January 11, 2007
CSD: On the Road with Kwik Trip
By Shahla Hebets, Publisher, Convenience Store Decisions
Through special arrangement, what follows is an excerpt of a current article
from Convenience Store Decisions magazine, presented here for discussion.
Kwik Trip Inc. operates more than 350 stores under brands such as Kwik Trip, Kwik Star and Tobacco Outlet throughout Wisconsin, Minnesota and Iowa. Plus, it operates a 150,000 square-foot distribution center in Wisconsin with its own fleet of semis to service its stores around the clock.
Steve Loehr, vice president of operations support for Kwik Trip, spoke with Convenience Store Decisions.
CSD: What section of the store do you see as your most successful?
Loehr: Our foodservice offering has been our most successful program. We know we could have prospered for several more years by just selling “Cokes and smokes,” but we knew we were going to hit a wall if we didn’t have a strong foodservice offering. It takes a great deal of planning, and when you have 300+ stores it takes a lot of capital expense and trial and error. Even with the best of intentions, some things don’t work, but we are smart enough to say, “let’s change it.” Our owner (Don Zietlow) is a visionary who rarely talks about what has happened in the past. He talks about what lies ahead because you can’t change what has already happened, but you can always do better in the future.
CSD: What current industry trends are of interest to Kwik Trip?
Loehr: Every year we travel to see what other markets are doing. This year we will visit convenience stores in London because Europe is ahead of us in many ways with respect to convenience offerings, and this is particularly true in fresh and hot foods. We know companies like Tesco are coming to the U.S., and we need to be ahead of companies of this size and influence. We ask ourselves, “What can we do in our stores to mimic successful operations abroad?” As a result, we feel we’re in front of these changes and ideally positioned for success.
CSD: What does Kwik Trip do to stay ahead of the competition?
Loehr: I think being hands-on and not being reluctant to change. We actually welcome change, and we never take anything for granted. We study what’s happening in the marketplace and we seek out industry trends. Most importantly, we listen to our customers. A lot of credit also has to go to our many strong supplier partners that talk to us about the trends they see out in the field and offer tips on how we can improve the business. These combined efforts aid in our ability to stay ahead of the competition.
CSD: What do you see as the biggest opportunity for the c-store channel?
Loehr: I think, ironically, the big box stores trying to get into the c-store business creates an opportunity because we are confident we can do convenience better than they can. Our locations are better, our prices are the same or better, and I anticipate that we can combat the “big guy” by doing things quicker. The Wal-Marts and the Tescos are our future competition as opposed to other c-stores. It comes down to attracting consumers and competing on the level of true convenience. This type of strategy and focus doesn’t happen overnight – it’s an evolution, not a revolution.
CSD: What do you think the c-store business will look like 10 years from now?
Loehr: I think the industry is going to be a lot smaller. I believe that there will be fewer players in the market, but the players will be stronger. The stores that survive will be, on the whole, more powerful. We are experiencing a great deal of acquisition in the convenience market, and smaller, less competitive stores are going out of business because they can’t compete with the larger players. Our industry, in general, is really positioned to grow, however, because of the demands on everyone’s time and the need for convenience.
Discussion Questions: What do you see as the biggest opportunity for the convenience store channel? What do you think the convenience store business will look like in 10 years?
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Growth, Growth and more Growth! Since the c-stores offer a location advantage, they only need to discover a more efficient business model, develop better target marketing and product/SKU differentiation for their products and this will become a key component to their business model. c-stores can start challenging traditional retailing on their own turf, since they have a location advantage (and often a first to market shopping advantage because of the sheer number of customers that they service). Combine some of the unique customer service programs, digital service models, and state of the art fulfillment models together and c-stores can challenge stores in the areas of consumer electronics to hard goods to grocery.
There are too many convenience stores. The largest opportunity: try to swap locations to gain local dominance while withdrawing from markets where dominance is unlikely. Build all new locations only in the markets where dominance is likely. And think about this long-term trend: as gas mileage rises, what will you do attract customers when they don’t need to gas up so often?
Food. The number one opportunity for convenience is food. Well made, well presented, great tasting, fresh food. The other attributes, gas etc., are being picked apart by other merchants. Food is where the convenience store can make in-roads, grab and hold share while taking advantage of changing demographics.
Steve Loehr’s comments on what has made them succesful and the keys to the future all hint at one thing: the importance of really knowing their specific market, the customer make up, their product needs and supplier expertise.
