Convenience Matters Introduction (00:06):
[Music] You’re listening to Convenience Matters brought to you by NACS. Whether it’s for food, fuel, drinks or snacks, about half of the U.S. population shops at a convenience store every day. We’ll talk about what we see at stores and what the future may hold for our industry.

Jeff Lenard (00:24):
Core sales dollars are the easiest thing to measure in terms of looking at a store’s success, but it’s only one part of the equation. What are the other parts? It’s what is the path to purchase at stores? How did somebody decide to get to your store? How did somebody decide to get out of the car and how did somebody decide to purchase those items? And even more importantly, what were the lost opportunities when they came in to buy something and it wasn’t there. Will they come back, how can you fix that? That’s what we’ll talk about today.

Jeff Lenard (01:00):
Welcome to Convenience Matters. My name is Jeff Lenard with NACS.

Stephanie Sikorski (01:03):
And I’m Stephanie Sikorski with NACS.

Jeff Lenard (01:06):
Today, Stephanie and I are going to talk with Leroy Kelsey. He is director of research at NACS, also, and we’re going to talk about those two big issues. What are the big trends related to how people shop looking at , which is the program that Leroy oversees and how can we ignite the fan base? How can we get people excited based on what we’ve heard in all these Convenience Voices intercepts. So Leroy, welcome to the program. And let’s just start off by give us an overview about what is Convenience Voices. It’s a relatively new program at NACS.

Leroy Kelsey (01:42):
Yeah, absolutely. Jeff and Stephanie first, thank you for having me today. It’s a pleasure to be here. If we look at 2020, really, that was a monumental year for our channel in terms of how shoppers behavior evolved. If we think about some of the challenging issues we faced. So thinking about social distancing, thinking about shoppers demand for less friction people were looking for ways to connect with products with more ease and more speed than ever before. And for these reasons it’s really what led NACS to lean into mobile technology. We went out and basically contacted our shoppers through mobile phones and conducted about 7,000 mobile intercepts across the U.S.. The key to this is if you think about the immediacy of our occasion, we have about a little over three minutes to give feedback from the shopper in terms of their overall experience in terms of their product perception and to capture things like product. And that’s one of the things that’s really unique about our channel. if you think about the grocery channel, for example, the average trip is about 41 minutes. So we have about one 10th of the amount of time to really get that moment of truth, read from shoppers in terms of, how we’re doing in our stores. And so that’s really why we implemented a mobile technology and that’s why we’re so excited and feel that NACS Convenience Voices is so timely.

Stephanie Sikorski (03:34):
So Leroy, I love how you referred to it as moment of truth. And I think that that’s so important. I think about myself as a marketer and we’re constantly, we’ve got the surveys and post event questions, but the moment of truth truly speaks to you. Like, what’s great about what you all are doing with Convenience Voices, because you’re truly getting the responses unvarnished from folks in the parking lot or as they’re sitting in their cars. And that’s what I think is so unique to this program too.

Leroy Kelsey (04:05):
Yeah, so absolutely. Stephanie, I think you hit the nail on the head in terms of what’s unique about our channel. So our average occasion starts and ends before four minutes is complete, usually around three, between three and four minutes. And if you think about some of the other channels grocery in particular usually takes about 41 minutes to complete that type of shopping occasion. And so time is of the essence. And so when we talk about the moment of truth in terms of retail it’s really key for us to get that feedback from shoppers and to do it using technology.

Jeff Lenard (04:49):
And I like the moment of truth because so often when we get surveys, when other other industries, you’re either really happy with something and you forget about the things that okay, I got what I wanted. And then you kind of gloss over the fact that you didn’t get this, or you didn’t get that, or you just had such a bad experience. You want to tee off on them, but allowing it to be on the phone in the moment you just get more gray in the middle where it’s just more of a discussion of, “hey, here’s what I wanted to get.” “Here’s what I didn’t want to get.” And, at our recent State of the Industry Summit, you, Leroy, you went through all these trends that are related to some of the things that Convenience Voices capture. And in some of those things, we’re talking about the huge difference in how people are shopping now much less in the way of commuters, much more in the way of people using us at the end of the day, instead of start of the day. Now part of that is from existing research that, that your team does, but part of that’s from the Convenience Voices, isn’t it?

