Photo: Sheetz
Convenience stores need to automate or get left behind
A convenience store’s main competition was simply another c-store until relatively recently. That’s changed, however, as quick commerce businesses have made aggressive moves into the convenience space, promising delivery of small baskets within as little as 10 minutes.
Convenience retailers looking to stay relevant must improve, streamline and automate in-store operations to elevate the customer experience.
C-stores have unique challenges related to their small footprint and high cost per square foot. They must balance high availability with the ever-present risk of waste and lack of backroom space to hold safety stock. They also need to ensure that their customers can find exactly what they want and quickly make a purchase.
Space and inventory management are equally important for c-store staff.
Stores have a limited number of associates available to handle all essential tasks, such as stocking shelves (including fresh items) and keeping aisles free of clutter, while also checking out customers.
Store-level planograms, which are difficult to create manually, are highly valuable to guide staff in maximizing existing space and optimizing replenishment schedules.
Shipments to replenish existing items, stock new products or support short-term promotions must arrive on an as-needed basis and be ready to go direct-to-shelf.
C-stores must move toward a technologically advanced, unified system that uses a single source of data to inform decisions about operational tasks to stay competitive in a rapidly changing landscape where there are so many moving parts to supply chain management. They also need a system to automate these decisions, from replenishment orders to staff scheduling to space planning and further streamline store operations to ensure quality customer service.
Will brick-and-mortar convenience stores, five years from now, be replaced by delivery services? It’s unlikely. Yet, without striking a careful balance between protecting margins and maximizing the shopping experience, c-stores stand to lose in-store customers who would rather pay a bit extra to have their basket come to them, taking a hit to their top and bottom lines.
Discussion Questions
DISCUSSION QUESTIONS: How can c-store retailers stay competitive with the new series of fast commerce operators as well as traditional rivals? What technology investments do you think hold the greatest potential for generating positive results for c-stores at this point in time?
Poll
Loading …BrainTrust
Lisa Goller
B2B Content Strategist
Neil Saunders
Managing Director, GlobalData
Like all retailers, c-store operators are trying to drive sales results, and so they need to look beyond their traditional unique advantage of convenient locations. One area that c-stores could further exploit is micro-targeting product assortments. Customer demographics can vary from one store to the next – even stores in close geographic proximity – so micro-targeting product mixes will increase the probability that a c-store visitor finds what they want and converts to a sale.
Mark, you are 100 percent correct. With limited space in the store, and lots of locations, across many different sorts of neighborhoods, assortment planning is the most critical capability these stores can leverage to drive incremental sales. You are spot on that high conversion rates directly correlate to precision merchandising based on local neighborhood characteristics.
What convenience retailers need to remember is that customers infinitely prefer a great experience over speedy experience. If speed and convenience are the main drivers, customers can just use rapid delivery services like Uber Eats, GoPuff or Door Dash to get a much wider array of products delivered into their hands in 30 minutes or less. Automating a c-store can’t compete with these rapid delivery models, especially since they can’t offer the same quantity of SKUs in the limited store space. A much better use of time and money for convenience retailers would be to focus on building partnerships to become a hyper-local points for shoppers to access a wider range of retailers and services and to double down on incentivizing great staff empowered to give customers a higher level of engagement and expertise.
I have always seen the food industry as being at the forefront of retail, until recently. Home delivery, on-demand timing and phone applications have proven that grocers are better at the store operations than the digital ones. That is not all bad. While they need to invest in technology, they should just get really, really good at what they do better than others–display great products on the right shelves at the right prices. Self checkout may be necessary given labor challenges and higher wages, but staying true to being and acting local, providing friendly service, giving regulars a smile and knowing their orders or preferences when they come in will keep customers coming back. The new mandate is clean store, clean bathrooms, hot coffee.
The expanded use of self-checkout, kiosks for ordering and paying for services, integrating mobile apps for customers, adding the use of mobile devices to aid in setting planograms and provide store managers with real time alerting, and integrating closed loop processes for delivery partners and internal delivery process are all either being evaluated by most tier 1 and tier 2 c-stores or are already in process. At a recent conference held by one of the leading software providers in this space every one of these topics was front and center on the agenda and garnered a lot of attention from the participants. Most c-store operators understand they need to automate to survive. Their biggest challenges are building a road map and finding the starting point and then executing. The good news for this space is that for the last several years the major software providers have been building suites and capabilities to enable these functions.
History shows it is unlikely that these fast delivery operations will survive. And, at most, if they survive it will have to be only in the urban core of our largest cities.
My recommendation for convenience stores: don’t get sucked in by the hype. Instead, stay focused on delivering the value which matters most to customers. Retail has already lost a decade with online store obsession. Don’t fall for the tendency to believe headlines paid for by VCs.
To deliver signature convenience, c-stores need efficient tech to serve customers better and faster. More c-stores are investing in innovative assortments, delivery subscriptions and omnichannel tech to boost their competitiveness.
Mobile apps, touchless payments, AI and robotic micro-fulfillment boost c-stores’ flexibility and productivity. In time, expect more cashierless tech (like Amazon’s Just Walk Out) for speedy service.
