The coronavirus pandemic has created chaos and confusion across our industry. At Taiga, our mission is to bring order to chaos by identifying new trends rapidly through data analysis. We created the New Normal Newsletter to share some of the most common questions that we’ve received and the resulting analysis. In this edition we look at convenience store fuel sales.

This volume analyzes recent fuel price volatility and its impact on convenience store operators trying to maintain their profits and customers.

Observation 1: It helps to have the 30,000 foot view

What if you could expand your view of the market? It’s important to track your competitors down the road, but it’s just as important for you to see price trends occurring across your state so you can anticipate them before they hit your local area.

A Front Office Platform now allows you to track fuel price trends as they sweep across different regions of the US. These maps update on an hourly basis. Now you can see and anticipate a price restoration before it arrives locally. 

What you see here is an interactive map where blue represents price increases and red represents decreases. The timeline cis customizable to show monthly, weekly and even daily trends. The map can look at a specific region like the state of Ohio or show the entire country. This example is from the actual price restoration activity in the Midwest last week. After weeks of modest competition and high margins, the competition came roaring back to life with the restorations in June. This is literally the 30,000 footview. Using tools like this will help keep fuel sales at you convenience store on track.

Helpful Tip: It’s important for convenience store operators to realize that they don’t have to purchase fuel from their local city. Jobbers are hauling fuel across wide regions so it’s important to look at all of your options within your region. Convenience stores have many fuel options to impact sales.

Observation 2: Fuel prices are not likely to settle down anytime soon.

If there is one industry that’s seen turmoil in recent times it is the oil industry.  Oil (and fuel) prices have been affected by all these major changes:

1. Fifteen years ago the commentators told us we were at “peak oil” in the US and that US production would decline rapidly in the 2010’s.  We were supposed to run out of oil and gas and have to import it from overseas.  We even built LNG facilities so we could import natural gas.  The coming shortage caused fuel prices to go way up.
2. The US discovered fracking, in just a few years we not only became self-sufficient, we became the biggest oil producer in the world.  Prices went down again. Unfortunately the commentators kept their jobs.
3. The Covid lockdown reduced fuel demand by 60% in March. At the same time, fear in the hearts of shoppers kept them away from crowded supermarkets and big-box stores, driving some of them to shop at conveniece stores.  The people who used to stop and shop after buying fuel cut way back, but the new “grocery buyers” took their place.  The mix of products sold went through wild gyrations and convenience stores experienced many stock outages as management tried to change their ordering to match the new buying patterns.  The operators who guessed right made money – the rest waited for the return to normal.  They are still waiting.
4. Russia and Saudi Arabia couldn’t agree on a response to the lockdown and instead got into a squabble, increasing production until we had every tanker in the world filled to the gunnels anchored outside ports.  Some refineries couldn’t get enough business and closed.  The glut caused prices to drop to levels not seen in decades, but not without a lot of hair-raising moves up and down from day to day. 

So what might happen next? Recent market pricing allowed convenience stores to maintain high margins, which offset some of the pain of lower volumes.  But now competition is coming back and margins on convenience store fuel sales will probably be thin.  So what should operators do?

When prices change frequently and your margins depend on meeting the market price, you need to be aware of price changes and stay one step ahead of your competitors.

Most operators set prices by looking at certain nearby competitors.  Often, this involves a staff member driving around and scouting for changes.  If you’re operating a dozen stores, this is a lot of driving and looking. To alleviate this issue, Taiga’s Front Office Platform is equipped with a real-time competitive fuel price tracking tool.

This tool allows convenience store operators to compare each of their stores with a unique group of local competitors. They can also track groups of stores in other areas to act as price barometers.  Automated alerts are sent to specific staff members based on custom “triggers” that are set up. For example, an alert can be sent if the system detects that a single store is more than $0.03/gallon above the competitive average for the local area. Quick action preserves margins in a world full of changes and surprises. Take control of fuel sales at your convenience store with tools like these!

Helpful Tip: Another valuable bit of knowledge is up to the minute wet stock inventory figures.  If you can help your jobber make fewer stops by directing them to the stores that have the lowest inventory, you will help them operate more efficiently, and more efficiency paves the way to better margins.

