The US town of Gainsville is all but invisible from the Lee Highway, the main artery which takes commuters between their jobs in the business hub of Washington DC and their homes in the rolling countryside of Virginia.
In fact all the driver will see of Gainsville from the wheel of their SUV is the four forecourts within line of sight of each other, each of them fishing for scraps from the stream of traffic flowing into the capital.
Times are tough for US forecourt operators. Outside the city centres, tumbling margins on fuel sales have caused turmoil in the industry. "In 1999 gas sales amounted to 38% of profit contribution," says Dan Munford of Insight Research. "Today, it’s about 24%. The challenge now is to find something to replace that."
Here in the Washington area, petrol has just topped $3 a gallon - and while the rise is not enough to shock the world’s most auto-centric nation out of their cars, it has sparked a price war which has seen margins slashed and a comfortable income from fuel disappear.
"Many of the established chains are having to redefine their image in the face of eroding margins on key products and competition from all around," says Mumford, "and as a result there are some bold strategic moves under way."
Carl Bolch, owner of the Race Trac chain of some 525 forecourt sites, explains just how competitive the market has become. "We monitor gas prices at 10 competitors, with dedicated staff surveying them twice a day. We can respond immediately to changes. Years ago when gas was around 60c a gallon we used to say that a one cent advantage would sway customer activity. Now the price has soared but the same rule applies - a one cent advantage wins you customers. There’s something about gas that makes people willing to spend a dollar to save a penny."
With the proximity of the Lee Highway sites, the effect is instantly obvious, with car owners prepared to traverse four lanes of traffic and several sets of lights to find the best deal. As one store manager observes: "We’re right opposite a rival - if we change our price, we can play a little game of guessing how quickly they will respond." He doesn’t have to wait long.
With the fuel price advantage effectively neutralised, the Gainsville forecourts have each developed a convenience offering which is barely recognisable to British eyes. It’s noticeable that Millers Neighborhood Market is not, by our definitions, in a neighbourhood - nor is it a market, as it doesn’t stock fresh fruit and veg or fresh meat. Instead the focus is on food to go. As Bolch points out, almost every food item in the US convenience mix is intended for immediate consumption. "Fresh food is generally consumed within 3-4 minutes of purchase, and in the car," he says.
The 4,500 sq ft store includes a Subway franchise and a variety of self-serve food stations from hot dogs to heat-it-yourself pizza and nachos. Two full walls are given over to chilled drinks, with chiller doors opening directly into a cold storage room. Additional space goes to a drinks fountain and coffee concession.
Alcohol, particularly beer, is stacked high on the floor and the aisles, such as they are, are given over to crisps, nuts, snacks and confectionery. Here, as in the other Gainsville stores, the section marked ’grocery’ is an overlooked 2m, four shelf unit in a quiet corner. There are loose apples and bananas available, but no fresh vegetables. You’ll find doughnuts but you’ll struggle to locate a loaf of bread.
There’s some clever segmentation going on. Millers, on the westbound side of the road, caters for evening traffic while across the road, an ExxonMobil On the Run gets commuters on the way into the city and builds its offer around breakfast and lunch.
With petrol prices deadlocked, it’s left to another kind of fuel to sway the floating voter. America may have been built around gasoline but it’s coffee which drives the population. It’s not unusual for customers to choose a store for the quality of its brew, and none stays in business without a choice of up to 12 varieties ready to serve on hotplates, all sold at knock-down prices and in bucket-like containers. Even larger are the cups for drinks from the soda fountain, a must-have fixture in US stores. Customers can choose from up to 30 flavours in sizes up to 64oz, and if there’s a certain amount of wastage from spills and sly sippers, it’s more than made up for with margins north of 60%.
Clearly the Mom and Pop shops which once fed small town America, and had a passing resemblance to convenience stores as we know them, have had their day.
Scott Hartman, chief executive officer of Rutters Farms Stores, a 51-store chain based in Pennsylvania, explains how the forecourt offer is developing: "Alongside the food-for-now offer, you’ll see a move towards prepayment for everything," he says.
"Forecourt stores are getting larger - small formats are having trouble keeping up," says Hartman. "We’re also seeing more and more kiosk ordering and self service, which reduces both staff costs and queues." The areas of differentiation where outlets can make their mark, he says, are in their offer to teenagers - whose burgeoning disposable income makes them a key target market - and, perhaps surprisingly, in the toilets.
"Better restroom facilities are the next frontier, believe me," he adds.
These tips may serve the market well. With record fuel prices and the recent credit crunch, a weak dollar and rising interest rates, the US economy is stalling and the stream of cars on Lee Highway may be a little thinner in future. "My personal opinion is that the next one to three years are not going to be rosy for us," says Hartman. He also picks out credit card fees, in which the US convenience industry paid out more last year than it made in profit, as "a huge, huge, problem - they really are the devil."
Back on the strip, the two forecourts standing face-to-face across the street demonstrate two different strategies for development. The 7-Eleven, part of US convenience history with a presence in the market since 1927 and some 30,000 stores nationwide, takes the community route. A cheery greeting at the door and attentive service throughout is backed up by a community noticeboard and even a small police station at the rear.
By contrast, the aspirational Wawa across the street is a larger, 5,500 sq ft forecourt with 18 pumps and a wider food to go and food service offer. Touch screen ordering enables customers to create their own sandwiches, baguettes and tacos. Fresh fruit displays, clever lighting, subtle music and palatial toilets give the site an entirely different appeal to its neighbour.
One thing that’s common to all four sites, and to the US convenience industry as a whole, is the exceptional service. The presentation, product knowledge and enthusiasm of staff is up with the best to be found in the UK. As Carl Bolch puts it: "You’re only as successful as the people you surround yourself with. Good people are a huge investment but a friendly greeting, cleanliness, outgoing staff; these things really pay dividends."
=== US convenience trends ===
? Food to go dominates
? Prepay credit and top-up cards are growing strong
? 80% pay at pump
? Stores are getting larger
? Customer loyalty systems are becoming more sophisticated
? Kiosk service and touch screen self service food ordering reduce queues
? Teenagers are the latest target market
? Restrooms are the next point of difference
? Broadband connectivity is widespread
? Industry pays more in credit card fees than it makes in profit.
=== Coming soon ===
? Flat panel TVs throughout stores
? TV at the pump
? Drinks retailed at pump - added to bill
? Marketing via mobile phones
? Store locations advertised on Sat Nav
? Electronic gas price signs