CHICAGO -- Because competitive pressures are driving down the prices and profits of cigarettes and gasoline in convenience stores -- the channel's core products -- it's time to revamp Center Store sections, according to Paul Weitzel, vice president, Willard Bishop Consulting, Barrington, Ill.
"More people are selling cigarettes and more people are selling gasoline, so they are going to have to figure out something else," Weitzel said. "Part of that is going to be the center of the store. Store brands will help in certain areas, as well as controlled brands.
"Looking at the next wave, I think you are going to see more Center Store products, although they don't have the kind of volume right now in the Center Store to make that kind of change," Weitzel said. He spoke at the Private Label Manufacturers Association trade show here recently.
"The bottom line we are finding as we work with operators is that the traditional Center Store brands are not making any money for convenience stores. They are not adding any value and they are not differentiating the store," he said.
Out of more than 2,100 stockkeeping units, 90% of convenience-store sales come from about half of those SKUs, he said. "Margins are declining as well," dropping from 20.9% gross margin in 1997 to 15.8% in 2000, he said.
But even as convenience stores improve their Center Store mix, they are not likely to pick up market share from supermarkets, Weitzel said. "I think it is more about getting impulse sales.
"The traditional convenience store has the Center Store mix for consumers' fill-in shopping. But now you have supermarkets or drug stores on nearly every corner, so you can get those products pretty much anywhere now," he added.
"The question is: What categories will be left over that will drive the volume? That is still to be determined," Weitzel said. While convenience stores are now focusing more on food service, in the immediate future they may also look to seasonal items and in-and-out promotions to drive sales, he concluded.