Convenience retailers aren’t letting the pandemic get them down

Discussion
Photo: 7-Eleven
Jan 12, 2021
George Anderson

If the pandemic served up lemons for convenience store retailers in 2020, the vast majority were able to turn them into lemonade based on the results of a new survey by NACS.

Nearly twice as many operators (59 percent versus 30 percent) reported achieving same-store sales increases than decreases last year. The channel, which represents 80 percent of all fuel purchased in the U.S., saw declines in gas sales and customer traffic during the year. Many quickly shifted focus to ready-to-eat and heat-and-eat foodservice items.

“More than anything else, stores had to look at how they fit into new routines,” Jeff Lenard, vice president, strategic industry initiatives, told RetailWire. “In some cases, that was a significant challenge, especially for stores that previously had heavy commuter traffic. In other cases, there were opportunities as some consumers looked to convenience stores more as an option for quickly picking up pantry items.”

Thirty-nine percent of those surveyed increased their emphasis on cleaning/toiletry categories and 34 percent percent did the same on grocery items. Stores, which are heavily reliant on the sales of alcoholic products, increased their focus on take-home sales as on-premise consumption was severely limited by COVID-19 transmission concerns.

The channel had to overcome numerous pandemic-driven challenges in 2020, including product supply, coin circulation and labor.

Sixty-nine percent say they had difficulty remaining in stock on cleaning products and toiletries. Forty-eight percent reported alcoholic beverage shortages and 42 percent had the same problem with non-alcoholic drinks.

Labor was a major challenge that convenience operators had to confront last year with 69 percent reporting difficulty in finding qualified candidates to fill open positions.

Convenience retailers, hardened by the experience of the past year, are moving into 2021 with the pandemic raging at record levels across much of the country.

“There really isn’t a one-size-fits-all answer for what will stick in 2021 and beyond,” said Mr. Lenard, who sees three areas retailers will concentrate on going forward: people, added convenience with take-home and pantry items, and the deployment of technology.

NACS reports that 38 percent of those surveyed plan to expand app-based ordering and payments. Thirty-two percent will build out mobile ordering for store pickup and 14 percent will include offers at gas pumps for pickup. One-third will offer more curbside pickup, 18 percent will employ drive-throughs and 17 percent will add home delivery.

DISCUSSION QUESTIONS: Do you think that convenience stores will come out the other end of the pandemic in a stronger or weaker competitive position than they were going in? Where do you see the greatest opportunities for retailers in the channel going forward?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"The c-store world is more than half comprised of independently owned stores and franchised businesses. That means flexibility when it comes to a retail challenge like COVID-19"
"Based on my experience with the c-stores we work with, I can say that a large percentage of the segment will come out stronger than before."
"Convenience stores are quickly approaching consumer recognition as the local corner store."

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25 Comments on "Convenience retailers aren’t letting the pandemic get them down"


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Neil Saunders
BrainTrust

The vast majority of the categories that convenience stores sell grew strongly in 2020, so from that perspective they were well positioned for growth. On top of that a lot of consumers shopped more locally and closer to home, especially for top-up purchases – a dynamic that benefitted the convenience sector. That said, there is no room for complacency as there are plenty of challenges on the horizon. Price pressures from rivals, the expansion of convenient dollar stores, and the consolidation of shopping trips including the ongoing shift to online are just a few of the issues the convenience sector will have to grapple with in 2021.

Gary Sankary
BrainTrust

I 100 percent agree that localized shopping is a big plus for this segment. I suspect the growth will continue in urban markets where these stores are within walking distance. Once I get in a car then all bets are off – then I start thinking about consolidating trips, and one more stop at a convenience store to get something doesn’t quite make the cut.

Mark Ryski
BrainTrust

Yes, convenience stores will come through the pandemic well and some of them may be stronger on the other side. As the pandemic rages on, convenience stores have become an essential supplier to many people for a wide and expanding offering of goods. I think the greatest opportunities are being uncovered as convenience operators expand their offerings, particularly in ready-made food — a category that had been gaining importance even before the pandemic.

Joel Goldstein
BrainTrust

The convenience store world is more than half comprised of independently owned stores and franchised businesses. That means flexibility when it comes to a retail challenge like COVID-19. These businesses know their customers better than almost any other as they see a lot of the same customers week after week, knowing what they buy and knowing their habits. We work with over 1,000 direct store jobbers that service these accounts and many are on the second and third generation owners as it remains a family business serving the neighborhood.

David Naumann
BrainTrust

Convenience stores have benefited from the same dynamics as grocery stores during the pandemic. As consumers curtailed their indoor restaurant dining and shifted to cooking from home or take-out of prepared meals, grocery and convenience store sales remained strong. While gas consumption was significantly down due to lack of travel, consumers valued the convenient location of convenience stores for staple items to avoid traveling farther to a large grocery store. Some of these habits will continue after the pandemic.

