Sheetz Continues Reinventing Convenience
First to market in Pennsylvania with the convenience restaurant and E-85 fuel, the chain predicts strong growth in the coming years.
by Shahla Hebets
When it comes to delivering quality and value, few chains are as highly regarded as Sheetz Inc. The Altoona, Pa.-based chain has long been admired for its superiority in innovation and its diligent commitment to consumer satisfaction.
It's not just that Sheetz has 326 stores in six states that make it a leader in the convenience channel; it is the total package of goods and services, quality and value that is driving the business. Sheetz strives to constantly reinvent itself "and put the Sheetz of today out of business," said company President and CEO Stan Sheetz.
The privately held retailer generated $3.37 billion in sales for the fiscal year that ended Sept. 30, ranking 87th on the Forbes list of the largest private companies. The chain aims to become a more efficient retailer by 2010 so it does not have to rely on fuel margins for its overall profitability.
At the Media Trade Show in August, sponsored by the Retail Merchants Association, Sheetz estimated his company earns a margin of about 3 cents on each dollar of gasoline sold. Eating away at that profit are expenses, including salaries, operating costs and maintenance. "It is a high-volume business, but not a high-profit business," he said. "So we want to be such strong retailers that we don't need to rely on any profits from gas."
Among the ways the company is doing that is its self-distribution center in Claysburg, Pa., being the first to market with concepts like no-fee ATMs and E-85 fuel and its new convenience restaurant concept.
The $22 million distribution center opened in 2002 and consists of 157,000 square feet allocated for dry storage, 41,000 square feet for cooler space, and 26,900 square feet for freezer space, and 10,500 square feet allocated for administrative office space. The center supplies all company-owned stores and, by purchasing items in bulk, enables the company to take advantage of the economies of scale enjoyed by mega retailers like Wal-Mart and Costco.
The convenience restaurant measures 10,000 square feet, about twice the size of an average Sheetz store. The facility has a substantive food offer. A crisp new logo adorns the entry-way; Sheetz has updated its famous red logo with strips of green and added the tag line, "Fresh Food Made to Order." The store has two main entrances: one primarily for the restaurant, and another for the convenience store.
Multiple touchscreen order points gives customers the option of ordering brick-oven pizza, paninis, gourmet salads and other made-to-order foods. (Each "base" food item on the touchscreen menu lists the individual sandwich components so customers can select exactly what they want on their food item.) To the left lies an open atrium equipped with Wi-Fi Internet access, several big-screen televisions and an ample seating area with wood floors, bistro lighting and other design elements typical for fast-casual restaurants.
A made-to-order Sheetz Bros. Coffeez Espresso bar, manned by baristas trained in the art of crafting specialty coffees, adjoins the restaurant and c-store. Sheetz has raised the bar with its inline coffee station, offering high-quality hot and cold coffees and coffee alternatives.
Sheetz began researching the project as far back as September 2001. The company certainly considered competitors inside and outside the convenience channel in piecing the store together, but no existing retail concept served as a model for the prototype-the company started from scratch based on research culled from customers, vendors and employees.
As a whole, the convenience restaurant has an upscale, big city feel, but manages to maintain many of the design elements Sheetz regulars have come to expect. The store cost the company $7 million to build out of the ground. It arose from a Sheetz "Creation & Reinvention" project headed by Steve Sheetz that involved practically the entire Sheetz executive team and took three years to realize from conceptualization to the opening last year. The company expects the convenience restaurant to revolutionize the convenience industry.
"While the Sheetz of today is seen as a gas station that sells good food, the Sheetz of tomorrow will be seen as a convenience restaurant that sells gas and convenience items," Steve Sheetz said.
Stan Sheetz provided Convenience Store Decisions with personalized tours of its state-of-the art distribution center in Claysburg, Pa., and one of its new convenience restaurants. He spoke candidly about the company's operations and the enormous success of the family-owned convenience chain.
CSD: Sheetz retail offering has become synonymous with excellence. To what do you attribute your success?
Sheetz: I believe success has been driven by our corporate culture. We always think we can do better or that good is never good enough. It is also embodied in the vision of our organization, which is to create a company that would put Sheetz, as we know it today, out of business. We continuously reinvent ourselves, and that means we always have to get a little bit better at everything that we do.
CSD: Are there advantages to being a family-owned business?
Sheetz: The advantage is that we are a closely run company, meaning we don't have to act like a public company. We don't have to make decisions based on a quarterly earnings estimate. I think that environment can sometimes drive poor decisions. Being a private company allows you to look more toward long-term investments and make decisions to ensure the long-term success.
CSD: Clearly you have a large number of employees, and as we walked through your distribution center you knew everyone by name. As your organization grows, how do you maintain this family-like atmosphere?
Sheetz: What you see is a result of hiring good people and treating them the right way. As a result, our employees stay with us. We staffed the distribution center with people from our stores so many people there have been with the company for a long time. When employees stay with an organization for a long time, you get to know them. We have quite a few company events, and we make a point of spending time with people. Many of our employees have stayed with us for a long time, and I hope that is a because of us treating them well, and them being happy working for us.
