Meet the upscale gas station

Apr 04, 2012


FORTUNE -- A new report concludes that gas-station convenience stores should go "upscale" to boost business, a notion that might sound counterintuitive given the industry's slim profit margins as well as the fact that most shoppers at such stores are in a hurry.

Problem is shoppers increasingly swipe their credit cards at the pump, never entering the store at all. That means fewer impulse purchases of Doritos, Mountain Dew and Kenny Loggins compilation albums. Turning a gas-station shop into more of a destination by, for example, offering fresh foods, can boost bottom lines, according to the report (pdf) prepared by the Association for Convenience and Fuel Retailing and the Coca-Cola (ko) Retailing Research Council and presented Wednesday in Chicago.

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Another big part of the problem is that other kinds of retailers are increasingly competing with convenience stores for shoppers. Drug stores, big-box retailers, and supermarkets are all "trying to win their convenience business," says the report. And when you're paying for your gas, you might think to yourself that you'd like a Butterfinger, but you need to stop at Target (tgt) for paper towels anyway so why not just pick it up there?

By offering fresh baked goods, high-quality coffee, and even a wide selection of fresh produce, convenience stores can offer incentives to enter the store and even linger over the merchandise for a while. One crucial element, the report notes, is that the shopping experience should be pleasant. That runs counter to the usual image of grungy, overlit, ill-decorated stores that seem designed to dissuade people from hanging around too long. "Grab and go" has been the philosophy of the convenience industry throughout most of its history.

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Such big upgrades, of course, are expensive and risky. Crain's Chicago Business, which wondered whether gas stations are "the next Whole Foods," cited one local convenience store owner who seems to have thrived by going upscale. But while making convenience stores less unpleasant couldn't hurt, it's hard to imagine "high end convenience" becoming a widespread trend.

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