Background and challenge
A major convenience and gasoline retailer sought to develop a five-year strategic plan to improve its competitive positioning and margins. Company executives engaged L.E.K. Consulting to develop this growth strategy.
We helped the client devise strategies for improving gross profit outside of tobacco and fuel by looking for ways to drive incremental store traffic and differentiate its offering in an increasingly competitive market.
Approach and recommendations
Although the client had a compelling strategic position in its core market, with clear brand recognition and market share leadership in fuel sales, it had not materially invested in its stores in more than a decade and was substantially over-reliant on tobacco and packaged beverages.
We worked with the client to develop a strategy to dramatically enhance and grow the business through:
- Developing a new store concept that will drive much greater traffic and stronger gross margins, built around a compelling coffee program, freshly prepared food and select hot food offerings
- Renovating the store portfolio to shed poor performers and invest in attractive locations, and to enhance store density in select markets
- Investing in technology, and rebuilding the organization to manage and grow the business
After testing and validating the approach, we assisted with planning and prioritizing the new concept deployment and portfolio renovation.
Results
The new store concept drove 50% greater in-store transactions once at steady state, and gross margins are now 100-200 basis points higher. The retailer deployed approximately $300 million of incremental capital to renovate the store portfolio and has successfully driven strong double-digit returns on incremental capital.
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