Observation 3: Fuel sales at Convenience Stores aren’t as important as they used to be.

Ok, fuel sales are still important, but they have become a lousy indicator of your in-store performance. During the pandemic, new customer groups cancelled out losses from the decline of fuel buyers.  The secret to staying profitable was to avoid outages of all the unusual things that the new customers were buying.  In our next issue, we’re going to describe some of the capabilities of our Front Office Platform that will help you make stocking decisions in the face of rapid change. It’s sort of a real-time planogram for every category and sub-category in each individual store. It displays how fast items are selling and how soon you will run out.  So no more excuses for outages!

The days of using fuel volume as the key indicator of in-store sales, inventory needs, and profitability are gone in the New Normal.

In the past, there were approximate ratios that held between sales rates of various items and the volume of gallons sold. An experienced manager could tell the health of a convenience store just by examining those ratios.  If things looked “out of whack” to him, he relied on his past experiences and instincts to identify what issue needed to be resolved.  In the New Normal, the Key Performance Indicators “KPI’s” have changed.  

To determine these new KPIs, it’s time to start asking new questions:

• With fewer fuel customers, how often do I convert one of my fuel customers to make a purchase in-store?
• How can tracking “conversion rate” from forecourt sales to in-store purchase become one of your new KPIs?

Here are a few additional questions that we have heard from convenience store operators and were able to find the answers in their store data:

• How are store customer counts trending?
• What is the balance between commuters, landscapers, grocery buyers, and other consumer groups?
• What is the store’s average basket size? What is the average basket size of each of my consumer groups? What’s in the basket?
• Which products, brands, and categories are driving growth? Which are in decline?

Adapting is not easy to do, and certainly not easy to do over a Zoom session, as everyone has discovered. Every convenience store is challenged to keep up with all the changes flooding in. The operators who innovate and adapt to the new normal will win customers and better margins.

The coronavirus pandemic has created chaos and confusion across our industry, significantly impacting Convenience Store operations. At Taiga, our mission is to bring order to chaos by identifying new trends rapidly through data analysis. This new Normal Newsletter shares some of the most common questions we’ve received and the resulting analysis.

This volume focuses on what convenience store operators are learning by being forced to operate remotely in a dynamic situation.

Covid has forced convenience store operators to work remotely.  With this, operational weaknesses that were hidden before are being revealed, especially once staff had to work remotely.  The good news is that strengthening these operational processes will be helpful even when the pandemic dies down.

Observation 1: Operators have become too reliant on visits from corporate staff to discover “what is going on” at the store level.

When corporate staff were locked in their homes or forbidden access to local stores, Zoom sessions were insufficient to keep corporate staff informed.  No district manager showed up and noticed that there were only two half-gallon milk cartons on the shelf. Or noticed that the store had sold 22 in the prior six hours (eleven times higher than normal demand).  Outages were occurring or imminent for a wide variety of unusual item.  The outages were bad enough, but the fact that the corporate staff didn’t know was much worse.  Convenience Store operations were changing – how can the central staff take proactive steps if they can’t notice the problems?

This is a “process problem.”  The organization is too reliant on the good sense and deep experience of the district manager. If for any reason that district manager can’t get to the local store to gather local knowledge – corporate is flying blind with that store.  This lack of knowledge means lots of easily fixed problems will fester and reduce profits.  

Improving the process will involve:

• Identifying what a good district manager would notice and consider “important.”
• Setting up a method for local staff to routinely capture this important information.
• Establishing a “cadence” for the delivery of this information to corporate in a standard form.  Some convenience stores, for example, compile a “scorecard” of important information that is transmitted to corporate every week.
• Like all processes, management must insist on the delivery and accuracy of this information. They must also ingrain the collection of this information into the organization.  Otherwise this process will become another boring recurring management headache.
• Note that this is the kind of work computers do well, without complaints.

As we start thinking about what your district manager notices when he goes from store to store, we discover something else that has changed in the New Normal:

Observation 2: What were once reliable “rules of thumb” aren’t working any more.

For example, any good district manager used to be able to look at the gallons of gas sold at a particular store and predict accurately how much milk to order, what beer sales probably were and what the overall profit margin likely was for the week.

The days of using fuel volume as a key indicator of convenience store sales, purchase needs, and profitability are gone in the New Normal.