This is difficult to do, given today’s limitations, when the size of a company reaches the point where the operations can no longer respond to these market-specific needs. Kwik Trip, and perhaps other regional convenience stores, may begin to play a larger role in traditional food and GM retail as they evolve from the dingy purveyors of gas and “cokes and smokes” to savvy merchants meeting specific needs on a localized basis.
I believe, as Seth Godin proclaims, that “small is the new big.” I made similar comments in yesterday’s panel discussion on “Top Ten Supply Chain Trends of 2006.” Those comments centered on what I believe to be the demise of the Mass Market in response to globalization and technology enabled marketing to ever more diverse segments of the marketplace (reference Chris Anderson’s book entitled “The Long Tail: Why the Future of Business is Selling Less of More”).
Convenience Stores such as Kwik Trip may be able to build on their smallness through marketing to their specific customer base better than any national chain could ever do. They will do this through product offering, services related to food and product that are more uniquely tailored to their market than could be achieved by larger chains.
Their advantage again is in their ability to marry cost effective operations with customer specific needs. Additionally their size allows them the advantage of speed and flexibility to try new things and to change those that don’t work.
I feel Steve Loehr is right in his comment that his industry is positioned to grow due to the demand on people’s time and need for convenience, but I disagree that it will come at the expense of the number of players. In fact, I believe that this industry is set to expand the number of participants and their reach into the total retail spending pie. Rather than a few BIG players with more stores, I think we’ll see a lot of SMALL players succesdfully gaining ground.
I agree that the industry will continue to consolidate. We have seen many mergers and acquisitions over 2006 and that will continue in 2007. Companies like Alimentation Couche-Tard and The Pantry, just to name a couple, are gobbling up locations in a big way. As consolidation continues and companies grow larger, this does leave opportunity for smaller chains and independents to cater to their local customer base and place a specific focus on their particular customer’s needs. Also, the importance of co-branding will increase.
Tesco’s entrance will apply pressure on some c-stores in the West, at least initially, and depending on the company’s success, could force those companies to re-examine their business models. Only time will tell in that scenario.
Look for more c-store companies to place a higher value on retail technology such as implementing labor scheduling software tailored to specific company needs. Contactless payment options are projected to make a big splash over the next five years.
It is no longer the “convenience store” industry. As an article this Christmas in the New York Times pointed out, it is “Convenience Retailing.” As consumers are more and more squeezed for time, this segment of the market is going to continue to grow. Maybe not as much in the number of locations but in size of transactions inside the store, number of visits per customer per month, and the type of customer served. The lines are going to continue to blur between c-stores, fast food, drug stores and other retailing concepts.
The emerging trends that will affect C-stores are not completely known, as our society continually evolves and sometimes the most unexpected things carry big impact (look at what Apple has done to music and may very well do to cellular hardware). The key is to stay flexible and react to the market in a timely manner.
I do agree with the above that food and products targeted to specific segments is definitely low hanging fruit. The one thing we can bank on is that time management is not getting easier. “Editing choices” as closely as possible to the segment profiles just makes sense to stay competitive…especially since this is one thing grocers and big box are coming to understand well.
Successful convenience retailers are ones that understand the customer, their purchase behaviors, and their needs. And this should tie into a strong category management plan for the retailer. It should include defining categories & roles, and then determining the appropriate assortment, pricing, shelving and merchandising strategies and objectives. How do you attract customers to your store? Once the customer is in the store, how do you get them to buy more? Which categories, segments & brands do you need to be price competitive with other channels?
With limited store space, you need to maximize every square foot, and meet the needs of the time-crunched convenience customer. It’s worth the time & investment to develop a strong category management approach — this will be a key determining factor in who “wins” in the convenience channel.
Kwik Trip, as evidenced by Steve Loehr’s comments, seems to have a good handle on the issues facing the C-store operator at present as well as the opportunities down the road. The Food Service area to me is the area to focus on. Providing customers with an array of hot/cold, fresh, appetizing food selections “to go” is a key point of difference from the normal stop for gas, lottery tickets, cigarettes and snacks. Another opportunity, both within the food-to-go arena and for other store items is the growing importance of Hispanics. Given Kwik Trip’s regional presence in Wisconsin, Minnesota and Iowa, this might not be a hot button for them right now, but in many markets C-stores have Latino store traffic above 30%. “Coke and smokes” is being replaced by “Un Jarritos y un Gansito” as Hispanics travel to factory, landscaping, construction and other service jobs in the market. We’re all aware of the projections for growth of this demographic segment, so it makes sense for C-stores to ensure that their stores are Latino-friendly in terms of staff, store set and food-to-go selection. I’ll take a carne asada burrito with extra jalapenos, por favor!