Absolutely, they’ll stay competitive. All retailers (c-stores inclusive) must continue to innovate and improve their technological prowess, but they are not going away any time soon, even with q-commerce rivals. As long as people are driving their cars (electric or gas), there will be demand for local c-stores and the products/services they offer. In fact, c-stores can thrive and differentiate themselves even among new q-commerce entrants by doubling down on advanced analytics that produce new insights that can be leveraged for a variety of means within the organization. This starts with having a solid data strategy and tech stack that can deliver a single source of truth (SSOT) using hundreds of sources of data. Without quality data, the old saying applies — garbage in, garbage out.
I don’t disagree with the points made but the reality is that many convenience stores are profitable and the vast majority of quick commerce operations are deeply unprofitable. Quick commerce is simply a business model that doesn’t work economically. Over time this will give convenience stores the edge. That said, in the meantime they do need to up their game to remain relevant, which includes being on-point operationally around things like availability and speed of service.
The convenience store operating model has evolved over the past several years. Now, customers can find healthier food options and other items while on the go. However the most friction-filled experience in the convenience sector remains the checkout process. Due to the sheer volume of customers, associated labor shortages, and the lack of sufficient store associates, there is typically a fairly long checkout line, which defeats the purpose of going to convenience stores.
Automation comes in many forms, and the convenience store sector is a prime category to capitalize on these capabilities. The Amazon Go “Just Walk Out” innovations would be an excellent value add to the convenience store sector. In addition, several self-checkout options would help relieve the stores’ congestion. Essentially if convenience is your primary strategy, then why not leverage the latest capabilities to drive this?
How big an issue, really, is “fast commerce” in the convenience store sector? Those delivery companies seem to be downsizing almost across the board. And what kind of delivery charge is the customer going to pay for convenience store product? The basket size and $$$ transaction size makes any delivery charge a big percentage of the total transaction? Where is the value?
The biggest part of the brand promise of a c-store is convenience. To me, that means three things. Product, proximity and speed. Isn’t product usually a snack or drink of some kind? Maybe a bottle of windshield wiper fluid. Proximity means location of the store relative to the route I am already driving. How far out of my way am I going to go for a “better” c-store experience? Not far. And for speed, the very nature of a c-store purchase means a pretty quick transaction. Maybe there’s a person ahead of me, but probably not. “Scan and go” would be great, but not a big deal is the grand scheme of things.
“Scan and go” will probably be the benchmark for c-stores down the road, but my vote is that it is an evolutionary tactic where the ROI is maximized. I don’t see the short term ROI reason to rush into it. Not with proximity being a main draw for why the customer will visit any given store.
Convenience stores need to focus on their core differentiators. It’s all in the name of convenience. The definition and measurement of convenience change over time as technology, economic, and social forces impact consumer purchase behavior. C-stores need to focus on their stores’ assortment and cleanliness. Operators should consider options to streamline checkout, as well as integrating ordering and inventory management which will improve operations. Given the size and labor content of the P&L, judicious tech investments in the right places will go far.
Tech and innovation are critical for c-stores given the increased cost of operations and their staffing model as well as the obvious competitive factors. This category continues to grow despite these elements due to expanded assortments, increased shopping options (digital/delivery) and an increased focus on the experience. Knowing which tech to implement becomes the greatest challenge. Do too much (or target the wrong tech) and you can alienate your core customer – do too little and you will get quickly left behind.
C-stores will always be competitive provided they know their customers, their trading area, day part variations, and adjust inventory – selection and merchandising – accordingly. I think the greatest technology potential lies in data analytics.
“Day part variations…” Great way to put it. Like “wearing moment” in apparel. Different best sellers morning, noon and night. No wonder there is always a palette being unloaded somewhere in my local c-store no matter what time of day I stop in.
One of the great differentiators for C-Stores is their ability to help customers accomplish multiple things in short order.
An example where tech can help? Mobile pre-ordering in advance prepared food for pick up (i.e. fresh made pizzas, grilled sandwiches) to save valuable time, whether on the way or onsite while pumping gas (via scanning a QR code and menu as your tank is filled). Taking care of two things in 10 minutes when it could have been 20 to 30 gets customers to where they need to go with some time margin. This is especially helpful in more rural areas where the C-Store is an important provider in the community. Thank you, C-Store!
The literal meaning behind the existence of convenience stores is “to provide the customers a state of convenience.” You need to fully understand your customers and target audience to deliver the solutions they want. 10 minutes delivery service is slowly losing its appeal. Today, customers are willing to pay more to avail a seamless shopping experience. Convenience stores should invest in systems that can give the best returns on their inventory and ensure higher conversion rates. Implementing Omnichannel Strategies like Buy Online Pick-up in Store (BOPIS), Ship from Store, and Store Inventory Management can be one of the most efficient ways to meet the consumers changing behavior. C-stores should provide a unified experience by striking a balance between In-store and Online operations. For example, ordering online and then later picking up those items in the store when they are ready for pickup, is such a hassle-free way to shop. Costco fits perfectly into this scenario, they excel at delivering their customers a remarkable shopping experience. If paved correctly in the right direction convenience stores can take their business to the next level!
Convenience stores ofter serve the “on the go” consumer. The need things as they are mobile. All the points mentioned regarding assortment and partnerships are valid, but the mindset is not always about getting goods to the home. C-Stores also serve the needs of shoppers moving from one place to another and speed is an essential component of convenience.