Convenience Store Sales: What is on Your Customer's Shopping List?
By: Jeff Weghorst, director of merchandising at dunnhumbyUSA. Original Post Located Here.
One of the primary drivers behind a customer’s willingness to transact with a retailer is product selection. If a customer does not encounter an appealing assortment of products in-store, they are highly unlikely to engage even once with the retailer, and much less likely to become a loyal customer. A customer-first product assortment can often serve as the foundational element of a relevant shopping experience, driven largely by a deliberate and strategic collection of offerings.
For the c-store, where additional factors such as fuel brand, can be a key differentiator for prospective customers, relevant assortment can serve as a key element of cultivating a loyal customer base. Moving away from the traditional thinking: “We have something for everyone,” today’s c-store assortment strategy should tell a different story: “We understand what you need.”
Building an assortment to satisfy the needs and wants of the customer is not as simple as just choosing the most popular products available with the highest sales. In many cases, there are thousands of products to choose from, with hundreds of new items available each year. Certainly, a retailer should carry products that sell, but only considering sales does not ensure that the needs, wants and expectations of the customer will be met.
There are three key elements to achieving an assortment that will both delight consumers and ensure that business goals will be met:
1. High Performance
The assortment must include high performing items, but should be defined here as more than just sales. There are several customer-based performance criteria that must be satisfied:
- Assuming that the retail strategy is not 100% niche, items that have broad appeal are essential to generate in-store traffic.
- Keep items on the shelf that maintain a loyal following and are often repeat purchases. Product loyalty engenders retailer loyalty, and the consequences of not having these items available can be extremely damaging.
- Carry items that are favored by the store’s best customers. If deciding between two products that perform relatively similarly, reward the store’s best customers by keeping the item that they consistently prefer.
Shopper loyalty data is the best resource to measure performance at the item level and offers an optimal lens into how consumers interact with each individual product. In other cases, additional data sets (e.g., survey research, online click-through data) are useful in filling in these customer insight gaps.
2. Coverage of Consumer Needs
The mix of items offered must meet the varied needs of the c-store consumer. Some buyers seek convenience while others prioritize value. And still others have specific brand preferences. An in-depth understanding of the customer, their need states and usage occasions is essential. This can be achieved by a variety of means, either through survey research, or better yet, an examination of actual consumer behavior from shopper loyalty data, which provides the most granular understanding of all purchase patterns and needs. Often a combination of both provides the most complete picture.
Typically, research in this area can identify customers’ key needs through an analysis of a product’s substitutability. Products that are not consistently preferred by the same customers or for the same usage occasion are thus differentiated- they are resonating with different customer needs. In contrast, products that are favored by the same customers for the same usage occasions have a higher degree of substitutability and are less differentiated. At dunnhumby, once this measurement is calculated and then examined in the context of the customer, we have found this to be a powerful tool in determining which products are duplicative and which deliver to specific needs of the customer. The need to avoid duplication is particularly heightened in c-stores more than traditional grocery, given the limited shelf space available.
3. Relevance for the Right Consumer Targets
A relevant assortment for all consumer types can mean making sure that there is a variety of targeted options on the shelf. It can also mean catering and customizing the assortment by store or transaction point. For example, a customer-centric retailer will offer and display more upscale products in stores that serve more affluent consumers and feature more value oriented products in stores that serve value consumers.
Customer-first retailers approach product assortment as a form of storytelling, as a way to thoroughly engage and personalize the shopping experience for their most loyal customers. This is an impossible task to undertake without a complete view of the customer. Retailers must learn to disregard their assumptions about who they think their loyal customers are and what they think they want. Further, sales figures are not the only indicator of a product’s performance. As a retailer begins to study and understand who their most loyal customers are and what they need, product assortment decisions become more effective and successful. This model will help retailers achieve not only greater cross-category alignment but ultimately, a more loyal customer base.
Jeff Weghorst is director of merchandising at dunnhumbyUSA, responsible for developing customer-driven assortment strategies and promotions for dunnhumbyUSA’s engagement with The Kroger Co. He played a critical role in the development and recent launch of dunnhumby’s best-in-class assortment solution that allows both retailers and consumer packaged good companies to quickly identify best performing items across categories of products and consumer groups. Weghorst started his career at The Nielsen Company, where he spent nearly a decade in analytical services, delivering strategic insights in assortment, pricing & promotion and marketing models to clients.