2011 convenience retail outlook


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Balvor survey highlights the concerns, focus and
sentiments held by convenience store operators
heading into 2011.

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2011 convenience retail outlook

  1. 1. FeatureFoodservice Retail Outlook: Coutiousy OptimisticBalvor survey highlights the concerns, focus andsentiments held by convenience store operatorsheading into 2011.By David Bishop, Contributing Editor T HE OUTLOOK FOR THE retail landscape in the year COMPETITIVE THREATS ahead can best be described as cautiously optimisic. Fuel discounts top the list of concerns that retailers Cautious, because a number of external factors, rang- have about competitive threats in 20ll-whether its other ing from continued high unemployment, constrained convenience stores offering their own discounts or part-consumer spending, and weak construction and housing nerships with grocery chains in the market. (Chart 1). Thismarkets are creating especially stiff headwinds for their is understandable given the critical role that fuel plays atcore shopper base. driving site traffic and sensitivity that consumers have rel- Optimistic, because over the last couple of years conve- ative to fuel pricing.nience retailers have demonstrated an ability to thrive when Increased competition for the morning foodservice busi-other retailers have struggled, leading some to describe ness is not far behind with over 60% expressing concernthe convenience store and petroleum retailing industry as about this growing threat. Larger store operators are morebeing recession resistant. concerned, possibly given their broader market coverage To better understand what 2011 may have in store and likelihood that theyre located in closer proximity tofor the convenience retail industry as it relates to the in- these competitors.store business, Balvor, with the assistance of ConvenienceStore Decisions, conducted on online survey with retailers. BUSINESS ACTIVITIESA total of 113 convenience retailers shared their views in What activities are retailers most likely to focus resourcesNovember 2010 on a variety of topics, including compet- on in 2011? Out of 20 areas that cross foodservice and mer-itivethreats, likely business activities and outlook for the chandise (Chart 2), here are the top five were likely to seecoming year related primarily to the in-store business. the most activity across the industry this year: Chart 1: % Concerned About Competitive Threats Chart 2: % Likely to Test/Implement in 2011 Raise retail prices on hot ••••••••••••••• Other ccnvenlence stcres ••••••••••••••• dispensed beverages offering fuel discounts Addnewproduct ••••••••••••• Grocerystorespartnering ••••••••••••••• categories with specific c-store chains on fuel discounts leverage multi-vendor ••••••••••••• displays Foodserviceoperators •••••••••••• expanding into morning Expand range of products •••••••••••• daypart available on roller grill Drug stores selling beer in ••••••••••• Upgrade hot dispensed •••••••••••• more locations beverage equipmentSource: Balvor 20 II Convenience Refail Out/oak Survey Source: Balvor 20 II Convenience Retail Outlook Survey52 Convenience Store Decisions I January 2011 CSDecisionso
  2. 2. FeatureFoodservice • Coffee. Increasing commodity costs are creating pres- Now, comparing the current results to those capturedsure to raise prices while fierce competition is forcing a in January 2010-the last time Balvor surveyed retailers onthoughtful response so as to protect volume. So, its not sur- these indicators-shows retailer sentiment is moving in dif-prising that while 52% of the retailers indicate theyll likely ferent directions depending on the level of the question.raise prices in 2011, only a quarter of these are extremely Optimism for the overall economy is down three percent-certain prices will go up. Other retailers may not be con- age points; whereas, its up six points relative to the retailerssidering an increase-11 % according to the survey-as they own prospects. Also, the degree of optimism is much stron-already executed price increases during 2010. ger for the retailers business today as 44% of the retailers are • New Categories. Finding new items that are a good fit extremely optimistic versus just 25% a year ago.for the store has long been a goal of many retailers. Whilethese products may not satisfy the industrys definition of a SALES FORECASTcategory, they create new usage occasions and attract more Continued growth is expected in 2011 with moreconsumers, leading to stronger foot traffic. Although this than 90% of the retailers anticipating stronger in-storestrategy involves additional risk, the reward is motivating dollar sales versus the prior year in both the food service and45% of the retailers to possibly test and/ or implement new merchandise businesses.segments not previously available in their stores in 2010. Most retailers also believe foodservice will grow at a • Multi-Vendor Displays. C-store retailers continue to faster rate than merchandise. This may be in part be dueimprove space productivities and clean up the store by con- to an increased investment in food, as well as the absencesolidating manufacturer product lines in one display to of any planned events-like the federal excise tax increasebetter serve the hurried shopper. Growing awareness of the that occurred in 2009 with tobacco-that could acceleratebenefits of such programs-whether in refrigerated fresh top-line dollar sales.foods, candy or snacks-led 45% of the retailers surveyed In terms of the forecast range, foodservice is expected toto say theyll likely install them in 2011. increase 2.6-5.9% while merchandise is anticipated to grow • Roller Grill. Food prepared onsite is the largest cat- 2-5% in 2011. Larger retailers believe theyll enjoy moreegory in foodservice and the roller grill plays an integral robust growth this year compared to smaller companies.role in this area. As such, 41% of the retailers are likely to (Chart 3).evaluate adding new items that extend the utility of thegrill across the various day-parts, as well as appeal to more Chart 3: 2011 Sales Growth Forecast vs. Prior Year .•shoppers in the store. • Coffee Equipment. Starting in 2010, many leadingchains had upgraded their delivery systems and Balvorfound that 16% of the retailers surveyed may have alreadydone so as well. Given the importance of this category to themorning daypart, another 40% of the retailers are likely tomake the investment upgrades in 2011. What are top performers-based on reported year-to- 1-10Stores 11 - 50 Stores 51- 200 Stores 201+ Storesdate sales growth in 2010-going to focus on in 2011 across • Foodservice • Merchandisethese areas? Theyre 34% more likely to upgrade the coffeeequipment and 19% more likely to install multi-vendor dis- Source: Balvor 20 7 7 Convenience Retail Outlook Surveyplays in the store. However, they are 18% less likely to raiseprices on hot coffee this year. LESSONS LEARNEDBUSINESS SENTIMENT Convenience retailers are well aware of the threats their The strength and resiliency of convenience retailers is traditional business models face. Many are making the nec-evident in their business outlook in 2011 even though the essary investments to enhance customer services, expandsame cant be said for the broader economy. For instance, product offering, and engage consumers in more relevantalthough only 28% of the retailers are optimistic about the ways to improve their competitive position in 2011.Ll.S.economy in the coming 12 months, 72% share a positive These findings reveal more convenience retailers areview for the convenience industry and even more-84%- becoming pessimistic about the broader economy while atare optimistic about their own prospects. the same time recognizing that they can take advantage of the Some convenience retailers dont share this positive many opportunities created during challenging times.sentiment. Interestingly, nearly all of the retailers that are pes- The outlook, although cautiously optimistic, issimistic about their companys prospects in 2011 also indicate promising, especially considering the state of thethat year-to-date sales trends in 2010 were down versus the economy. And, it appears that retailers who have suc-previous year. Whats also intriguing is that all of these retail- cessfully grown during the recession to-date areers are single-store operators, underscoring the challenges of well prepared to win even more market share in thesurviving in this industry with just one location. coming year. CSDCSDecisionse January 2011 I Convenience Store Decisions 53