Leroy Kelsey (06:03):
Absolutely. Jeff. So one of the things that we asked shoppers is about the type of trip that they’re making and what we found is you’re exactly right. So shoppers are really shifted in terms of taking short, local trips think about going out to connect with essentials and staples and then stopping in with us along the way. So, really when we think about the fact that shoppers have, in some cases opted to shop a smaller box, so not really wanting to be around public places, trying to avoid crowds and really taking the opportunity to come in and visit with us. We’ve found that our basic occasions that could be classified as quick trips to pick something up, have really doubled year over year. So when you think about shoppers kind of staying within their orbit and staying within their local neighborhoods we really benefited from our corners, our great locations, and being the closest to the community

Stephanie Sikorski (07:08):
And Leroy, one thing that I’m curious about kind of piggybacking off of some of the trends here and in some of the surveys and things on my end, talking with folks just about like how we’ve shifted as an industry, right? Like, I mean, at NACS, we’re always talking about being forward looking and what’s around the corner. Um, what, I don’t think any of us expected was the trends that we were predicting seven, 10 years down the road happened in seven to 10 months instead of years. Um, and one of the things that I know your team’s been talking an awful lot about is last mile. So how, how has that changed and what have we heard from consumers as we’ve talked to them about just those, those quick trips, like you said, the in and out, but even from you know, curbside delivery and other?

Leroy Kelsey (07:58):
Absolutely. Stephanie. So one of the things that we asked our shoppers was we tried to inquire about their interests in terms of last mile fulfillment. And we know that 75% of our shoppers have voiced that interest. Um, one of the things that’s going to be absolutely essential as shoppers look for more ways to connect with the convenience channel in a low friction way is developing those services across our enterprise. I think that you spoke about shortening the development curve and it’s somewhat been the silver lining of the pandemic. If you can even identify a silver lining is a fact that it’s really forced us to kind of lean into technology and to develop some of those services and products and ways for shoppers to connect with product in a faster way and more thoughtful way.

Jeff Lenard (08:59):
I was going to say one, one thing that really impressed me about your State of the Industry presentation, as we kind of look towards talking about igniting the fan base was the discussion about lost opportunities. And there were two things that, that you talked about that I think were really profound in terms of, yes, retailers found some solutions related to last mile, and we had a positive in store sales year, which was quite remarkable considering what last year was like for retail as a whole and the economy as a whole, but the two lost opportunities or opportunities. I’ll just phrase it that way that you talked about is one is 31% of our customers went to a QSR within half hour of going to our store. The second one was that annually, our missed opportunities are somewhere on the level of 4%, meaning if I understand it correctly, one out of 25 people that came into the store had an experience where they wanted to get something else. It wasn’t to their liking, or it wasn’t available last year, that missed opportunities went from 4% to 18%. So looking at both those numbers 31% went to QSRs after visiting us and 18% lost opportunities. What are the big takeaways for retailers in that?

Leroy Kelsey (10:29):
Yeah, Jeff, I think you just touched on two of the most significant opportunities that we’re going to see moving forward and convenience. Um, I think it’s pretty easy to make a case for high-margin food in terms of being the future of convenience. If you think about foods, committal rate three define meals and addition to any meals, stand-ins, and meal bridges that we can count. One of the things that we’ve seen along with the shift in terms of shoppers moving more towards quick trips to pick something up is we’ve also seen a shift in terms of more evening traffic. The morning commuter has always been a shopper segment that we tended to dominate in. And if you think about the overall impact of unemployment, we’ve seen a shift of more shoppers and essential workers and busy families coming in to stop with us in the evening day parts.

Leroy Kelsey (11:36):
And so if you think about the fact that those shoppers are also looking to connect with food, looking for substantial meals, looking for ways to provide food to the family and stopping in because we’re convenient in terms of our corners. Um, this is a huge for us and we noticed shoppers are coming, looking for substantial meals because they’ve, we’ve seen it over the years in our research and we saw it again and Convenience Voices. When we conducted surveys last year, about one out of four of those shoppers said that they needed to connect with a substantial meal to either take home, to share with others or either to consume for themselves. And so when we look at that, we know we have an opportunity there to sell, but we also found out when we asked shoppers whether they intended to buy fast food at another location within the next half hour. Now, keep in mind, these shoppers were onsite with us choosing to come in and visit with us either for some product or service that they thought was worthy of their time to stop in. Um, those same shoppers indicated about one out of three or 31% more specifically, just to dovetail on what you shared, also indicated that they did intend to buy food fast food somewhere else, or with one of our competitors. That’s a significant opportunity.

Stephanie Sikorski (13:05):
So my back of the napkin math is not very good, certainly on the fly, but if we’re talking about 31% doing that, that’s quite a lot of dollars that are up for grabs for our industry.

