumer wants not only the convenience of fresh, prepared meals and healthy packaged foods but also the ability to pop in and out of a store in mere minutes. Changing trends in grocery shopping point to a consumer population with more single-person households that buy fewer items at once, as well as shoppers who stock up once a week and fill in the gaps with quick stops for fresh items.
“Fresh, prepared meals and healthy eating are all leading the charge for today’s time-starved society and millennial-driven culture,” explains Craig Rosenblum, partner at retail consulting firm Willard Bishop. “Convenience has become more than just a convenient place to get something. It is now about, Where can I get something ready to eat, nutritious, and healthy, and at the same time get some basic groceries.”
Consumers are noticing the changing tides. According to a recent survey from the National Association of Convenience Stores, 61 percent of Americans recognize that convenience stores are offering healthier, more nutritious products and serving sizes. The survey also found consumers are increasingly turning to convenience stores to make those purchases.
“People are much more receptive to purchasing healthy options in places outside the grocery store,” says Jeff Lenard, vice president of strategic industry initiatives for NACS. With outlets ranging from discount retailers to department stores selling granola bars and drinks at the register, the basic idea of convenience shopping has broadened greatly.
To serve these convenience-focused customers, a wide range of businesses—from traditional gas-station mini-marts to mass-market retailers—are creating options to woo them.
The Independent Format
Often referred to as micro-grocers or green grocers, a bevy of independently owned modern convenience stores are popping up across the country. While shop owners have different takes on what contemporary convenience looks like, many of these specialty food–oriented stores stock freshly prepared meals, healthy options, and local, seasonal foods, in addition to everyday home staples.
Harvest Grocery & Supply in Richmond, Virginia, encompasses 1,400 square feet of retail space and boasts a large produce and organic perishables section, as well as basic groceries. Owner Hunter Hopcroft opened the store with the belief that people would be more willing to buy locally sourced food if it were more convenient and presented in a friendly, well-curated environment. “As for shelf-stable groceries, we focus on best-in-category products from all over,” Hopcroft explains. “We seek out small, up-and-coming brands and work hard to promote them once in the store.”
Harvest partners with JM Stock Provisions, a local butcher that operates a whole-animal butcher case out of the store. The store also sells milk from Old Church Creamery in nearby Manquin, as well as wine and beer.
Each Peach Market, located in Washington, D.C.’s Mount Pleasant neighborhood, carries a wide range of pantry staples like olive oil, bread, and crackers, in addition to a seasonal cheese selection, charcuterie, and house-made sandwiches.
Owners Emily Friedberg and Jeanlouise Conaway conceived of Each Peach out of a desire to open a real neighborhood store where people would have access to fresh, high-quality food. “We wanted a place where people would shop in a more urban or even European way,” Friedberg explains, “where they would stop in almost every day to pick up groceries for that day.”
Keeping a focus on their customers has paid off for the pair. “We have excellent customers,” Friedberg says. “Most are from the neighborhood and have been incredibly supportive. We have many regular customers we know by name.”
As a convenience market that is also focused on a restaurant element, Green Zebra Grocery in Portland, Oregon, has also made a name for itself among local consumers. “We’re redefining what convenience means,” Peter Koehler, Green Zebra’s business development director previously told Specialty Food Magazine (see “Rise of the Grocerant,” Spring 2015). “Imagine Whole Foods Market and 7-Eleven had a baby—you’d get a Green Zebra.”
Green Zebra stocks a selection of products from local suppliers, including gourmet salts and chocolates, craft beers, and micro-roasted espresso. An entire wall in the 5,500-square-foot space is devoted to wine, and dietary preferences such as vegan, dairy-free, and gluten-free are all carefully considered in the ready-to-eat selections. The store even offers online ordering and grocery delivery within two hours.
Smaller still, Minneapolis-based Simpls promises the experience, variety, freshness, and quality of a farmers market, but jam-packed into a 1,000-square-foot convenience store format. The retailer carries products from specialty manufacturers such as B. T. McElrath Chocolatier and Joia Life All Natural Sodas, and also serves local specialties, healthy grab-and-go meals, and kombucha on tap.
Even more oriented toward speed and convenience, The Cube in Norman, Oklahoma, is a prototype drive-through store that sells everything from freshly made breakfast burritos, craft beer, and lattes to dog food, diapers, and toothpaste. The Cube allows customers to place an order and pick up everything they need without ever leaving their cars.
While it deliberately employs modern architecture to move away from the standard concept of a c-store, Rosenblum muses it can come across more like a fast-food restaurant than a convenience store.