CSD: What do you deem your most innovative customer program?
Sheetz: Our focus is on the "on-the-go" consumer. It's hard to put a pin on the demographic because so many people are on-the-go. We focus on people that value time, and we do not focus on one specific program, but rather create programs around a large demographic of convenience shoppers. One of the best things that we did years ago was to add restrooms to all of our stores and open them to the public 24 hours a day. This was difficult to execute because cleaning restrooms is not something that people like to do, but our customers really appreciated that we thought of their needs.
The ultimate convenience consumer, "the road warrior," knows that they come to us for a clean restroom, fuel for their car and something for their belly as well. That's who we are catering to, that's the customer that we want to attract and the one we want to keep.
CSD: Your distribution center is an example of technological innovation. What technological advancement had the greatest impact on your business?
Sheetz: There isn't one advancement in technology that stands out more than the others. Rather, it was really our employees' ability to integrate seven major software systems that make the whole process work from the store to the distribution center then back to the store-the ability to make that system work from beginning to end is really where the biggest bang comes from. We're to the point now where the technology at the store automatically creates the order; the order is processed by the distribution center and then delivered to the stores. All of this is done electronically; all the invoicing is done electronically, and when the products arrive at the store, we don't even need to check them in. That creates so much efficiency.
Over time, we've gained so much confidence in the system because it really works, but it can't work without human intervention. This innovation frees up our management from paperwork and allows them to spend time on what's important-their customers and their employees.
CSD: The Sheetz convenience store has been in existence for 54 years giving your company a great deal of history and experience. What recent experience had a significant impact on your organization?
Sheetz: One of the largest impacts occurred about seven years ago, when we instituted our employee stock ownership plan. Every employee that has been with the company for more than a year becomes a stockholder automatically. We do not ask our employees to contribute or pay for the stock in anyway. Rather, we give them the stock as part of their compensation and incentive plan to foster a vested interest in growing the organization. It's a really great thing, as it gives people a sense of ownership because they actually have ownership. But more than that, it gives them a sense of pride in delivering the Sheetz brand to our customers.
The only way to increase the value of the organization is through taking care of your customers and your employees.
CSD: What advice do you have for the next generation of c-store operators?
Sheetz: Any advice I would give relates to entering the retail market in general. I think the long-term horizon of retail is that whatever you are doing today will not be good enough for tomorrow. You've got to be willing to change in order to be really successful; you've got to drive change. If you do not drive the change then the market will. If you let the market dictate, then you will always be behind the 8-ball. Somebody is out there working hard to do it better, faster and cheaper. That is the biggest challenge in retail market.
CSD: What are some of the hottest selling products in your store?
Sheetz: Cigarettes are still king, but the changes we are trying to drive revolve around foodservice. The change that the supplier community is driving involves new products line extensions, and it's most pronounced in the beverage category. Hot and cold packaged beverages seem to be where the action is, and there is a major shift occurring in carbonated soft drinks. The cold beverage market is going through some major changes. New nutraceutical beverages are receiving high customer demand and the bottled water category is incredible. Twenty years ago you couldn't find bottled water, and now it's one of the fastest growing beverages that we sell.
Our channel owns the single-serve beverage market, and I think some of the fast feeders are starting to wake up to the demand. Recently, McDonalds announced it is going to start carrying packaged beverages as opposed to forcing consumers to purchase a fountain beverage. This drives the point that customers are demanding options. They want their beverages and they are willing to pay for what they want.
CSD: Your company's mission includes the phrase "Total Customer Focus." Can you provide an example of what this means to you?
Sheetz: It's a mindset that we ask our employees to embrace. It means the reason that we are here is for the customer, and if you're going to hustle for something, the reason to hustle is to satisfy the customer. For example, if there is a line at the checkout counter, then open another register and service the customer. It's about being attentive to what's really important. I don't mean to downplay our supplier partners, but when there is a vendor in the store and a customer in the store at the same time, the priority is to service the customer.
CSD: Sheetz is involved with numerous charities. Does your company have a history of philanthropic endeavors or was there a specific reason for your involvement in these charities?
Sheetz: It's always been part of our family culture to try and give something back to the community. A long time ago, we decided that our charitable efforts would be centered on children. As a result, we focus on children's charities such as the Sheetz Family Christmas or the Special Olympics. Our resources go toward children and youth athletics. We have decided to try and make a difference in the lives of children.
CSD: What do you want the industry to know about the Sheetz company?
Sheetz: We just try to have fun and, if we're lucky, make a little money. We have been very active with NACS and share our experiences. We're proud to help. It's a great organization that helped my father [company founder Bob Sheetz] make the contacts that he needed in the industry that helped our company develop and grow over the years. We would be a different organization had we not been involved with NACS a long time ago. Through the association you get to know other people in the industry. No one has a monopoly on great ideas. You get know people, see them and copy them. There is nothing wrong with copying a great idea.
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