My 2 cents…. Surprising that he has not listed the corner drug store (6000+ CVS and 5500+ Walgreens) as a competitor but has listed the Tescos and the Wal-Marts.
Some Mom and Pop C-stores the world over offer at-home delivery…can and should this be replicated?
I think there is a great opportunity for convenience stores to become the consumer’s single shopping destination.
The big hurdle to online retailing is the “last mile.” Whether it is phone calls, services, or products, covering that last step from the “broadband network” to the individual consumer is always a hurdle. This is where the convenience store sits in a perfect position…they have the locations and the storage areas that allow them to hold deliveries for subsequent pick-up.
So, you go online, do all your grocery shopping, maybe even buy some general merchandise or clothing, and it is all delivered to your local “convenience store.” You then visit the store with your dry cleaning, pick up your online purchases (with the frozen items still frozen and the refrigerated items still refrigerated), get your dry cleaning from the previous visit, and add a few fresh or impulse items that you hadn’t already bought.
Now you’re set to go home with all your chores done and life is good!
I think we will see more “store-in-store” within big supermarket formats as the convenience shopping trip can be important to capture, but having an express check-out lane where the milk is still a 10 minute walk away from the front door isn’t going to cut it. I believe that this will be driven not only by retailers but by manufacturers who realize that their product category might be a focal point for the convenience store-in-store.
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Growth, Growth and more Growth! Since the c-stores offer a location advantage, they only need to discover a more efficient business model, develop better target marketing and product/SKU differentiation for their products and this will become a key component to their business model. c-stores can start challenging traditional retailing on their own turf, since they have a location advantage (and often a first to market shopping advantage because of the sheer number of customers that they service). Combine some of the unique customer service programs, digital service models, and state of the art fulfillment models together and c-stores can challenge stores in the areas of consumer electronics to hard goods to grocery.
There are too many convenience stores. The largest opportunity: try to swap locations to gain local dominance while withdrawing from markets where dominance is unlikely. Build all new locations only in the markets where dominance is likely. And think about this long-term trend: as gas mileage rises, what will you do attract customers when they don’t need to gas up so often?
Food. The number one opportunity for convenience is food. Well made, well presented, great tasting, fresh food. The other attributes, gas etc., are being picked apart by other merchants. Food is where the convenience store can make in-roads, grab and hold share while taking advantage of changing demographics.
Steve Loehr’s comments on what has made them succesful and the keys to the future all hint at one thing: the importance of really knowing their specific market, the customer make up, their product needs and supplier expertise.
This is difficult to do, given today’s limitations, when the size of a company reaches the point where the operations can no longer respond to these market-specific needs. Kwik Trip, and perhaps other regional convenience stores, may begin to play a larger role in traditional food and GM retail as they evolve from the dingy purveyors of gas and “cokes and smokes” to savvy merchants meeting specific needs on a localized basis.
I believe, as Seth Godin proclaims, that “small is the new big.” I made similar comments in yesterday’s panel discussion on “Top Ten Supply Chain Trends of 2006.” Those comments centered on what I believe to be the demise of the Mass Market in response to globalization and technology enabled marketing to ever more diverse segments of the marketplace (reference Chris Anderson’s book entitled “The Long Tail: Why the Future of Business is Selling Less of More”).
Convenience Stores such as Kwik Trip may be able to build on their smallness through marketing to their specific customer base better than any national chain could ever do. They will do this through product offering, services related to food and product that are more uniquely tailored to their market than could be achieved by larger chains.
Their advantage again is in their ability to marry cost effective operations with customer specific needs. Additionally their size allows them the advantage of speed and flexibility to try new things and to change those that don’t work.
I feel Steve Loehr is right in his comment that his industry is positioned to grow due to the demand on people’s time and need for convenience, but I disagree that it will come at the expense of the number of players. In fact, I believe that this industry is set to expand the number of participants and their reach into the total retail spending pie. Rather than a few BIG players with more stores, I think we’ll see a lot of SMALL players succesdfully gaining ground.
