Actionable Insights From APT's Retail Practice

Taking a Bite out of Restaurant Industry Sales

January 28th, 2014 | Posted by CCorman in Restaurants

Convenience stores, pharmacy chains, and grocery retailers are all trying to take a bite out of restaurant sales by ramping up their fresh food offerings. According to Convenience Store News, prepared food offerings in c-stores exceeded $27 billion in sales in the US in 2012, a 7.6% increase over the previous year – in fact, convenience chain Casey’s General Stores is even offering pizza delivery in a select number of locations.

To fight the growing availability of prepared foods offered by retailers, restaurant executives need to compete on guest experience, quality, and customization.

  • Guest Experience: Though high-end grocery chains may add seating areas for customers who wish to dine in-store, retailers are unlikely to replicate the dining experience found in restaurants (and probably won’t try to do so). Restaurants that fear incursion from new retail competition should consider highlighting the guest experience in their advertising and possibly experiment with dining room refreshes.
  • Food Quality and Innovation: Though the quality and variety of foods that grocers and c-stores offer appears to be continually improving, most are unlikely to be able to compete with fast casual and casual diners on food quality. Menu innovation and freshness is likely to be a key focus to stay ahead of retailers.
  • Customization: Decades ago QSR chains pioneered the idea of mass customization (i.e. we can sell a billion burgers and each one will be slightly customized to what the guest wants). Besides a few innovative convenience chains, most retailers are unlikely to be able to easily customize food offerings; for example the basically limitless possible combinations that go into a sandwich, salad, or burrito are difficult for a retailer to replicate in their prepared foods section.

If restaurants don’t focus on non-traditional competitors, they run the risk of losing market share and having their core offerings eaten-up by retailers.

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