The World's Unsexiest Business
adding a little sizzle to the convenience store industry
Let's forget about Jeff Bezos for a minute. And then totally erase from your mind his now realized vision of creating the ultimate online one stop shop for everything imaginable. Then to really give the convenience store industry a shakeup (while perhaps even raising the middle finger to it), he decided to stick his nose in brick and mortar and the deluge of negativity came raining down. John Dvorak's overall negative impression might be a little too one-sided.
Throw in a dash of Alibaba founder Jack Ma and a sprinkle of Flipkart's founders Binny and Sachin Bansal and you have the entire online retailing spectrum covered on a global scale. But while you were too busy focusing on these online retail influencers (or even their massive accumulation of market share and then wealth), you may have forgotten about the vision behind that branded (dare I even refer to, and somewhat agree with it being a "symbol of class status") beverage you're currently sipping. Or just pretend for a moment that you cheated on your in-house super premium java. Speaking of which, from an observation perspective occurring at the last three NACS shows, I've seen brands such as Farmer Bros (in 2015 was faced with having to shift its California operations out of state) and Canadian based Van Houtte spend fewer dollars on their booth build-outs and marketing while small to mid-sized US based distributors, manufacturers, and suppliers alongside longstanding Italian ones have directed more dollars to beefing up their trade-show presence.
Among one of the more noteworthy coffee brands seen on the 2016 trade-show floor from a packaging, taste, and vision standpoint was La Colombe.
Back to that beverage you're sipping...
I'm just hoping you didn't order a Unicorn Frappuccino and then proceed to gloat over your conquest of the poor barista that was subjected to your wrath.
Followed by a barista meltdown...
Then came the thousands of Instagram selfie posts disproportionately overpopulating my Monday morning feed -- nearly all possessing the requisite 'like-worthy' components:
Needless to say it was a success on many fronts. Great digital marketing led to solid follow-through sales in stores.
Meanwhile, Howard Schultz's reputation remains firmly intact as he enjoys the view from his Greenwich Village $40mm NYC penthouse.
Is it just my casual observation or has Starbucks always been seeking to expand its 'convenience' offerings?
Expanding sweet and salty snack product offerings centered around the checkout area? Check.
Its own branded (Ethos) bottled water stacked deep in baskets lining the checkout queue pathway? Check.
That fresh category that nearly every convenience store chain is fumbling its way through? Totally got that covered. Check.
An overall increase in the number of SKUs and menu items in the store? Check+.
Upon my visit this morning, I counted a total of 36 (not including non-edible items such as mugs and dispensers along with beverage or food items listed on the primary menu). And that's up from roughly 20 a couple of years ago.
Promotions which seem quite reasonable and satisfy the under $10 reasonably priced 'meal threshold'? Well, let's do the math and see how much of a deal we're actually getting. Going with the most expensive options:
And the total comes in at $12.15 for a savings of $4.15 or 34%!
Supposing you in fact do have an in-house developed QSR inside (or adjacent) to your convenience store. How do you position that business to compete?
And don't even consider for a second that Starbucks isn't a legitimate competitor.
Let me start off by saying that you can't think of it as directly competing with Schultz and Co. Otherwise, feelings of defeat and trauma might take over your ability to react. Exaggerated statement of the morning.
You'll start off by playing defense thereby preventing your loyal QSR customers from surrendering to the power of that $8 low price point. And then you'll play offense by growing your top line once you've successfully marketed, repackaged, and/or altered your product mix. Keep in mind that a key assumption I'm making is that your in-house QSR didn't stray from the sandwiches, wraps, salad, or even Hispanic tinged menu items. I mean if you happen to be running an authentic taco stand and you're worried about the Starbucks down the street eating into your bottom line, you're gonna be ok. In fact, sip (don't shoot!) a 100 year old añejo tequila tonight with your prime rib.
My area of specialty is data science and technology so for me to go out on a limb and issue marketing playbook recommendations is rare. So let me waste no time in bringing on the data.