I agree that the industry will continue to consolidate. We have seen many mergers and acquisitions over 2006 and that will continue in 2007. Companies like Alimentation Couche-Tard and The Pantry, just to name a couple, are gobbling up locations in a big way. As consolidation continues and companies grow larger, this does leave opportunity for smaller chains and independents to cater to their local customer base and place a specific focus on their particular customer’s needs. Also, the importance of co-branding will increase.
Tesco’s entrance will apply pressure on some c-stores in the West, at least initially, and depending on the company’s success, could force those companies to re-examine their business models. Only time will tell in that scenario.
Look for more c-store companies to place a higher value on retail technology such as implementing labor scheduling software tailored to specific company needs. Contactless payment options are projected to make a big splash over the next five years.
It is no longer the “convenience store” industry. As an article this Christmas in the New York Times pointed out, it is “Convenience Retailing.” As consumers are more and more squeezed for time, this segment of the market is going to continue to grow. Maybe not as much in the number of locations but in size of transactions inside the store, number of visits per customer per month, and the type of customer served. The lines are going to continue to blur between c-stores, fast food, drug stores and other retailing concepts.
The emerging trends that will affect C-stores are not completely known, as our society continually evolves and sometimes the most unexpected things carry big impact (look at what Apple has done to music and may very well do to cellular hardware). The key is to stay flexible and react to the market in a timely manner.
I do agree with the above that food and products targeted to specific segments is definitely low hanging fruit. The one thing we can bank on is that time management is not getting easier. “Editing choices” as closely as possible to the segment profiles just makes sense to stay competitive…especially since this is one thing grocers and big box are coming to understand well.
Successful convenience retailers are ones that understand the customer, their purchase behaviors, and their needs. And this should tie into a strong category management plan for the retailer. It should include defining categories & roles, and then determining the appropriate assortment, pricing, shelving and merchandising strategies and objectives. How do you attract customers to your store? Once the customer is in the store, how do you get them to buy more? Which categories, segments & brands do you need to be price competitive with other channels?
With limited store space, you need to maximize every square foot, and meet the needs of the time-crunched convenience customer. It’s worth the time & investment to develop a strong category management approach — this will be a key determining factor in who “wins” in the convenience channel.
Kwik Trip, as evidenced by Steve Loehr’s comments, seems to have a good handle on the issues facing the C-store operator at present as well as the opportunities down the road. The Food Service area to me is the area to focus on. Providing customers with an array of hot/cold, fresh, appetizing food selections “to go” is a key point of difference from the normal stop for gas, lottery tickets, cigarettes and snacks. Another opportunity, both within the food-to-go arena and for other store items is the growing importance of Hispanics. Given Kwik Trip’s regional presence in Wisconsin, Minnesota and Iowa, this might not be a hot button for them right now, but in many markets C-stores have Latino store traffic above 30%. “Coke and smokes” is being replaced by “Un Jarritos y un Gansito” as Hispanics travel to factory, landscaping, construction and other service jobs in the market. We’re all aware of the projections for growth of this demographic segment, so it makes sense for C-stores to ensure that their stores are Latino-friendly in terms of staff, store set and food-to-go selection. I’ll take a carne asada burrito with extra jalapenos, por favor!
My 2 cents…. Surprising that he has not listed the corner drug store (6000+ CVS and 5500+ Walgreens) as a competitor but has listed the Tescos and the Wal-Marts.
Some Mom and Pop C-stores the world over offer at-home delivery…can and should this be replicated?
I think there is a great opportunity for convenience stores to become the consumer’s single shopping destination.
The big hurdle to online retailing is the “last mile.” Whether it is phone calls, services, or products, covering that last step from the “broadband network” to the individual consumer is always a hurdle. This is where the convenience store sits in a perfect position…they have the locations and the storage areas that allow them to hold deliveries for subsequent pick-up.
So, you go online, do all your grocery shopping, maybe even buy some general merchandise or clothing, and it is all delivered to your local “convenience store.” You then visit the store with your dry cleaning, pick up your online purchases (with the frozen items still frozen and the refrigerated items still refrigerated), get your dry cleaning from the previous visit, and add a few fresh or impulse items that you hadn’t already bought.
Now you’re set to go home with all your chores done and life is good!
I think we will see more “store-in-store” within big supermarket formats as the convenience shopping trip can be important to capture, but having an express check-out lane where the milk is still a 10 minute walk away from the front door isn’t going to cut it. I believe that this will be driven not only by retailers but by manufacturers who realize that their product category might be a focal point for the convenience store-in-store.