No business can be complacent in today’s retail environment with stiff competition, advanced technology and rapidly changing customer demands. Many companies—and convenience chains—aren’t waiting for someone else to roll out new products or effective sales tools. Instead, they’re doing it themselves in their proprietary innovation labs where they create and collaborate with business partners.

In January, Wawa opened its first new store of the decade, which the Media, Pennsylvania-based company described as an “innovative food-focused destination for customers on the go.” Located in Philadelphia, the outlet is 3,000 square feet, or half the size of a standard store, and features a unique design with a pickup window. In addition to fresh foods, including Wawa’s famous hoagies, customers can enjoy a new line of expanded hot and cold express items and a self-serve hot tea bar. The store will help reduce its environmental impact by offering compostable straws, reusable bags and an option to purchase a reusable mug for beverages.

Our goal is innovation and improvement through extensive knowledge-sharing.

A year ago, Irving, Texas-based 7-Eleven launched the first of several fully operating lab stores to test new offerings. Situated near downtown Dallas, the store sells high-end wine, private-label cosmetics, growlers, smoothies, cold-pressed juices, novelty beverages and a wide range of coffee drinks prepared by baristas. Inside is a Laredo Taco Company taqueria, the Tex-Mex operation that 7-Eleven acquired when it purchased Stripes Convenience stores two years ago.

Meanwhile, Altoona, Pennsylvania-based Sheetz recently opened its first technology and innovation hub in Pittsburgh to develop and test offerings and equipment that may eventually appear in the chain’s 600-plus outlets. "Our mission at Sheetz is to create a business that puts the Sheetz, as we know it today, out of business,” said Emily Sheetz, assistant vice president of strategy, Sheetz. “This hub is an investment in the future.”

Not every retailer wants to or can invest in an innovative lab store to test out new ideas, so many retailers turn to their supplier partners for data and insights.

Cutting Edge

Manufacturers—both startups and historical brands—want to meet customer needs by bringing new products to market, and they value input from retailers who deal directly with customers.

According to Mars Wrigley, about 20% of shoppers browse the candy aisle, but only 17% make a purchase. Officials believe those figures can be improved and will soon be collaborating with Des Moines, Iowa-based Kum & Go to make that happen.

This year Kum & Go became the first convenience chain to experience the new Mars Wrigley Innovative Merchandising Incubator in Hackettstown, New Jersey. The goal: Develop a customized solution for retail challenges in the confectionary aisle.

The retailer met with Mars Wrigley to discuss unique concepts about traditional merchandising, improving the consumer experience and boosting sales. Before year-end, a customized solution will be tested and evaluated in-store. Kum & Go was chosen for the exercise after completing an application and agreeing to implement Mars Wrigley’s resulting recommendations in select locations.

“This national program is aimed at helping retailers address their toughest challenges,” said Shaf Lalani, vice president, strategic demand leadership, at Mars Wrigley. “We will measure success by the positive results that stem from our recommendations, the impactful long-term relationships we form with retailers and the overall growth of the category.”

Challenges and Changes

Like fingerprints, each lab is unique to the individual organization’s needs and goals.

In 2018, Hershey, the Pennsylvania-based candy company, unveiled its Mobile Customer Insight Center, a 53-foot-long semitrailer containing a live candy aisle and classroom. For 49–50 weeks each year, the rolling lab travels to retailers who meet with Hershey’s subject matter experts, discussing ways to drive sales and profits.

“It’s more of a merchandising lab,” said Glenn Frazier, director of category management, Hershey. “We share insights we’ve acquired working with customers and information about how consumers shop. We’re trying to help customers find products easier. When you think about c-stores, the real objective is for customers to find what they’re looking for.”

Hershey has done financial analysis on chains that have attended a Mobile Customer Insight Center meeting. “When they [implement the recommendations], they drive sales,” Frazier said.

Five years ago, Rich Products opened its $18.5 million, 84,000-square-foot Innovation Center in Buffalo, New York. Designed for training, product presentations and menu ideation, the center includes an industrial kitchen and culinary team, a video production studio and a conference room and learning lab for problem solving. A hospitality room provides guests with offices and lockers while visiting.

When you think about c-stores, the real objective is for customers to find what they’re looking for.

“We want to be an invaluable resource to our customers and help develop foodservice solutions,” said Tom Michalewski, customer marketing manager, convenience, for Rich Products.

“Each customer is unique, so flexibility is key,” he said. “The center allows us to create an environment that is specific to the needs of the retailer.”

In September 2019, Core-Mark began construction on its 14,000-square-foot Center of Excellence between Dallas and Fort Worth. Featuring an interactive test kitchen, plus technology for virtual product placement and frictionless checkout, the facility gives customers and staffers a place to experiment and discuss business goals. “It’s a dynamic collaboration space where leaders can inspire, educate and challenge visitors to think beyond traditional business practices,” said Amanda Sulc, director of the center.

Sulc expects retailers who experience the center to “walk away with actionable initiatives that they can implement right away, whether it be trending products based on data, insights from our category management team, the latest from our fresh food program or optimizing their assortment based on meeting margin drivers.”

In Atlanta, Coca-Cola has introduced the KOlab, a high-tech facility where retailers draw up business plans, demo merchandising setups and visualize products in their stores in a simulated setting. “KOlab is not an R&D lab, which makes it different from other types of innovation centers,” said Robin Perry, director, Coca-Cola Collaboration Centers. “We offer trusted beverage and industry expertise that is primarily focused on collaborative, customer-focused solutions.”

Perry wants the lab experience to leave retailers “feeling inspired and empowered to improve the consumer experience,” she said. “When we help increase revenue for our customers and create value for them by leveraging our size, scale, knowledge and insights, we view that as success.”

Last year in Purchase, New York, PepsiCo opened its Foodservice Digital Lab to better prepare partners to communicate digitally. The lab teaches retailers how to identify and use technology solutions, such as consumers’ digital habits, digital business tools and online ordering and delivery platforms. Participants are exposed to leading-edge technology, such as voice, augmented reality and machine learning.

“The challenge with adjusting to the digital revolution is that changes are ongoing,” said Gilbertson Cuffy, head of PepsiCo Foodservice Digital Lab. “PepsiCo recognizes this and plans to continue to be on the forefront of consumer evolution in the foodservice industry with innovation and knowledge.”

Schedule a Visit

Retailers interested in experiencing a supplier’s lab should contact their designated representative for details and availability.

“Before any visit, establish service-level agreements to clearly and concisely define what targets and thresholds are to be used to define success,” said Sulc. “Quantitative metrics can consist of same-store sales, sales revenue, repeat customer visits or unique customer visits. Depending on the client’s goals and objectives, the different key performance indicators will vary for each experience.”

Whatever they’re called—labs, hubs, incubators—these facilities are expensive to develop and operate. But companies that have them believe the investment will pay off.

“The foodservice marketplace is becoming more competitive each day, and a lab space is a necessity to be competitive,” said Michalewski. “These centers allow retailers and manufacturers to come together and discover solutions to industry challenges and consumer needs.”

“Thankfully, retailers have options that don’t always require them to invest in their own full-blown labs,” said Perry. “We look for every opportunity to work with our customers as trusted partners to uncover ideas to grow their business.”