Still, this new crop of retailers believes they’re filling a growing niche. “I think stores that fill the gap between bodega and supermarket will continue to grow in popularity,” says Hopcroft. “The experience of going to a traditional grocery store, especially just for a few items, is so bad [that] the opportunity for stores like ours, especially in residential urban areas, is huge.”
The Appeal for Large Retailers
Shifting consumer preferences have led mid-size and large chain grocery stores and big-box retailers to offer new retail concepts to stay relevant with today’s shoppers. Companies like Walmart and Kroger have already opened smaller concept stores, some of which cater to urban markets, while others fill a void in rural food deserts.
While Walmart’s Neighborhood Markets have been around since 1998, the company recently rolled out more than 200 new, smaller-footprint stores.
Walmart Stores president and CEO Doug McMillon said at a recent investor presentation that the company expects to continue expanding in the convenience market. “Time is the new currency,” he said. “Our shoppers want convenience, and we recognize that shopping in one of our supercenters isn’t always convenient. Hence, we will continue to build out Neighborhood Markets and Walmart-to-Go.”
Sendik’s Food Markets, with 12 locations in the Milwaukee area, recently announced plans to expand its Fresh2Go convenience store model, which allots more space for fresh produce and prepared foods like sandwiches and salads.
In the United Kingdom, grocery giant Tesco has embraced two different types of smaller-format stores, with Tesco Metro catering to city centers, and Tesco Express serving as more of a gas station and traditional convenience store. The number of Tesco Metro and Tesco Express stores has even overtaken the supermarket count in the chain’s repertoire. (See "Grocery Giants Go Small," below.)
The Fit for Specialty Food
Joe Quintero, regional sales manager for artisanal cheese company Vermont Creamery, says his company’s association with specialty convenience stores like Harvest Grocery & Supply has been extremely positive and beneficial for business. “Those are the stores that gave us the opportunity to grow to the company we are now,” he says.
Specialty products continue to gain in popularity—and are easier to find in all kinds of outlets, including traditional convenience stores—as the American consumer has developed a more sophisticated and discerning palate, according to the Specialty Food Association’s 2015 “State of the Specialty Food Industry.”
The overall specialty food retail market’s continued rise has mainly been due to a combination of successful new product innovations and increased penetration in outlets that are readily accessible to a wider American audience, as is the case with convenience stores.
Rosenblum suggests the growing smaller-format store model will create more opportunity for specialty manufacturers and distributors as those retailers continue to grow their healthy, natural, and organic offerings. In the case of Kroger, the Ohio-based supermarket chain, its good-for-you and specialty sections have become stores within the store.
“All [retailers] are focused on incorporating or expanding specialty,” Rosenblum says. “It meets shopper need, drives traffic, and, in most instances, is very profitable.”
For NACS’ Lenard, catering to consumer desires—whether that be specialty packaged goods or a hot dog—is of the utmost importance. “You have to know what the customer wants,” he explains. “You can’t push things and presume that trends will dictate what your sales will be.”
Managing the Challenges
Independent neighborhood markets meet a particular need for consumers, but the specialized format can come with its own problems. Several shop owners point to an inability to stock diverse product options like standard grocery stores, and others see issues with competitive pricing.
“We do sometimes struggle with customer expectations,” explains Hopcroft. “While we’ve tried to hit all the major categories, we obviously can’t mimic the selection and variety of a traditional supermarket.”
Harvest carries three cereal options and four pasta options, so customers have to be a little flexible when they visit. If a recipe calls for gigli pasta, Hopcroft says, a customer might have to settle for farfalle.
“The major downside is how geared toward scale the entire grocery industry is,” he says. “We are trying to transcend novelty and be a truly useful part of people’s food-buying habits. That means we stock things like toilet paper, black beans, and ketchup, [though] working with large distributors to keep these things on the shelf can be a challenge.”
Friedberg says Each Peach Market runs into similar issues. “We can’t have the same variety of products as the big grocery stores,” she says, “and we can’t buy enough product at a time to get the price deals that bigger stores get.”
Larger retailers tend to have a leg up on independents in terms of knowing exactly how to manage a business and also cater to particular customers. “Their scale, experience, and understanding of the market provide them a huge advantage on product cost, equaling lower prices and investment in building new stores,” says Rosenblum.
