Inventory, Pricing and Promotion Strategies for the New Convenience Store

In the fall of 1960, The Andy Griffith Show on CBS introduced Andy Taylor and his lovable sidekick Barney Fife to American audiences. Like many U.S. cities at the time, the tiny, fictional town of Mayberry, North Carolina prominently featured a local market or general store called Crowley’s Grocery where residents could pick up their essentials.

Over time, these local, often family-owned stores (let’s call them community stores) all but disappeared from the U.S. landscape, replaced by big-box options like Wal-Mart. But in recent months, the community store has been making a comeback. Only, it has a new name: convenience store.

The new community store

A year ago, if you had asked consumers would they choose to buy their toilet paper from a convenience store, the answer probably would have been no. Recently, all of that changed.

Convenience stores quickly became the go-to place for consumers to pick up everyday items without exposing themselves to long lines and throngs of people at larger stores.

On Saturday, June 27, 2020, the U.S. reported the highest number of new COVID-19 cases in one day, according to the Centers for Disease Control (CDC). For the foreseeable future, convenience stores are continuing to fill the role of the new community stores. Here are a few things operators should keep in mind.

Know what your consumers want

Several years ago, PDI released Enterprise 8.0, which, among other things, offered an ordering and inventory system complete with forecasting and inventory management tools based on everything from historical trends to basket-level transaction data.

While some c-stores have been using basket-level data in various ways for years, the COVID-19 pandemic highlighted the value of that data to deliver actionable insights into what consumers want and need in unpredictable times. These insights not only connect to your ERP system to ensure you have the right inventory in your stores, but they can also inform your loyalty-specific or non-loyalty promotions strategies.

For example, here’s what the data from Insights Cloud is telling us. Since the pandemic began, we’ve seen a decrease in immediate consumption products and an increase in future consumption products (i.e. center of the store items like bread, deli meat and multi-pack items). Look at the data your system provides, and make sure your convenience stores are stocked accordingly.

Pricing to help manage supply chain pressures

Often, consumers who come to convenience stores aren’t necessarily looking for a bargain. That’s not to say that convenience stores can’t entice value consumers through offers and promotions (we’ll get to that later), but the primary focus is convenience. In this case, a higher premium is placed on less exposure to a virus we’re still learning about.

Even when you know what consumers want, you can still steer them to items, or at minimum, item sizes, that will take into account your inventory constraints. For example, at the height of the pandemic, perhaps there weren’t a lot of bulk packages of toilet paper. In this case, you may consider charging more for a 16-pack because they’re harder to get. On the other hand, a 4-pack of toilet paper may be the bargain item since it is more readily available. Not only does this help ensure you are meeting the need of the bargain and bulk consumer, but it also alleviates some of your supply chain pressures during unreliable times.

Tie promotions to loyalty

Typically, many retailers without loyalty programs will use the fountain drink category in the summer time as a destination for consumers. It’s not uncommon to see all-day promotions for fountain drinks priced at .99 cents or .79 cents a day to help drive traffic.

Right now, however, that tactic is probably not working very well. According to insights from our consumer behavior reports, fountain drinks and prepared foods have been hit very hard, and they’re not rebounding at the same rate as other categories. This is made even worse by the fact that trips to convenience stores are still down compared to last year. So, what can convenience retailers do?

Having a bundled price point that includes two or three items has been very successful for convenience retailers over the years. And it continues to be a successful strategy to drive incremental purchases during the pandemic. Tying this promotion strategy to your loyalty program increases its value by delivering data that enables you to personalize your marketing efforts and offers to the consumer.

Additionally, concentrate your promotions where consumer spending is most active (e.g. alcohol, tobacco products, chocolate, etc.), or broaden your promotions to include items you may have historically neglected (e.g. center of the store items).

Quite a few smart people have mused about whether the changes we’ve seen in consumer behavior are permanent. Only time will tell. However, one thing is certain. For now, convenience stores must continue to invest in the right tools to gain the insights they need to provide the experience customers expect.

You can thrive in today’s digital economy. Contact us today, to learn how we can help you transform your business.