Expanding into new product categories can open new revenue streams and boost customer loyalty, but it requires careful planning, writes Jason Joukhador, GM Merchandise and Dealer Channel at Ampol.
Expanding into new products and categories can offer growth and opportunities for convenience retailers, but it also comes with some risk. It’s important to weigh several critical factors before making the leap. Here are five considerations before jumping in.
1. Is The Trend Your Friend?
Identifying market trends in the convenience retail sector involves monitoring consumer behaviours, sales data, and emerging innovations. To distinguish between genuine trends and fleeting fads, assess whether the trend addresses a long-term need or solves a persistent problem for customers. Look for consistent growth over time and broad adoption across different demographics. Additionally, analyse whether the trend has staying power by evaluating its alignment with broader industry shifts and economic factors. Engaging with industry reports and consumer feedback can also provide valuable insights into the trend’s sustainability. As the saying goes, “the trend is your friend until it ends”.
2. Know Your Customer and Brand
Before venturing into new product categories, it’s crucial to thoroughly research and understand your customer base. Identifying the types of products your customers are likely to purchase helps prevent investing in items that might languish on the shelves. By aligning new offerings with customer preferences, you enhance the likelihood of success.
Equally important is considering how these new categories will affect your brand identity and if you have the right to play. It is important not to confuse your brand; integrating new products that align with your brand’s core values and strengths can reinforce your store’s reputation and foster greater customer loyalty.
3. Financial and Operational Feasibility
Entering new product categories requires financial investment and logistical planning. The costs involved include sourcing new suppliers, updating inventory systems, staffing, potential renovations (for example, if you’re adding a fresh food section), and marketing to promote the new offerings. It’s essential to assess whether your current business model can support these changes. Consider if the return on investment (ROI) is high enough to justify the expense. Running a small test with limited exposure before fully committing can help gauge customer interest and reduce financial risk.
4. Supplier and Distribution Challenges
Partnering with the right suppliers is critical for the success of any new product line or category. Ensure that you choose suppliers who can consistently meet demand while maintaining product quality. This is particularly important in categories like fresh food, where stockouts or poor quality can quickly erode customer trust. For smaller convenience retailers, establishing partnerships with suppliers who can offer favorable terms and consistent supply is often a challenge. Additionally, it’s important to evaluate the logistics of handling new product categories, especially if they require different storage or transportation solutions.
5. Impact on Store and Customer Experience
Introducing new products can affect your store’s layout, which in turn influences the customer experience. If you’re expanding into larger categories like fresh food, consider whether you have enough space to display these products effectively. A poor layout can deter customers and reduce the overall shopping experience. You may need to reorganize or invest in new shelving, refrigeration units, or other equipment to ensure your store remains accessible and visually appealing.
This article was written by Jason Joukhador and originally appeared in the October/November issue of Convenience and Impulse Retailing magazine.
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