What price convenience?

Erika Pacini and Jeff Rogut
AACS Research
April 2012

For many years, the value equation according to many retailers has been: value = price. These words have somehow become interchangeable and this misinterpretation has resulted in the escalation of price-led offers in the market.

To a shopper, value is not purely price. “From the customer’s perspective, value has two components: the benefit received and the price paid,” says The Cambridge Group in Chicago. “Value increases as benefits are added at the same price point or as price is reduced for the same benefits.” The benefits received can be a range of attributes, such as convenience, quality, scarcity, service, durability and so on.

Due to increased financial pressure, consumers are spending their money more carefully, and in many cases, choosing not to spend at all. Consumers are exercising greater caution and, as a result, shopping has become a more mindful process, with consumers taking into consideration what they need, rather than what they want. Consequently, consumers are spending ‘smarter’, presenting brands and retailers with the challenge of understanding the changing value equation for their customers.

Jeff Lenard, vice president of industry advocacy for The National Association of Convenience Stores (NACS), recently presented research on how consumers view convenience stores, and gas retailers in particular. Consumers were asked what one word would describe the “perfect” convenience store, the results showed that the words most often said were: easy, cheap or convenient. But when asked to describe the “reality” of convenience stores, the words most often used were: convenient, convenience and expensive. This disconnect grew even wider when consumers were asked to describe their impression of food at convenience stores, as they said: expensive, junk, unhealthy and convenient. Then, when asked their thoughts about “gas retailers,” the words that came up most often were greedy, expensive and rip-off.

With aggressive pricing by competitors, fuel discount dockets and later supermarket trading hours the value equation is changing. The question is raised as to what premium if any can convenience stores still command. Certainly convenient locations, 7 day / 24 hour trade in modern, clean and bright locations has a value, however value add services that can further justify a premium price beyond the convenience factor as well as a pleasant and efficient shopping experience should be considered and can help to change the current value perceptions in some consumers minds.

The Convenience 2020 report conducted by the Australian Centre for Retail Studies in 2011, identified various value add services that could potentially be implemented in convenience outlets. Below are some examples already in stores around the globe.

Download the Full Article