October 20, 2021
Whilst many smaller chains (1-20 stations) have been swallowed up, others are having a bumper year in the face of adversity.
2020 was a tough time for everyone, so it may surprise you to find out that smaller chains consistently outperformed many of the industry averages in 2020.
A Convenience Store News report gives us the low-down. A smaller decline in total dollar sales per store (14.6% vs 16.5%) and a smaller decline in average weekly transactions (11.4% vs 20.3%) shows the smaller operator perhaps offers something it’s larger competitors don’t.
Of course, this could be due to the pandemic changing buying habits. Smaller stores mean less people (and less clean air per person, but we won’t go there) and therefore may have been a conscious destination of choice. Or they could just be more bulletproof than we think. It’s hard to know.
With the market consolidating and volumes and margins fluctuating, the 1-20 operator will have to continue to adapt in order to compete.
So, as an operator of 20 stores or less, what do you have in your locker that can give you that competitive advantage?
Speed to market
This changing market needs speedy decisions. Bigger players may have the money to make snap decisions, but typically larger contracts take longer.
We can use our own data on this one; our deal cycles (time it takes from contact to contract) double for bigger portfolio prospects. Why’s that you ask? Because in most cases multiple people need to be involved in the decision making process and they often have conflicting views and opinions. As they say, a camel is a horse designed by committee.
When it comes to you- the small-to-medium player- there is a much smaller group of people involved in this process. Maybe it is just you. This is a huge advantage of speed. You can adopt new technology quicker, get the latest ‘cool new products’ on to the shelves and make strategic fuel pricing decisions and action them later that day, all of which can drive profit for your business. Sonic the Hedgehog had better watch out!
This leads on to the control you have over stations. You probably talk directly with your Station Managers and decisions come from the top straight to the store. Larger players have multiple layers in their organization that often means changing something is more difficult or mis-communicated along the way.
The most advantageous part of this works the other way around with information coming up the chain. You have the ability to receive information directly from source and may well have better relationships in place with the boots on the ground. Plus, if you aren’t happy with the information you receive you can ask for it to be amended (a price survey for example can be performed on demand).
This means that you are able to set strategies that larger organizations can’t. For example, one EdgePetrol user saw their volume dropping in real time, so asked the Station Manager to check the big competitor down the street. Their price was significantly lower and was therefore hurting volumes. After a quick check of the live margins, a pricing decision was made and the crisis was averted.
This brings us on to technology. The same CS News report tells us that 36% saw keeping up with technology as a key challenge in the coming year. This is clearly front and center of mind for many SMB retailers.
Whilst this is indeed a challenge, it is also an opportunity. You are able to adapt much faster to new advances in the market. Rolling out electronic labels across hundreds of stations is a huge job. Rolling it out to twenty stores can happen in a matter of weeks.
As a small-to-medium player, you are also more likely to be an early adopter. Big companies have due diligence, tender processes and budgets to contend with. Whilst you may be performing these tasks in your company, the chances of you taking on something new and exciting is much higher. Therein lies a competitive advantage for you.
For example, early adopters of EdgePetrol have seen an increase of 18% or more in profits by having access to insight and data that most larger companies simply don’t have.
Whilst you may be looking for consistency across your stores, you can adapt your strategies, your offerings and your pricing (in-store and fuel) to each store. You can double down on this, adapting strategies to suit the season, the month, the week, the day, or even the time of day.
Sure, your larger competition can do this too, but it’s tougher to be flexible in a larger machine. It’s like doing a u-turn in a compact versus a dump truck; it’s smoother, faster and you’ll get it done in less turns.
So what’s the actionable insight here?
The action you should take is to take action. If you are still doing the same thing you were doing 5 or 10 years ago, you’re probably not optimizing your business.
The EIA predicts that from 2022 demand for gasoline will reduce every year through to 2050. This means each gallon needs to generate more revenue in order to make the same profit. With big players using economies of scale to further eat into your profits, it would be wise to use the attributes outlined in this article to your advantage.
Get our best content on fuel pricing and retail in your inbox weekly.