Leroy Kelsey (13:19):
Absolutely. If you think about 165 million transactions per day, and let’s say to just 10% of that is foodservice. We’re talking about billions of dollars in terms of the overall opportunity and more significantly, what does that say about our brand equity and our stickiness in terms of our loyalty? Um, if we’re failing to meet shopper needs.

Stephanie Sikorski (13:46):
So that’s a great segue for one of the questions that I had here that I wanted to ask you, we’ve, I’ve heard food service like repeatedly. So I mean, anyone listening right down foodservice, right. But what are the other big opportunities when we think about categories, right. And so much has changed over the last 12 months plus, but are there other big opportunities for what you all are seeing in the data, what you’re seeing in talking directly with consumers, anything else that we would consider kind of ripe for growth?

Leroy Kelsey (14:18):
Yeah, absolutely. So if you look at the categories that really make up 80% of our inside sales, and I’ll just touch on a few that really tend to draw shoppers in. We had a really positive year in terms of some of the traditional categories that we haven’t seen growth in. If you look at tobacco and if you look at beer, those were really interesting, bright spots. Um, we saw double digit growth in beer and we saw sales growth in tobacco that we haven’t seen in a while shoppers, both tended to stock up and kind of front-load their traditional consumption. But we also experienced some non-traditional shoppers that typically buy those categories in other channels, whether it be grocery or mass merchandise that chose to shop a smaller box. And so we experienced growth in terms of a shopper stocking up, but we also experienced growth in terms of trip consolidation and folks looking to buy larger pack sizes.

Leroy Kelsey (15:26):
Um, if you look at the types of package size that we were selling, we sold more twelves and more eighteens and 24 packs in terms of cases than we had in the past for beer. We also sold more cartons in terms of cigarettes and tobacco use. And so those were really positive trends in terms of growing sales. We expect some of that to, to normalize year, over year as personal travel starts to open up. But we’re still taking advantage of some of the higher growth subcategories in both of those categories. So looking at modern oral and thinking about OTP and some of the lozenges and nicotine products that are available and really hit the ground running in terms of sales, but also thinking about some of the categories in beer that have really been bright spots. So looking at hard seltzer, for example, has been a real opportunity for growth that we talked about at the state of the industry summit.

Stephanie Sikorski (16:33):
Fascinating one to watch, right? Like the movement from craft beer to the switchover, or maybe not switchover, but at least migration to, to hard seltzers as a craft beer lover, I never thought I’d see the day, but here we are. Okay!

Leroy Kelsey (16:48):
So Stephanie, you talked about the exciting growth that we’ve seen in hard seltzer, and that’s one of those categories where we’ve seen a lot of innovation and we look to see more. Um, I think that that category is on trend in terms of healthy, better for you products. People are looking for ways to engage products that have simpler ingredients and less calories. And I think that that’s right on trend. I also expect to see the same thing continue in terms of alternative snacks and salty snacks. So people are looking for bold innovative flavors. They want a break from the norm. And I think these snacks are really providing that. I also expect to see energy continue to perform in terms of packaged beverages. Um, we had some growth in CSDs last year, which I think shoppers are looking for national brands that they trust. Um, and they’re also looking for ways to get more done in terms of consolidating trips. And so we’ve seen them pick up larger sizes to, to to fill the pantry. And we’ve gotten some benefit from that in terms of some of our ambient packages, as well as the cold packages.

Jeff Lenard (18:10):
We’ve talked about trends and what’s going on overall, but let’s spend the last couple of minutes talking about how to grow your share of these opportunities and Convenience Voices does this to a remarkable level. It basically you follow the consumer from the about the time they grabbed their keys or decide to walk up to the store and you find out why they’re coming to the store. What’s what they’re looking for. Why you’re there making decisions without giving away everything in the program. Are there a couple of things you can talk about that would be of interest to any retailer out there and how decisions are being made along the way?

Leroy Kelsey (18:56):
Absolutely. Jeff on of the things that I think is absolutely essential for the channel is we have to be more strategic in terms of developing a higher profile for our shopper experience. And I think it starts with asking a fundamental question in terms of what are you famous for? So in other words, why are shoppers choosing to shop with you? Why are they coming to your site? And then once you understand what those category drivers are once you understand what lever to pull and what knob to twist in terms of effecting your shopper’s behavior, then you have to understand how you’re performing and the way Convenience Voices actually measures how it’s performing in terms of the overall experience is through the net promoter score. Um, we as shoppers basically on a scale of zero to 10, what’s the likelihood that they would recommend our or the convenience product or service to friends or family. In other words, someone who they trust and who trust them in terms of their overall opinion and, and the overall experience. And then the folks that rate a zero to six are considered detractors. So those folks have a very low probability of recommending your product or service. They’ll probably go out and talk about how bad the experience was. And so literally detract from your brand in terms of overall

Jeff Lenard (20:30):
It’s called the internet. Yes.