Oliver Guy
BrainTrust

Convenience retailers benefit from being allowed to stay open but also providing additional services (like Hermes/UPS drop off) to their communities that drive traffic. Success or otherwise can be impacted by converting that traffic into additional sales. Rarely have I seen stores set up and laid out in such a way as to maximize the potential of this. There is arguably something missing in terms of planning.

Chuck Ehredt
BrainTrust

Convenience stores adopted this name because they can be convenient. Since customers are time-starved, I envision those groups that can best tailor their offerings to the needs of customers will definitely come out of the COVID-19 situation stronger and grow revenue from customers that appreciate their products and services.

Of course given the footprint of most convenience stores, they cannot be everything to every customer, but since 70 percent to 80 percent of monthly consumption could be made up from a narrow selection of items, there are opportunities for such stores to take marketshare from supermarkets – at least for customers who are a bit less price-sensitive.

Online, however, convenience stores can sell with nearly infinite virtual shelf space. Whether they have the talent for extended e-commerce is a separate question – but definitely an opportunity.

Gary Sankary
BrainTrust

I don’t think the pandemic will have a demonstrative effect on this segment, good or bad. In urban markets, neighborhood proximities and walking distances will be key. In suburban and rural markets gas is critical to traffic. What I suspect we’ll see for these stores are more grab and go options for food and beverages. Especially prepared food that’s something better than hotdog rollers. Wawa has been a stellar example of this, and they’re rewarded with outstanding loyalty.

Michael Terpkosh
BrainTrust

The convenience store channel has done an excellent job over the last few years upgrading their stores, expanding on their non-perishable grocery item offerings and aggressively expanding fresh foods. This helped to prepare them for the pandemic. The channel also deserves credit for being nimble and recogniing changing consumer shopping trends. I believe the channel will emerge from the pandemic stronger than ever if they keep their eye on the consumer. Convenience stores are quickly approaching consumer recognition as the local corner store.

Shep Hyken
BrainTrust

Convenience stores are, as the name implies, convenient. In an era where consumers want to stay away from crowded stores – including grocery – the convenience store offers a safe haven. Like grocery stores, they are considered “essential” to the consumer, yet they are an alternative to the larger, more crowded grocery store. They must offer a level of confidence focused on the health and safety of their customers, as all business should do. They must have an inventory of what their customers want and need. That combination is what gets customers to keep coming back again and again.

Raj B. Shroff
BrainTrust

I believe convenience stores will come out stronger, COVID-19 has forced them to accelerate digital efforts which will help them longer-term. And it has exposed weaknesses which will allow management to take various scenario planning exercises more seriously.

While having the right alcohol assortment and some general merchandise will help, they also need to be thinking about the next generation. Fresh food, healthier assortment. Adding EV charging stations, seating options, drive-thru, delivery to car, maybe not be married to their standard box on a postage stamp with pumps out front.

Who knows, maybe Uber AV or Tesla will start their own c-stores to become modern day hubs like the old bus depots. Don’t ignore the near-term but think more broadly about the future.

Richard Hernandez
BrainTrust

Most definitely they will. I believe the pandemic has caused c-stores to re-evaluate their customer needs earlier than intended. Assortment, system enhancements, labor considerations, delivery options, are all being reviewed to see where c-stores can play in servicing their customers. The key is going to be how nimble the retailer can be to change quickly, as what we know now and how we do business will continue to morph even after a vaccine has been administered to the general public.

Perry Kramer
BrainTrust

Yes, the vast majority of convenience stores will come out of the pandemic in a better position than they went in. Much of this is because they put the convenience back in the consumer’s mind. Those that have expanded into quality quick serve food products are probably at the top of the winner’s board for several reasons including a mindset around cleanliness, safety and a focus on local product lines. Additionally, since almost all of them were able to stay open during the pandemic they had an opportunity to build and educate an expanded customer base on the depth of their product lines.

Brian Cluster
BrainTrust

Convenience stores will come out stronger at the other end of the pandemic due to their ability to meet the immediate needs of consumers that don’t want to venture out to the larger big box or supermarkets. I agree with Neil and Mark on a couple of their points on this channel. Convenience stores need to continue to improve and not become complacent on their food offerings. For many that do not offer quality meal solutions, it is time to test and learn what may be a better meal, whether it is a salad or a better sandwich offering or something else. By keeping a pulse on what their customers want, and testing out solutions, the better stores will evolve with the needs of the customer.