While that may be the case, several large chains have failed at building smaller stores or convenient formats, Rosenblum notes. In 2008, Walmart opened four Marketside convenience stores in Arizona, only to shutter the shops by late 2011. Instead of moving forward with the Marketside concept, the grocery giant decided to take what it learned from the experience and apply it to its Walmart Express stores, then under development.
Pricing can be a delicate challenge. Customers expect to pay higher prices at convenience stores, but prefer not to be insulted with egregious markups, Rosenblum says. “Traditionally, convenience stores are more expensive than grocery stores,” he explains. “However, the continued growth and evolution of private-label or own brands have made convenience stores much more competitive with traditional grocery.”
Tips for Retailers Entering the Market
Even with these challenges, new consumer shopping habits, coupled with an expanding and fluid definition of convenience, make it an ideal time to jump into the micro-grocer game. A tight focus can make for a more successful venture, Rosenblum advises.
“One-store or single-location operators tend to do better, because they can focus on the right shopper and become symbiotic with the community,” he explains.
Competition from larger chains can still pose a threat, especially as executives implement updates. With grocery stores increasingly carrying specialty products and fresher offerings, competing on the small scale can be an uphill battle.
At a recent investor presentation, Kroger CEO Rodney McMullen explained how his company is catering to consumer desires. “Shoppers want a one-stop shopping experience,” he said. “They don’t want to have to go to all of the specialty retailers to get healthy and organic products.”
Still, Rosenblum believes, chains must toe the line to find the perfect balance. “Rolling out a chain is a difficult proposition if you don’t get the location, store offering, and pricing right,” he says.
At the end of the day, NACS’ Lenard asserts, the desire for convenience is at an all-time high, and any store that enters the market should be ready to offer it. “The value of convenience continues to increase,” he says. “It doesn’t matter what the format is; people want convenience. If it doesn’t act like a convenience store, it’s an inconvenient store.”
Grocery Giants Go Small
Large grocery chains are increasingly entering the convenience business, a move that Craig Rosenblum, partner at retail consulting firm Willard Bishop, calls a strategic play to enter new markets where a smaller format would be more suitable.
As shoppers are increasingly turned off by traditional grocery stores and supercenters both in the United States and the United Kingdom, executives at those stores are admitting, with new concept stores, that smaller might actually be better.
H-E-B. In an effort to stay competitive with Walmart’s Neighborhood Markets, Texas-based grocer H-E-B is said to be exploring the option of opening small-format stores. At 12,000 square feet, the proposed stores will be more like a mini market than a typical convenience store, but remain far short of a typical 80,000-square-foot H-E-B store. The chain is conferring with Canadian retailer Sobeys on best practices, as that merchant has seen success with smaller convenience stores.
Kroger. The Ohio-based retailer has opened several Turkey Hill Minit Markets in the Columbus area in an attempt to find its place in the convenience sector. At around 7,500 square feet in size, the convenience stores are just a fraction of Kroger’s usual 67,000-square-foot grocery stores. Turkey Hill offers both typical convenience-store fare like hot dogs and pizza by the slice, as well as grocery staples, good-for-you options, and even a gas station and car wash at some locations.
Tesco. U.K. grocery giant Tesco is experiencing a boom in its Tesco Metro and Tesco Express convenience stores abroad, though its Fresh and Easy small-format stores struggled in the U.S. While 50 of its 167 stores are closing, the chain plans to make a comeback stateside with new concept stores that will fall between 3,000 and 5,000 square feet and offer fresh convenience with produce, made-to-order sandwiches, and a beverage bar. Fresh and Easy is working with ADMI, the San Francisco design firm that designed the Apple stores.
Gas Station Mini-Marts Up Their Game
Even owners of traditional gas station stores are recognizing the opportunities to be had by improving their offerings. Jeff Lenard, vice president of strategic industry initiatives for the National Association of Convenience Stores, says consumers visit gas stations and convenience stores more often than virtually any other retail outlet. With 80 percent of convenience stores also selling gas, working to appeal to health-conscious, time-strapped consumers is becoming a no-brainer.
Kwik Trip, a convenience store and gas station chain based in La Crosse, Wisconsin, has made a commitment to stocking healthier snack options like fresh produce and fruit parfaits, as well as sandwiches, salads, wraps, and good-for-you family meals.
“They move a fair amount of produce and healthy options,” Lenard says. The convenience chain also sells more than 400 pounds of bananas per store per day in 400 of their locations.
“All retailers are focused on incorporating or expanding specialty. It meets shopper need, drives traffic, and, in most instances, is very profitable.”
Emily Crowe is a freelance writer and regular contributor to Specialty Food News.
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