The stores of today are definitely not a reflection of those from the past, and it’s a sure bet that the image of the c-store a decade from now will be quite different than current operations.

“C-stores 10 years ago didn’t sell bottled water, and they still made money selling gas. In a few short years, that dynamic has changed. Packaged beverages are now the number-one profit driver in this channel,” says Jeff Lenard, director of communications at the Alexandria, VA-based National Association of Convenience Stores (NACS).

In today’s tough economy, retailers are positioning their stores to better compete with other channels by creating destinations, rather than a place to stop for gas.

“Stores have moved from being destination stops for gas to being destinations for other consumer needs. Success is about the ability to draw customers into the store and increase sales,” says John Scardina, vice president, merchandising at Eby-Brown, a distributor based in Naperville, IL.

Columbus, OH-based TNS Retail Forward, a consulting market research company, produces an industry outlook for c-stores each year. According to Jennifer Halterman, senior consultant, some of the biggest challenges this channel is dealing with are low fuel margins, high credit card fees and increasing competition from alternative gas retailers.

Experts say these issues will directly affect innovations and technology in this retail channel.

To compete against other retailers, the key to success will be to focus on convenience. “Convenience has to remain c-stores’ objective,” Halterman says. “Still, the most successful players will stand for something more than convenience by positioning themselves as a destination stop. They will focus on foodservice, healthy options, private brands and more services, like ATM kiosks and financial services. C-stores that can reduce their dependency on the low margin fuel business and go after other categories can better position themselves for the future.

Updated offerings
According to Rob Razowsky, executive director and COO of Rmarts, a 22-store chain based in Deerfield, IL, most of the convenience operators who will survive long-term will be innovative with a broader selection of options for customers. “In the future, we may see more variety in the types of food served and a greater ability to offer take home and carry out for meal replacement,” he says.

Rather than gas stations that sell food, c-stores will increasingly become known as restaurants that sell gas. “People now expect good food at c-stores,” NACS’ Lenard says. “Gone are the days like depicted in National Lampoon’s Vacation movie, where Chevy Chase says he is so hungry, he could eat a convenience store sandwich.”

Lenard recently spent time touring U.S. c-stores and noted a number of unique concepts, including Nexstore MarketPlace’s on-site sushi chef and Oklahoma City’s Pops store, which offers more than 400 types of soda, in addition to a soda-ordering kiosk.

“Sheetz and MAPCO Express offer sandwich ordering at the pump, where food is ready after the tank is filled. This gets people into the store, and that’s what it’s all about,” Lenard says.

Stores with on-site food preparation also are now offering touch-screen order stations both at the pumps and inside. “Yet, the real technological advances in the coming years will be behind the scenes in terms of foodservice equipment innovations and store management systems,” Scardina of Eby-Brown notes.

Forward-thinking retailers know that it’s not just about the offerings, but how stores go about putting together a foodservice program.

Ron Coppel, vice president, business development at Eby-Brown, says both fast and fresh food have the potential to return significant margins to operators, but if these programs are not managed properly, they have the potential to deliver equally significant losses as well.

“Foodservice in c-stores used to be an occasional grab-and-go item. These days, c-stores must be in foodservice to compete for the attention of the consumer and draw them into the store,” says Sharon Kuncl, vice president, merchandising, foodservice at Eby-Brown. “This area has changed from an after-thought to a necessity in the c-store.”

Many predict foodservice in the convenience channel will become even more sophisticated and continue to evolve, focusing more on day part merchandising.

According to Bill Bishop, president of Barrington, IL-based consulting firm Willard Bishop, “Taking their cue from quick-service restaurants, leaders in the field like Wawa organize their foodservice programs by day part. Looking ahead, we can expect to see more of this in the c-store channel,” he says.

David Bishop, Bill’s son who is the managing partner of Balvor, a Barrington, IL-based sales and marketing consultancy specializing in the c-store industry, says foodservice is still evolving. “Retailers are still experimenting to find balance in offering customers a fresh food product,” he says.

C-store retailers like Quik Chek, Sheetz and Wawa are now offering services that have been commonplace in quick-service restaurants. “Sheetz now has a sit-down concept, while Wawa is testing a drive-thru prototype. These stores are experimenting with these concepts to see what the market accepts. By doing this, they are pushing the envelope in terms of what it means to be a convenience retailer,” David Bishop says.

This will help carve a path for other stores in the years ahead.

In addition, with foodservice margins double those of packaged goods, stores are looking at these programs as differentiators. “It is more about these items being prepared on-site, rather than prepackaged foodservice items,” David Bishop notes.

Along with developing signature foodservice programs, c-stores of the future will focus on healthy items geared toward the younger generation.

