Wednesday, September 17, 2008

Small-Format Food Retailing Memo: 'USA Today' to Open 'USA Today's' Travel Zone Convenience-Oriented Micro Small-Format Stores in Airports in America

Have you heard the joke going around that the newspaper business is SO bad in America (and it really is having serious problems) that USA Today, the newspaper with the largest circulation in the U.S., has decided to go into the convenience store business?

Well, it's not really a joke that's going around.

In fact, it's not a joke at all. We just made it up for an opening paragraph.

Gannet Company, which owns USA Today (the newspaper), today opened its first USA Today's Travel Zone micro small-format retail store inside the Detroit USA Metropolitan Wayne County Airport.

A second micro-small-format USA Today's Travel Zone store is to open before the end of the year in New York's LaGuardia Airport, along with not one but two stores opening in the Indianapolis, Indiana USA Airport in November of this year, according to Christy Hartsell, who is the director of brand licensing for USA Today. Additional stores are planned in other airports as well.

Hartsell says the airport stores will feature a wide variety of products, including beverages, snacks, candy, sundries, reading materials (lots of display space for USA Today the newspaper we expect), travel-related items and other related goods. The stores also will feature prepared foods items in the form of ready-to-eat grab-and-go-style snacks.

Here's how Ms. Hartsell describes the strategy behind the USA Today's Tavel Zone stores:

"USA Today is synonymous with travel and convenience. Therefore, "USA Today Travel Zone stores create a new opportunity for travelers to get the news and information they need when away from home."

Makes sense. USA Today (the newspaper) is synonymous with travel because it is everywhere travelers go. And it's synonymous with convenience because its editorial style is to feature shorter stories than most newspapers do, along with designing the paper and its website for quicker reading.

USA Today (the newspaper) won't actually operate the stores. Rather, Under a license agreement, HDS Retail, the world’s largest travel retailer with more than 4,000 stores in 18 countries, will operate the stores, says Ms. Hartsell.

She says USA Today wanted to create an extension of its brand and therefore decided the micro small-format convenience-oriented stores located in airports would make a good fit based on the USA Today brand image.

What we think

We certainly see numerous synergies between USA Today (the paper) and the stores, particularly with having them in airport locations.

Additionally, we think the stores offer numerous cross-marketing and merchandising opportunities with the newspaper -- both its online and print additions.

USA Today (the newspaper) has long associated itself with travel. The paper version is available all over America's airports, is left for free in front of the doors in most medium-range to higher-end hotels, and offers lots of content about travel and weather conditions for its readers, including business travelers.

The online edition is full of travel related content as well, along with being involved with numerous travel-related content providers and travel companies.

We think the combination of offering consumables, reading material and sundries, along with other goods, in the stores also is interesting. While numerous airport stores do this already, they don't have the potential tie-ins with a newspaper like USA Today (the store) has the potential to exploit via USA Today (the newspaper).

For example, ads for the micro small-format airport stores can be placed regularly in USA Today (both the paper and online editions), along with coupons for discounts (and introductory free) beverages and related items.

Promotions can be conducted as well using the paper as a marketing venue, especially the online version. For example, how about buy a beverage and snack at the store, get a free copy of USA Today (the paper) promotion to start. Ads and coupons placed in both the print and online editions.

The potential for good marketers is near endless really.

Of course, the success or failure of the stores will depend on executing the retailing fundamentals: location, merchandising and price, along with a few other key variables.

USA Today does have an experienced retail operations partner in HDS Retail North America.

We think it's an interesting development though. It also shows the differentiation and growing fragmentation of retailing in the U.S., particularly when it comes to consumables, even if just a few categories within the larger definition. In other words, consumables are increasingly -- in one form or another -- becoming an overall category that nearly every retail format is taking a bite out of, so to speak.

Be it Target selling perishable and shelf-stable food and grocery products in its discount stores, Cost Plus World market selling wines and craft beers (and specialty foods) in its import format stores along with furniture, or Home Depot selling beverages and some snack items in its big box home stores and Office Max doing the same in its office supply big boxes, there's a whole lot of consumables retailing going on -- and not just in food and grocery stores.

NSFM Editor's note: Please note we've coined a new term: micro small-format retailing. We checked extensively and haven't found it used by any other publications or others to date. If you've seen it used, send us a copy of the publication.

And, stay tuned, we've found some other examples of what we are calling micro small-format retailing, including food and grocery.

Our definition: Since small-format food food and grocery retailing generally is defined as stores from about 5,000 (very small-format) -to- 25,000 (high end) square feet. We define micro small-format in food and grocery retailing as about 5,000 square feet and below.

In other types of retail formats, such as drug stores, its all relative. For example, a 5,000 -to- 15,000 square foot drug store is considered average size today. Therefore a micro small-format drug store would be one less than say about 5,000 square feet in our analysis.

The USA Today travel-oriented airport convenience stores are considerably smaller than 5,000 square feet, by the way.

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