Leroy Kelsey (20:32):
Yeah, that’s right. They only have those those nine and tens Jeff, that we consider promoters. Those are those folks who are going out and basically evangelizing the brand and talking about how good the experience was. And so they’re going to promote your brand. And then finally we have those sevens and eights that are considered passively satisfied. In other words, you’ve kind of commoditized the experience for those folks. Um, anyone of your competitors could probably create a very similar experience. And so by taking the detractors and subtracting them from the promoters, you end up with a net promoter score. And so if overall, your overall operation has a net promoter score of about 50%, that’s considered a really strong score. So the first thing that I would do is measure the net promoter score for all shoppers that come through my front doors and that’s going to be your baseline.

Leroy Kelsey (21:30):
And then the next thing I talked about identifying those category drivers that you’re famous for, take the net promoter score of those categories as well, and get an understanding of which ones are providing lift in other words, higher than the overall average and the ones that are actually dragging in terms of your overall brand equity, the ones that are lower than your overall average. And you want to identify those strategically. So you can’t go get out and boil the ocean. And I’m not suggesting that you try, but if you prioritize a raise in the overall profile, especially with those categories that have more reach in terms of the number of shoppers that come in, looking for them, and also those categories that maybe are the lowest of the performers, that bottom 20% that you can get the most impact with. It can be really powerful in terms of raising your overall profile of your shopper experience.

Stephanie Sikorski (22:30):
Well, and Leroy, you talked about like, I mean, we all know that digital isn’t going away, right? So when we think about putting on my marketing hat for a second with the promotions and how you build that in it’s not just about like up in your score, it’s how you can use this to layer into your overall like sales process and how you’re teeing up the types of promotions that are coming out throughout the year. And more importantly, like you said, not boiling the whole ocean, but being very selective around who are those like critical promoters and where’s that larger fan base that can help to lift. And where can you find lookalikes if you will to draw them into your store with those types of promotions too?

Leroy Kelsey (23:16):
Yes, absolutely. And thinking about the fact that we have more loyalty participation than ever almost one out of two of our shoppers report that they’re engaged in some convenience loyalty program. So if we think about that as a digital gateway, to your point, we can really get custom in terms of the type of incentives that we offer, In terms of the type of communication that we offer to shoppers and really can speak to them on a level that resonates to try to connect incentivize and really inspire and activate behavior. And that’s really the key, that’s the the holy grail, if you will, in terms of reaching and connecting with our shoppers.

Jeff Lenard (24:04):
Well, I love that we talk to consumers and it’s really that that’s where you really get the energy. I know Steph and I both do focus groups where we talk to consumers and ask them about what if we did this? What if we did that? That’s how we guide product launches. And that’s how we look at new initiatives. Um, and it’s absolutely fascinating because a lot of the things you think you knew, they, they want the opposite and you kind of build programs out based on what they tell you and you really find you get quicker traction. So in wrapping up really Leroy, if you could just give people a sense where they can learn more about Convenience Voices, certainly we talked about the state of the industry summit, but they can also connect and learn more about how it could possibly be a part of their operations. So can you give a sense or can you tell them where they can learn about Convenience Voices and get started down this journey of hearing from customers?

Leroy Kelsey (25:02):
Absolutely. As shoppers increasingly prioritize convenience. Um, they’re going to look to us in terms of the channel to evolve our offer and really respond in terms of new and innovative ways to connect and NACS Convenience Voices is going to continue to provide feedback that helps us to quantify our progress and also unlock some insights in terms of how the shopper’s evolving. Um, if you’d like to participate or learn more about Convenience Voices please go to convenience.org/research. We’re going to kick off another study and participation has to be logged by May 31st.

Jeff Lenard (25:55):
So time is of the essence. Come join us on this because consumers have some pretty amazing insights and can grow your business and point you in the right direction. As we continue to come out of this pandemic and see the rapid growth of economic recovery that we expect for the rest of 2021 and beyond. So thank you for joining us later today and having your voice as part of this podcast. And thank you all for listening to Convenience Matters.

Convenience Matters Outro (26:26):
[Music] Convenience Matters is brought to you by NACS and produced in partnership with Human Factor. For more information, visit convenience.org.