Convenience store format booms, more growth in Northwest Arkansas

With around 60 convenience stores in the two-county area of Northwest Arkansas, one might think that’s enough. But c-store operators Kum & Go and Casey’s General Store continue to invest in Benton and Washington counties. And Wal-Mart is also getting into the game.

Wal-Mart appears to like the quick trip format and is including mini-convenience stores near many of the fueling stations of new Neighborhood Market stores. 

Kum & Go has built or remodeled 14 stores in the two-county area in the past three years and Casey’s General Store is at 19 and counting. Both of the Iowa-based chains say their multimillion investments in Northwest Arkansas are paying off.

Wal-Mart has the Walmart To Go in Bentonville, Walmart Campus store at the University of Arkansas and of a growing number of the mini c-stores cropping up in the region. Add in nine White Oak Stations and handful of EZ Mart’s and mom and pop operators and the density between convenient stores and people stands at about one store for every 8,333 local consumers.

Statewide the density is one c-store for every 1,600 people which is tighter than the 1 for 2,100 density level across the nation, according to Jeff Lenard, spokesman for the National Association of Convenience Stores.

Based on those calculations there is still more room for growth in Northwest Arkansas. Lenard said Texas and Florida are two of the states attracting major investment from c-store chains. But he also points out that retailers from JoAnn Fabrics to Ikea furniture or Old Navy and Home Depot each offer some type of food and drink beverage near their cashier areas as they recognize consumers enjoy finding food in unlikely places.

Nielsen reports that 2014 was another record year of growth for the U.S. convenience store sector with 152,794 stores at year-end, up about 1% from 2013.

"Our continued growth, even during a sluggish economy, shows that our core offer of convenience resonates more than ever with our customers, whether they visit us for a fuel fill-up, quick snack or drink, or stop by for fill-in groceries or healthy take-out meals," said NACS Chairman Steve Loehr, vice president of operations support at LaCrosse, Wisc.-based Kwik Trip.

Neilsen said the link between fuels and convenience retailing continues to grow. Overall, 83.5% of convenience stores 127,588 sell fuel, a 0.7% increase (930 stores) over 2013. Convenience stores account for 33.9% of all retail outlets in the United States, according to Nielsen, which is significantly higher than the U.S. total of other retail channels including drug stores (41,799 stores), supermarket/supercenter (41,529 stores) and dollar stores (26,572 stores).

FOOD, SERVICE QUALITY IMPORTANT
Lenard said there are a couple of trends playing out in the c-store space. First he linked to $4 gasoline in recent years, noting that consumers made fewer trips and were led to try food offerings at their local convenience stores who have invested in “fresh” and made-to-order entrees.

“You take someone who fills up and then goes inside and tries a fresh sandwich or other food and they are pleasantly surprised by the experience and then converted. We are seeing some chains offering samples at the fueling station in some cases to get consumers to try the food,” Lenard said.

He said long gone are days when gas station food is the punchline of a joke like in National Lampoon’s Vacation when Chevy Chase’s character Clark Griswold uttered, “I am so hungry that I could eat a gas-station sandwich.”

Food Channel celebrity Anthony Bourdain is noted as saying, “Proximity to petroleum products is rarely an impediment to a great meal.”

Consumers are also more comfortable trying food from different formats which is seen in the rise of the food trucks and the diverse c-store food offerings such as gourmet bakeries who cater weddings to freshly made pizzas, burgers and even sushi. Lenard said he visited the White Oak Market Pinnacle Station in Rogers a couple of years ago and it ranks on his top 10 convenience store operations in the country. 

“I hope to get to the Walmart To Go in Bentonville and The Cube, which is a drive through convenience format in Norman (Oklahoma) soon,” he said.

Lenard also notes that convenience store chains offering ready-to-eat foods have to be careful to provide quality products and customer service equal or better than area restaurants. 

“If a customer tries a food item at a convenience store and has a bad experience or the quality is not up to par they might not say anything to the store but they will tell others and they won’t likely try it again, which could be damaging to a store’s brand,” Lenard warns.

He said there is a big reason why Wal-Mart and competitor Target are focusing on smaller stores because the days of 45-minute grocery shopping trips are not the norm.

“People want to get in and get out quickly most of the time,” Lenard said.

BEVERAGE BOOM
However, the c-store is not a substitute for a grocery store. Lenard said 84% of the products purchased in a convenience store are consumed within one hour of purchase. He said the c-store is more aligned with a quick-serve restaurant (QSR) with the difference being that beverages drive sales at a c-store and food drives the purchases at a QSR.

Last year former Walmart U.S. CEO Bill Simon told The City Wire that the stand alone convenience store it built in Bentonville was “too expensive to replicate on a mass scale.” He said the retailer used the format as a testing lab to see what would sell and what consumers most wanted when they entered the store. Beverages were the biggest opportunity for added sales in this format.

Simon also said the fueling stations were a key component in the new Neighborhood Markets because they are traffic generators. The solution to selling more beverages has been accomplished by the retail giant who now has the mini-convenience stores at the fueling stations. The retailer also is putting a large beverage center in the front of its Neighborhood Market formats where shoppers can get a milk shake, cappuccino, slushy, soda, tea or coffee by the cup. 

The retailer removed by-the-cup beverage stations from its supercenter designs a few years ago, but they could be coming back.