In the past, Convenience store operations used approximate ratios that held between sales rates of various items.  Our experienced district manager could tell the health of a convenience store just by examining those ratios.  If things looked “out of whack” to him, he probably could identify and resolve an issue.  In the New Normal, the district manager can’t rely on his deep experience to quickly assess a given store.  Instead, he needs to examine whole ranges of figures about a wide variety of items and categories to try to make sense of the changing situation.  This is not easy to do, and certainly not easy to do over a Zoom session, as everyone has discovered.

Would you like to see what our Front Office Platform can tell you about your stores and customers?

Observation 3: Timely corporate reaction, on a daily basis, to changing conditions may contribute heavily to the bottom line in the New Normal.

Suppose your new data collection processes included the ability to map continuously the unused capacity of tanks at every store. This might allow you to take advantage of temporarily discounted gas offered by jobbers, improving your in-ground costs.

Another way to improve profits on in-store items is by avoiding outages.  But the speed of change is so high in the New Normal you can’t depend on the old monthly or weekly reports.  Nor can you depend on the old tried and true ratios.  You need a new process for tracking inventory and rates of sales for various items.  So many items are in flux that you probably can’t afford to have the central office staff scanning the numbers all the time looking for indications of outages. You need to implement some kind of computerized alerts flagging hot items.

Another computerized alert that is important in the New Normal is when gas prices are out of sync with local conditions (maybe a competitor updated their pricing).

Maintenance work could also benefit from improved data collection processes.  How about Just-In-Time delivery of filters for pumps that are getting sluggish?

Every convenience store is going to struggle to keep up with all the changes flooding in, especially with management staff locked down either at corporate or home.  The organization that establishes processes to routinely detect important changes will win the competitions for new customers, full stocking and better margins.

The coronavirus pandemic has created chaos and confusion across our industry. At Taiga, our mission is to bring order to chaos by identifying new trends and determine what is driving them through data analysis. We created the New Normal Newsletter to share some of the most common questions that we’ve received and the resulting analysis. This week are are looking at how the COVID lockdown impacted convenience store alcohol sales.

In Volume 2 we showed that while fuel sales and fuel customers are down by 50%, there is a new type of customer, the “Grocery Buyer”, filling the gap. To read more about the Grocery Buyers, click here to access Volume 2 of the New Normal Newsletter.

In this week’s edition, we focus on explaining the changes taking place within alcohol sales. Three different operators reported that alcohol sales were up but they were getting confusing signals from inventory counts and out of stock items. Why were some of their best selling products stacked high in the cold vault while they sold out of Craft Beer?

We began our analysis by feeding raw sales data into our Front Office Platform which confirmed that alcohol sales have increased substantially since the Lockdown, skyrocketing 14 – 26 percent. Next, we drill down into the categories, identify new trends, and the drivers behind them.

Observation 1: Alcohol sales are up, however the most explosive growth took place in unexpected subcategories.

We knew from last week’s Newsletter that the mix of customers has changed since the Lockdown and the addition of the Grocery Buyer has been disrupting the status quo.  When your customer mix changes, so do the products found in the “market basket,” including alcoholic beverages.

While we need to keep in mind that there are seasonal variances that have nothing to do with the Lockdown, here are some of the sales trends that appear to have been caused by the change to the customer mix during March and April:

• Flavored Malt Beverage sales up 28%
• Craft Beer sales up 22%
• Imported Beer sales up 28%
• Premium Beer sales up 7%
• Liquor and wine were increasing rapidly as but starting from a very low volume

These trends explain why the inventory counts and outages were confusing: the new customers are increasing the sales of higher-end beverages like craft beer while traditional beer sales only grew by 7%. Convenience stores need to adjust their inventory to meet this new mix, or their shelves will be overstocked with some items and out of others. The fact that these rather significant changes were apparent in just a few days means c-store operators can’t afford to wait for end of month or end of quarter reports – they need to check their shelves now and adjust to the New Normal quickly.

Would you like to see what our Front Office Platform can tell you about your stores and customers?

Observation 2: There have also been significant changes to alcohol buying patterns.

