Bringing the Store to the Pump
By Jerry Soverinsky
A clean store. Prominent signage. Loyalty offerings. There's no shortage of best practices to help drive in-store convenience store sales, an on-going industry imperative as fuel margins continue to shrink.
And there's a lot of work to be done. Seventy-three percent of gas consumers just pay for fuel and leave without making an in-store purchase, according to C-Store Shopper Insights (CSI), a shopper insight program conducted by State College, Pennsylvania-based VideoMining, a provider of in-store intelligence for shopper marketing.
It's a staggering figure of missed opportunities, and in an effort to provide actionable information for retailers, the NACS Convenience Tracking Program (CTP) surveyed 1,500 fuel-only customers across 33 states to determine why they just fueled and fled. The reasons, according to CTP data, are varied.
While 50.7% said they didn't need anything from the store, 23.3% cited a lack of time, 4.5% said they were traveling with children, 1.5% expressed discomfort at shopping at a convenience store and 0.7% said the register line was too long.
Strong promotional offerings can help chip away at resistance from customers who said they didn’t need anything from the store, but more difficult is extracting value from those with more tangible, emotional barriers (time, children, discomfort).
And rather than fight those reservations with even stronger in-store promotions (a losing battle — it would take far more than a BOGO soft drink offer to unbuckle a crying three-year-old from a car seat and head into a crowded store), a handful of retailers are taking a different approach: bringing the store to customers.
Admittedly, they're bringing a very small section of the store cold beverages but the effort aligns perfectly with a retailer's mission to deliver convenience, and it seeks to extract maximum value from the seven out of ten customers who never come into the store to make a purchase after they've refueled at the pump.
"Retailers are coming to grips with the fact that gas-only customers the majority of the convenience store customers prefer not to leave the gas island," writes Cary, North Carolina-based Vendgogh, a supplier of integrated gas island vending solutions, in its white paper, "Integrated Gas Island Vending."
According to Vendgogh, "The gas customer has long been a captive audience with limited choices. With the rapid and sustained growth of pay at the pump options, it would appear that there is a potential to create new buying zones at the gas island for a customer who has largely been ignored."
Enter vending at the pump, an "ideal solution," writes Vendgogh. "The gas customer enjoys the convenience of expanded service at the pump, no wasted time and the satisfaction of a cold beverage to go."
Integrated with fuel POS systems, Vendgogh allows customers to purchase beverages while they make a fuel purchase. There’s no need to leave the gas island, much less step inside the store; everything is done at the pump. One machine can service up to four separate fueling positions, allowing no wait convenience for time-pressed and child-toting motorists.
"The transaction is the same that customers are used to," explained Larry McAnallen, vice president of business development for Vendgogh. "They swipe their [credit] card, and much like a car wash add-on, the dispenser displays a prompt offering the customer the option to purchase a drink."
Vendgogh has its machines in a handful of stores, and its engineers are working on a design that offers snacks, too. "That's coming at the end of the year," McAnallen said. "However, there will be some retailers who will look at that and say, 'Hmm, now you’re starting to pull more products from the store,’" convenience that could actually cannibalize in-store traffic and sales.
The company provides retailers with the ability to remotely monitor the machines via a web application, and soon to come are text-messaging alerts that signal stock depletions.
Working to capture a share of what it hopes will be a burgeoning at-the-pump vending market, Dallas-based Cox Petrol rolled out its Fender Vendor gas island vending machine earlier this year.
"We started thinking, what can we do that's different; we have a lot to compete with," said Michael Cox, vice president of sales for Cox. "Our whole focus is evolving the consumer experience."
While Cox has been in the petroleum industry for nearly a century, it opened its first retail gas stations earlier this year, and plans to add the Fender Vendor to all Cox stations, which Cox said will number 30 by year's end.
"We're going to saturate as much as we can the Dallas market," Cox said, adding that he would make the machines available to retailers in other areas, too. "If they want it, we'll find a way to work it out."
Cox said pricing is a reflection of a number of factors, "but you’re not talking about more than a $10,000 investment per machine when all is said and done," he said. "But it depends on their setup and the POS."