Let's focus our attention to another QSR. Remember that pesky sandwich shop (40k+ global locations) on the corner that's been trying to single-handedly undercut your QSR prices for years? One that decided to run a ridiculously successful campaign that heavily relied on an annoyingly catchy jingle that would not seem to get out of your head?
Well, it was only a matter of time before the $5 footlong sub promotion made its way to $6 (as of February 2016) followed by the brand equity catastrophe what I personally refer to as 'Pedophilegate'. All in the name of disgraced former spokesman Jared Fogle.
Last year Business Insider, speaking about Subway's market share decline, stated the following (based upon a QSR Magazine report):
It also recently lost its status as the second most popular fast-food chain in the US, based on systemwide sales. Starbucks overtook Subway to snag the second-place spot, behind McDonald's.
And then in 2016, the revenue decline continued. An interesting visual observation of the charts (when combined) shows that the revenue on a per store basis shows even more of a precipitous decline.
So what's going on here? Is Starbucks, formerly known as just a 'coffee' purveyor, unseats the sandwich giant?
Looking to digital marketing guru Gary Vaynerchuk's assessment of the rapidly changing landscape in an IoT sense, a post on his own site two years ago puts things into perspective.
STARBUCKS IS STARTING A MEDIA COMPANY; THIS IS WHY IT MATTERS TO YOU
Having captured a huge audience and created a vision for its brand, Starbucks found its unique voice for which it would platform and showcase social and political issues. Clearly, that would complement its core business working in synergy to what I see as the highest level of engagement for its most loyal clientele. That way, they're hooked for life.
Comparatively, is Subway connecting with its primary customer base through multiple digital channels? If you consider multiple social media sources, then yes. Though it's one dimensional -- strictly for showcasing its product offerings. And maybe that's because its target audience isn't interested in their opinions on anything else but food! Now would you personally follow Subway on any social media channel?
Maybe that's best answered with cold hard facts. Social and political showcasing aside, #UnicornFrappuccino selfies (167k Instagram tags) are still going to be appear more a lot more eye catching than #6DollarFootlong posts (a dismal 33 Instagram tags as of April 27) when making your way through your social media feed of choice.
*Just for comparison sake, #5DollarFootlong and #FiveDollarFootlong dialed in at nearly 8k Instagram tags.
The comparison between Starbucks and Subway isn't meant to be performed on a vis a vis business model basis largely because the latter is franchise based. Digital strategies and presence are the topic at hand.
Let's throw McDonald's into the mix along with larger convenience store chains Sheetz and Wawa and then breakdown their respective social media following on a per store basis.
*I've excluded the largest convenience store chains 7-11 and Circle K from this analysis because their social media presence is weak. For the former, I couldn't even find it on Twitter and the latter, when I managed to do so, I found a relatively non-existent following that slightly topped 1000 users. And that's not to mention a serious lack of any meaningful user engagement.
Now the plot thickens! It appears that Sheetz is clearly winning this race with Wawa coming in at a not too far off second place. Facebook, Instagram, and Twitter presence clearly seek to elevate the brand with effective spending of marketing dollars -- slick photography and product promotions. For the larger players, store growth has definitely outpaced social media user addition.
Given that your marketing budget may already be low or perhaps stretched favoring non-digital channels, you could seek to 'selectively' replicate their digital strategy. After all, imitation is the sincerest form of flattery. Need great pictures taken but don't have much of a steady hand with even with cameras with stabilization features? Look to Upwork for top notch and reasonably priced freelance photographers and graphic designers.* As for guidance on how to strategically approach the content, Gary Vaynerchuk (mentioned again in this post cause I think he's a domain expert) breaks it down really well in his book Jab, Jab, Jab, Right Hook: How to Tell Your Story in a Noisy Social World.
*Disclaimer: I currently do not have (nor have I ever had) any endorsement deals with any products, services, or websites.
So what's incrementally important to the consumer now versus 3 years ago?
Along with the obligatory -- having a loyalty program in addition to being marketed through digital channels*, they want to know where their food is coming from and the availability of healthy options (includes dietary preference accommodation).
*Primarily measured through the consumer's willingness to positively acknowledge the brand