By Sara Counihan
ALEXANDRIA, Va.—The Consumer Price Index hit a 40-year high of 8.6% in May, driven by skyrocketing energy and grocery costs, and rising prices are starting to impact the way that consumers shop, including at convenience stores.
According to NACS CSX data, total store sales per store, per month in the first quarter of 2021 were up 31% year over year.
“While we wish that was all new shoppers and bigger transactions, the reality is what we’re seeing is transactions are staying relatively flat versus where they were for the same time period in 2021, but we're seeing fuel pricing driving the majority of that growth,” said Lori Buss Stillman, NACS vice president of research, during last week’s NACS webinar “Data-Driven Strategies to Minimize the Impact of Inflation on C-Stores.”
Stillman was joined by NielsenIQ’s Jason Zelinski and Lorelei Bergin, who discussed how inflation has impacted consumers and some strategies c-stores can implement to combat price pressure and keep their customers’ loyalty.
“Customer behavior is shifting drastically,” said Bergin. NielsenIQ is increasingly seeing consumers buying smaller pack sizes so they can still get the product they want by making the smaller amount last longer.
Bergin said that customers are also transitioning to private label now more than ever before, as consumers don’t have the same sentiment toward private labels as in years past. Now they feel they can get a comparable product to a brand name and at a better value.
“If you're not investing in private label this is the time to do so because your competitors are, and your consumers are making that switch,” said Bergin.
There are four strategies that retailers can use to blunt inflationary impacts, and they are pricing, promotion, assortment and supplier collaboration, according to Bergin.
“All of these have to happen in tandem. I cannot stress that enough,” she said.
When it comes to pricing, price optimization tools can help retailers understand if they have the right price points compared to the rest of their market.
“You can pull different levers to figure out if I make a price adjustment to this item what happens to all the rest of my items on the shelf, and we call that price elasticity,” said Bergin.
Zelinski broke down the convenience channel’s categories and noted that there are variations in price elasticities in the categories. Looking at the fluid milk category, the price of fluid milk has gone up, but units are down. He compared this to Walmart, which reported on its last earnings call that its customers are shifting from gallons of milk to half gallons and from national to private label.
“When we look at c-store, we're seeing a little bit of that shift, but actually we're seeing more of those negative units as consumers just walking away from the category versus reengaging inside either a smaller packaging or to a private label,” he said.
Zelinski added that with a price optimization tool, each category has to be done individually, and “then even within those categories you're going to find items that are going to react differently to those price changes.”
You can also make pricing changes on a local and regional level, which is a tactic becoming more prominent across retail.
“We're no longer price pointing things from like a Southern region to Northern region. We're looking at it even at a state level,” she said.
Overall, both Zelinski and Bergin said that c-stores should lead with data. It can help retailers understand their customers and their behavior shifts. Stillman echoed the sentiment, saying that “data-driven decisions are always, always important in the industry.”
If you are looking to get ahead of inflation and its impact on your business, you don’t want to miss this NACS’ webinar featuring NielsenIQ. Learn about the remaining three strategies to help mitigate inflationary impacts, how c-stores can leverage the increase in fuel trips to drive more conversion inside the store, more on private labels and how retailers should prepare for a possible recessionary period from a pricing perspective.
Here is where you can access this free webinar.
Sara Counihan is contributing editor of NACS Daily and NACS Magazine. She can be reached at email@example.com.