According to Jack Cushman, vice president of foodservice at Nice N Easy Grocery Shoppes, the New York State chain is differentiating itself from its competitors by making it easier for its customers to make healthy food choices.

The stores recently began offering fruit cups that are prepared on location. “These offer a decent margin, add value to the fruit and we’re selling a lot of them,” Cushman says. The sites also are incorporating fruit into other offerings, including parfaits.

Another healthy initiative was the recent redesign of Nice N Easy’s whole grain roll, part of its sandwich program. “Before the redesign, the whole grain roll was only 5 percent of our sales. After making the roll darker, adding honey and renaming it ‘honey wheat roll’, sales for this bread have increased to 40 percent,” Cushman says.

The stores also have updated beverage programs that dispense hot tea in the same types of units that brew coffee. “We are making it easier for consumers to make healthy choices, while differentiating ourselves from our competitors,” Cushman explains.

New innovations
Although it is difficult to predict what recent innovations will be a major part of the c-store industry in the future, there are some newer developments that experts say look promising.

NACS’ Lenard predicts that, in terms of fueling, there will be more gas and diesel grades offered in the future. “For instance, Pearson Fuels in San Diego sells eight different types of fuel, including electricity and biodiesel,” he says.

In terms of prepared foods, as more c-stores invest more heavily in their foodservice programs, some predict central kitchens will figure more prominently in their plans. Early evidence of this trend is the new $46 million kitchen facility recently completed by Sheetz. Called Sheetz Brothers Kitchen, the facility will be used to make ready-to-eat food products, including bakery and grab-and-go lines that will be delivered fresh daily to the company’s 350 locations using a dedicated truck fleet.

Recent innovations in the grocery channel may have an impact on c-stores in the future. For example, Piggly Wiggly Carolina Company, based in Myrtle Beach, SC, has used modern technology to restructure the traditional grocery store model. Advanced refrigeration is used in these prototype stores to arrange food items based on how customers intuitively look for them.

D’Agostino’s, a supermarket chain in New York, recently announced a partnership with Ikan to provide its customers with a Wi-Fi enabled device. This will give consumers the ability to create their shopping list from home, send it to their local store and have their grocery order delivered at a designated time. The Ikan appliance can be mounted under cabinets or on the wall for easy access.

Martin’s Supermarkets, in partnership with MyWeb Grocer, recently launched a new online service that provides an interactive weekly circular, enhanced e-mail, Recipe of the Day and other services to better manage its loyalty and club membership. This is designed to help the retailer communicate to specific customers about promotions and events, while also improving customer relationship management.

Marketing in the millennium
As technology becomes more innovative and sophisticated, experts say marketing programs and resources will change and adapt at the c-store level.

According to Bill Bishop, there are categories drifting into true convenience purchasing. “Supplies and accessories, like batteries and other things people use all the time, are important categories and new areas of emphasis. There also is a more explicit connection between inside sales and merchandising at the pump. Signs and pump talkers remind customers to bundle their purchases. Loyalty programs also are growing. These have many implications for in-store merchandising,” he says.

In addition, electronic media, including message boards, video screens and other communication vehicles, are becoming more commonplace both at the pump and inside the store.

“We will see many c-stores turn into scaled down grocery stores, with more perishables,” Razowsky says. “In addition, loyalty incentives and rewards will play a bigger part at both the pump and register.”

A growing area of focus, and one that is expected to become more prominent for c-stores in the future, is private label products. This provides retailers with the opportunity to create an identity inside the store and gives wholesalers a chance to help smaller retailers capitalize on this profitable segment.

“Retailers are creating private label programs to find alternative sources of profitable growth to offset gas price increases and credit card interchange fees,” says David Bishop. “Retailers that aren’t able to develop proprietary brands may turn to wholesalers for alternative products that can help strengthen their brand portfolio. There is a growing awareness for the benefits associated with private labeling and determining what strategy is right for the retailer.”

In the years ahead, c-stores will continue offering value-priced promotions during difficult economic conditions. David Bishop says two-for-one offers that reward shoppers for buying more have become widely used. “Retailers are doing this to entice shoppers to buy at a better price per unit. Over the last year, there has been a shift from simple price reductions to value-based promotional strategies that don’t discount a single item, but offer increments off existing purchases. How retailers do this is predicated in how they mine their data to see what customers are buying and in what combination. An example of this is the correlation between coffee and mint sales. In the coming years, retailers will have a greater ability to access sales data and connect it with customers,” he says.

Future c-stores will be more about wowing customers. “Customers want stores to understand them and care for them. C-store retailers that do this will stick around,” Lenard says.

Razowsky agrees, saying he expects to see a leaner and meaner c-store industry. “In the years ahead, these stores will run more efficiently due to economic pressures,” he notes.