Dave Bruno
BrainTrust

The pandemic certainly created many challenges (fewer commuters, supply chain, staffing, to name a few) but it also created many opportunities for convenience stores. The pandemic highlighted what has been the primary value proposition of convenience stores forever: localized assortments, few crowds, and easy in-and-out shopping. The long-term opportunity for convenience store operators will be to keep these new shoppers engaged and coming back. They will need to continue to work hard to stay agile by adapting their assortments, offers, and shopping options as consumer needs and preferences change in the coming months.

Rich Kizer
BrainTrust

Convenience stores have become very aggressive and competitive in category offerings during the pandemic, and they’re not stopping. In the pandemic environment, the word convenience hit the sweet spot with many customers. And if their experience was sweet, they’re locked-in fans.

Andrew Blatherwick
BrainTrust

As a lot of consumers are shopping more locally and some are trying to avoid the large shops the convenience retailers have a real opportunity to show themselves and make themselves part of the consumer’s shopping habit. Many have done a great job in reacting to the pandemic with more convenient offerings, technology enabling online shopping, BOPIS and curbside pick-up. In the first wave, when shortages happened due to panic buying, many convenience stores had the stock when the large retailers were hardest hit. They will come out fighting and in a great place to move forward in the future. People have got back into shopping more local and have probably found the local convenience store a really great alternative to the big shops. They will not replace the big grocers but they can certainly live with them, and that’s why so many big grocers have either bought or established convenience stores of their own.

Georganne Bender
BrainTrust

Many convenience stores are independently owned or are independently owned small chains. Indie retailers are going to rise to the occasion, doing what’s necessary to save their businesses because, and I know I say this a lot, their stores are more than a job.

We frequently work in this industry. In recent years, convenience stores have morphed into comfortable, modern, well merchandised and nicely outfitted places to shop. They have the opportunity to easily shift assortments; many offer a nice selection of ready-made foods, including pizza-to-go that’s really good. Like any retailer, those that pay attention to what their customers want,
and add services and conveniences like curbside, will come out of the pandemic stronger than when they went in.

Gene Detroyer
BrainTrust

Convenience, convenience, convenience! That is the retail of the future, pandemic or not.

Grocery shopping will be bifurcated. There will be things needed urgently (convenience stores) and things one can wait a day or two for (online). That leaves a sad middle with less reason for being. We are looking at default behavior here and convenience stores are in the right range to take advantage of that.

Matthew Pavich
BrainTrust

Based on my experience with the c-stores we work with, I can say that a large percentage of the segment will come out stronger than before. The segment was already growing at a nice clip and offering great innovations and products to consumers heading into 2020. Although it is true that tobacco has been in permanent decline and fuel took a major hit due to the pandemic, it is also true that c-stores offered people a safer (fewer interactions), more convenient way to shop categories which generally (like supermarkets) benefited from the pandemic. On top of this, a large reliance on DSD and minimal inventory protected them from some of the inventory challenges faced by other segments. And let’s not forget that 2020 was a great year for merchants catering to people who needed a drink every now and then! As with all businesses who were able to find success during a pandemic, the true c-store winners will be the ones that continue to evolve and invest in their future.

Patricia Vekich Waldron
Staff

C-store operators who can quickly adapt at the neighborhood level will be rewarded by customers. Physical footprint, assortment and convenience (speed) in getting necessities are advantages.

Ryan Mathews
BrainTrust

I think in the short term c-stores have benefitted from the pandemic because they are, well, convenient and simpler to shop. The problem is going to be achieving and/or surpassing comp store sales once the pandemic has passed and life returns to what we laughingly call normal. I think the greatest future opportunities are still where they were pre-COVID-19: fresh, CBD products, and prepared foods.

Doug Garnett
BrainTrust

For things to continue differently after the pandemic convenience stores need to develop something deeper than their pre-existing offering— something adding new value. I don’t see that happening in general. That said, I can imagine specific stores in specific areas using this opportunity to expand their offering where they find a sweet spot with customers.

Camille P. Schuster, PhD.
BrainTrust

Knowing your customers, sales, and on-hand inventory allowed smart managers the ability to pivot and stock items customers wanted to purchase. Easier said than done but effective when done well.

Craig Sundstrom
Guest

While I’m not going to say “no” to any of these ideas, they strike me as very incremental changes (I’ll hesitate on calling them outright “improvements”). Convenience stores have always been about … well, convenience: a small number items always in-stock, minimal staffing, yet quick in-out, etc. It’s a well, if narrowly defined formula that doesn’t seem to allow for a lot of modification(s). The thought that someone will (pre) order a fountain drink on their phone, and then expect it delivered curbside doesn’t compute for me.

wpDiscuz
Braintrust
"The c-store world is more than half comprised of independently owned stores and franchised businesses. That means flexibility when it comes to a retail challenge like COVID-19"
"Based on my experience with the c-stores we work with, I can say that a large percentage of the segment will come out stronger than before."
"Convenience stores are quickly approaching consumer recognition as the local corner store."

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