For example, in the past, alcohol sales peaked on both Friday and Saturday. They flatten Sunday – Monday and then moderate Tuesday – Thursday. New Normal alcohol sales levels still peak on Friday, are modest on Sunday, and up close to 20% on weekdays. It’s important to understand these new buying trends when you are running promotions or doing an in-store display.

Conclusion

The analysis of alcohol sales brings us back to the Grocery Buyers yet again. Last week we estimated that Grocery Buyers represent up to 25% of all in-store sales revenue. We also believe that they are responsible for most of the growth within the atypical subcategories like Craft Beer, and Wine. In an upcoming edition of the NNN we will do a full “market basket analysis” of the Grocery Buyer.

This change in Convenience store alcohol sales due to Covid provides operators the opportunity to take advantage of a nice increase in alcoholic beverage sales brought on by the Lockdown. They have captured a new type of customer, the Grocery Buyer. Operators can keep the Grocery Buyers for a long time but they will need to serve them by stocking shelves with the right product mix. This requires constant attention to the sales data on a weekly if not daily basis. Pay attention to your new customers and you will be able to keep them long after your fuel customers return.

Our casual conversations with convenience store operators indicate some tremendous changes taking place in the industry.  They reported that fuel sales (and customers) are down 50% or more yet higher margins have been offsetting. The in-store sales driven by fuel customers must be down accordingly.  Yet most in-store sales seem to be down only 20% and in some stores in-store sales are actually up.  Certain products, such as self-serve hot foods and soft drinks, were shut down by law in some locales, so this cut off another group of customers.  And while most stores sold out of the expected items, such as disinfectants, hand sanitizer, wipes, toilet paper, etc., they also experienced a whole range of stock outages on unusual items.

Clearly convenience stores are getting a lot of new customers who are balancing out the big reduction in traditional fuel customers.  We decided to use our Convenience Store analytics to make sense of all these changes.  Our first conclusion was:

Conclusion #1: Convenience stores have a new customer type: the Grocery Buyer or GB

Literally overnight, convenience stores everywhere have gained an important new group of customers due to the coronavirus pandemic. We refer to such a customer as a “Grocery Buyer” or GB.  GBs are now visiting your store to purchase items that they used to buy at a grocery store. GBs are apparently choosing to shop at convenience stores because they are less crowded, more convenient and appear to reduce the potential exposure to Covid19.

We used our Front Office Platform to analyze data we classified into four buckets:  urban, highway, residential, and rural. We then focused on several NACS subcategories of traditional grocery purchases. Taiga’s Convenience Store analytics provided by our Front Office Platform immediately began to provide useful insights:

• From the 30,000 foot view, we saw a clear upward trend in the sale of “grocery items” from month to month. This trend was so apparent, we decided to dig deeper and determine exactly what’s driving it. 
• When we took a closer look at the NACS categories of edible and non-edible grocery items, by revenue or volume, both approaches gave us the same result: increased sales of grocery items and paper products were making the biggest impact. We also determined that the following subcategories were also key contributors: Condiments, Pet Care, and Cereal. Click on the image below to see the full-size version.

Quick Tip:

Even though self-serve roller dogs were discontinued at some locations because of regulations, customers are purchasing their condiments at convenience stores. Given this, there is a sales opportunity if you have prepackaged hotdogs and buns available.

• Focusing on paper products; it is clear that local residents are now shopping at convenience stores for necessities including; paper towels, toilet paper and kleenex. This spurs the question: what else could be stocked that these customers might buy? Are there other related items like personal care or household cleaning products these customers would buy if they were available and prominently placed with these items? 
• A more thorough market basket analysis of these trends would probably identify some additional new kinds of buyers and produce numerous opportunities to cross sell, improve margins and maintain loyalty among these customer types. Click on the image below to see the full size version.

• When we focused on the edible grocery category, we were surprised to see that the leading product was Ramen Noodles. A number of canned and packaged prepared foods and soups – things that used to sell like snails followed closely behind. This trend was most prevalent on weekdays at urban and suburban stores. Are there other related items like microwave meals these customers would buy if they were placed in proximity to these items?

Conclusion #2: Grocery Buyers can be converted to permanent customers

The pandemic is already starting to lift.  Fuel sales are drifting upward.  How long will you be able to retain the GB’s?