Ordering at the pump is not new. Indeed, a 1991 Associated Press report detailed a Chicago Amoco station that allowed customers to order from an adjacent Burger King restaurant while refueling.
"[T]his is the first operation where motorists can pump gas while ordering food," the AP wrote, with a BK spokesperson commenting, "We’re taking the restaurant to where the people are."
The system isn’t around today, and there’s no record as to how long it lasted. More recently, Sheetz deployed a foodservice ordering option at several stores, allowing motorists to place a food order while refueling, for pickup inside the store. The option is no longer available.
"We have exited from the 'Order at the Pump’ kiosks that we operated in a number of test locations," wrote Louie Sheetz, executive vice president of marketing at Sheetz, in an email. "Not a bad concept in test but not practical to install everywhere based on the hardware cost, service/reliability issues and what we feel will be old technology in a few years when mobile ordering becomes prevalent."
Logistical considerations need to be considered for a pump-based foodservice ordering option. "Primarily, there’s no way to separate the pump order from the order done in the store," said Jerry Weiner, vice president of foodservice for Rutter’s, who said he had looked at the technology when employed at another convenience chain.
"What we had was food produced as the orders rolled in, but there’s a delay of three to five minutes when a customer is at the pump," Weiner said. "So we had hot food waiting on the counter waiting for the customer and we lost three to four minutes of heat.
"Outside of that, I didn’t see enough orders to justify the [system’s] cost," he said.
While food ordering at the pump may make a resurgence, for now, retailers are content to test the less ambitious beverage vending option.
"We've got so many sales going through [our store's] pumps, we were trying to utilize those to the best of our ability," said Bill Martin, president of Sherman, Texas-based Lone Star Food Stores, who added a Vendgogh gas island vending solution at its flagship store earlier this year. "It made sense since it integrates with the pump. And we wanted to make it easy for [our customers] to buy something."
Martin said installation was somewhat involved, "You’re talking about cutting concrete, which is expensive." But with flexibility to design the machines’ decals, he went to his vendors to help offset the cost. "We said,
'We're testing this out, we don't know our sales,' and we offered them the opportunity to promote their brands." Two vendors accepted his offer.
Martin projects a five-year ROI, and to get there Lone Star is actively promoting the service. "We have signage at the pumps and we offer video and audio messages via Outkast Media," he said. The service is offered at the company's busiest store, and Martin said he intends to roll it out to other stores, based on its performance. However, he cautions that ordering at the pump isn’t for everyone. "It really only makes sense where you're selling 300,000 to 500,000 gallons [of fuel] a month," he said. "You must have the traffic flow."
In consideration of the convenience factor of gas island vending, both McAnallen and Cox advocate raising the price of drinks sold at the pump. "People are willing to pay a premium to pay at the pump," McAnallen said.
"You should definitely mark it up [from the inside the store price]," Cox said. "If a drink sells inside the store for $1.50, I'd mark it up a quarter or maybe 50 cents."
The price differential provides a generous margin and if a consumer finds the in-store price savings overwhelming — all the better. "If you can get them inside your store, you can hopefully convert them to other stuff, too," Cox said.
Martin said his store's gas island vending gross margins "are pretty decent," ranging between 47% and 62%.
While Fender Vendor is new to the marketplace, Cox is optimistic about consumer adoption. "Based on research and our experience, we feel the dealer will convert one out of three drivers for at least one drink for the initial six months," he said. "After that, we believe this will increase, capturing about two out of three drivers," though he concedes the actual numbers will depend on a store’s traffic and purchase volume.
Martin is hesitant to project sales, as his program is only a few months old. "It's still early, and we're averaging about 24 units a day," he said. "One day you might sell 60 or 70, the next day just 12."
While the early figures don't point to a wholesale shift in convenience store shopping habits, it offers a practical solution for generating profits from a pool of customers that previously offered none.
"We need to figure out how to work smarter, not harder, to make the 1.5% profit we make as an industry," McAnallen said.
Jerry Soverinsky is a Chicago-based freelance writer and a NACS Daily and NACS Magazine contributing writer.