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Competing Successfully Against Hypermarkets

You’ve just learned that a brand spanking new fuel facility is to be built at your town’s __________ (fill in the blank with your big discounter, grocery store, etc.). Is it time to roll over and die, put on the boxing gloves, or stick your head in the sand? Likely none of these strategies will work. If you are within close proximity, here’s what you should do instead:

Analyze customer purchases—Before you panic, look at hard sales data for your site. Do you have mainly fuel customers with no inside purchases, fuel customers who also purchase inside, or heavy inside purchases that are not fuel driven? If it’s the latter, you have little to worry about. If it’s the first one, keep reading!

Figure out why customers buy from you. This may sound over simplistic at first blush, but knowing why customers buy from you is the crux to knowing the impact this new fueling site will have on you. Let’s begin with typical reasons customers buy where they do, the impact new fuel sites usually have, and then the strategy. We’ll start with worst case:

#1) Low Fuel Price—If you are positioned as the low price fuel leader in your market, and customers mainly purchase at your site because of your low fuel price with minimal inside purchases, you are in serious trouble, particularly if the new hypermarket prices way below market as they typically do. Data shows that the price-driven customer will switch. You typically won’t be able to keep your customers. So, to keep this site viable, you must immediately change your marketing plan away from low fuel and drive up inside sales.

To make you go through the pain of this change, you need to know the hard, cold truth of what could happen. Do this by computing breakeven store sales assuming ZERO fuel profits. Use this formula:

B/E Sales $ = Monthly Store Expenses

Average Inside Margin

For example, if your expenses were running $30,000 per month, and your average inside margin was 28%, you would need $107,143 in inside sales.

Have you recovered from the shock yet when you saw this number? The good news is, you can change this number. To reduce the store sales required, you can either reduce expenses, increase margin, or ideally do both. For example, by trimming expenses to $25,000 and increasing margin to 31%, your breakeven comes down to $80,645, a number you can at least shoot for.

Your challenge now is to transition your site from “cheap fuel place” to “cool, great place to quickly get stuff.” Your store must become everything the hypermarket isn’t — really quick, super friendly, and immaculately clean with really cool stuff (which translates to really good margins!)

Now is when you must understand your marketplace and your potential customer. Although professional data firms can help you with store demographics, a little common sense, a visit with your local chamber or university, and a few customer surveys will go a long way. Find out as much as you can about your market area, potential customer, and how to serve those customers. You have to transform your store to a destination site.

First, get yourself out of the “cookie-cutter box” mentality. If your store looks like every other c-store in town, it’s tough for it to become a destination. What you need is a differentiating look, a certain feeling inside that customers will want to come back to time and time again. A source of ideas may be other highly successful retail shops and restaurants in your town. Are there common landscaping or decorating themes that make them attractive?

Alternatively, could you come up with something new, fresh and inviting that hasn’t been done before? Your survival is depending on it so get moving.

#2) Quick Service—If customers frequent you for legendary, friendly, quick service, congratulations, you will survive! But, it’s time to ramp it up one more notch, and start a publicity campaign that highlights your wonderful service. Research is beginning to show that big box discounters are losing ground with a certain segment of customers. The likely cause? They are too big and shopping takes too long.

There isn’t a better time to cater to the customer who abhors lines, wants quick service and better yet, gets called by name in your store. In this day and age of faster, bigger and better, there are lots of folks wanting personal interaction with a big smile and a name greeting at your store. This industry had its roots in the small town sundries stores. If you can revive that feeling, you’ll have won against the hypermarkets.

In conclusion, hypermarkets may turn out to be the unwelcome catalyst that drives your company to its next level of excellence. Whatever you do, don’t ignore them. Use their looming presence to get even better at what you do.   Differentiate, get more efficient, become smarter about customers and marketing. You can survive and even thrive.

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