What can you do to make them permanent?

• The fear of exposure to the virus won’t be going away soon, so you want to make your convenience store an oasis of safety compared to the traditional grocery store.
• Make sure employees wear masks and do all the right cleaning (they will want to do it right for their own sake)
• But you need to do this work in a visible way, to give the GBs assurance you are clean.  Have signs where staff indicate when they last cleaned the bathrooms or the door handles, etc.  Have a guy offer to spray the handles of the shopping basket.  Make the GB aware that you have the virus under control in your store.  Don’t just be clean, give the impression of being clean.
• Have in stock what they want to add to the basket.  Don’t disappoint them.  Track down all your unusual outages and treat them as opportunities.  If the GB discovers, that you have a lot of what they need, they will keep coming back because you are convenient.
• GB’s won’t come back if you overprice their products. Many of these new high volume items used to sit on the shelves. Now you need to shave your margins or you will drive the GBs back to the big grocery stores.

 

Situations like the pandemic are once in a lifetime occurances.  But what if you could get Convenience Store Analytics at your fingertips whenever something unusual occurred?  This is now possible with Taiga’s Front Office Platform.  Contact us to learn more.

Here at Taiga, we’ve been working long hours since our founding last June to accomplish a single goal: The launch of our Front Office Platform, the first real-time data analytics platform purpose built for the Convenience Store Industry.  We were sure that a 5 minute demonstration at the M-PACT Conference would be enough to fire your imagination about how your operations could become more efficient and profitable overnight.  We expected our Front Office Platform to takeoff at the M-PACT Conference and instead we got: THE LOCKDOWN.

So, like you, we’ve been thinking. The LOCKDOWN won’t simply revert back to 2019 in a few weeks or months and allow us to pick up where we left off.  In fact, many things have changed and some of those changes are permanent. Together, we all need to adapt to the “New Normal” which will take some time and a massive amount of collaboration across the industry. To do our small part, we have decided to publish a free weekly newsletter where we share the new trends that we identify and their impact on convenience store operations. We have decided to call this the New Normal Newsletter.

The Topic of this week’s New Normal Newsletter comes from a recurring conversation that we have had with several convenience store operators. I wouldn’t be surprised if you have had a similar conversation so please read on…

“Fuel sales used to be a reliable indicator of how in-store sales were performing and depending on which source you use, fuel demand is down at least 50% across the US. Surprisingly, since the Lockdown began, most of my stores have only seen a decline in retail sales of 20%, and, there are a handful of stores that are actually outperforming their numbers from last year. It’s like my customers changed overnight along with my top selling items. What is driving these changes?”

We volunteered to use our Front Office Platform free of charge to investigate. Our Front Office Platform is a one stop shop for convenience store data analytics. To keep the process simple, we used sales data from 4 types of stores: urban, highway, residential and rural. Once the data was uploaded, Taiga’s Front Office Platform immediately began to provide useful insights:

Key Findings

 –  Customer Segmentation has changed at all 4 categories of stores. At the urban stores where “coffee commuters” were the largest segment, local residents have replaced them. **We’re planning to do a full market basket analysis in a future newsletter. No matter what we find, it’s clear that Fuel purchases are no longer the key driver.**

 – Age restricted sales are up across the board. In Addition, wine was the fastest growing subcategory of alcoholic beverages and the margins on wine were among the highest.

 – The perception of cleanliness and a lack of lines is driving grocery store customers to visit c-stores more often. Keep doing the little things that make your store clean and safe: good lighting, hand sanitizer stations, plexiglass shields etc.

 – General Merchandise sales were up across the board. This is another indicator that customers are going to a convenience store rather than a large grocery store.

 – Non-edible grocery sales were also up. Some categories were up 250% so it’s critical to track the sell-through rate of these items to avoid being out of stock. OTC pain meds like Advil, were among the top sellers in this category by volume and profit margin.

 – Propane sales were up by an average of 500%. While this trend was consistent across February and March, we’re watching it to determine if it is a one-time demand spike caused by customers “stocking up” or if demand will continue because customers are using more propane at home.

The start of the pandemic provided these simple data analytics for conveience stores, but a lot has changed since then.  Imagine what you could learn from Taiga’s Front Office Platform now!