CHICAGO — Convenience stores with a strategy of staying put are definitely in trouble, said Mitch Morrison, vice president of retailer relations for Winsight, during Invest or Divest: Staying Put Is Not a Viable Strategy, the Convenience Retailing University (CRU) Community kickoff session last week.
Along with Donna Hood Crecca, principal at Technomic Inc., Chicago, the two gave an overview of the convenience-store market that included looks at an uptick in acquisitions, dinner options, self-checkout availability and drive-thru service.
Here are the highlights of what they discussed …
“The last quarter of 2020 saw a tremendous acceleration, saw more than a dozen deals in our industry,” Morrison said. Buyers included Parkland, 7-Eleven, EG Group, Kwik Trip and Casey’s. Sellers included Speedway, Stop-N-Go, Bucky’s, QuickChek and Holmes Oil (Cruizers).
“Most surprising,” Morrison said, “was we saw many veterans who chose to get out, and for many good reasons. Some looked at the investment required to really stay relevant and to have a spark in their business going forward and they decided they didn’t have the appetite to do it. We saw great chains, many family-run … were on the seller’s side.”
Why? “They just didn’t have the appetite to make the necessary multimillion-dollar cash infusion and people infusion to really stay relevant going forward,” he said.
In 2020, the industry saw a considerable amount of investment in something new, Morrison said. And this wasn’t just from major players but also from a number of small to midsized regional players. Rutter's, for instance, “got liquor license in West Virginia, removing in-store seating and replacing it with a very robust liquor store," he said.
“New profit centers create new reasons to visit convenience-store locations,” Morrison said. “We are seeing a behavioral change in our operation and in our profit drivers.”
Does your chain offer traditional c-store fare with a classic candy and snacks, beverages, tobacco and fuel in the forecourt, or is it something more, he asked, noting that MotoMart is investing in video gaming in states that permit it.
Return to classic
Another interesting area is the return of the superette. “When we look at the original c-stores from the 1940s, 50s and 60s, many of which started as dairies, there was a small grocery with a small butchery section,” Morrison said. “Guess what, Yesway has revived that with their Allsup’s Market.”
Kwik Trip, he added, has made major investments to provide a solution for families with take-home options. This trend originated and was accelerated by COVID-19, said Morrison, who is seeing more opportunities in this area.
Solutions via tech
Solving logistical and space-constraint challenges has long been a major concern for the industry. Now, Morrison said, technology has provided solutions. “Technology enables more cost-effective opportunities to enable meeting the customer.”
Urban models like Foxtrot and suburban models like Wawa are using third-party delivery and curbside pickup due to the greater availability of mobile communications. “It’s very sophisticated in helping the customer and retailer engage each other any time they want and where they want to,” he said.
For consumers today, it’s all about minimizing touch points and maximizing the speed of their transaction, Crecca said. “Self-checkout is expanding very rapidly. It provides that speed and ease for the consumer, and for the operator can reduce labor and increase the granularity of the purchase data they can obtain.”
“Circle K has a system that has facial recognition,” Crecca said. “For customers who register, they literally never have to open their wallets.”
Scan and go
“Their app-driven system rolled out in April , and it takes that transaction at the checkout literally off the table. That might strike fear into some operators because we all know how much impulse purchase happens at the checkout counter,” Crecca said, “but there’s an implication that we might have to rethink how we engage consumers who are just walking in and scanning and going. How do we maximize their time in the store? But these things are happening.”
Another emerging technological piece, one making quick-service restaurant (QSR) operators very nervous, Crecca said, is the convenience operators’ forays into drive-thru. Wawa opened a drive-thru location and RaceTrac is leaning into drive-thrus, indicating that the blurring of the line between the segments is only going to accelerate. “And it puts this particular industry into a much more competitive position for not only the foodservice occasion but purchasing in other categories.”
Crecca added, “I think the pandemic really prompted so many operators to fast-track the development of these tech-driven amenities. An upside to this crisis: The guardrails came down on innovation and the process was really accelerated.”
These purchase models get us closer not only to who the customer is but how their basket will change based on how and where the purchase and the transaction is taking place, Crecca said. “This is ushering in an era of 'customerization,' a new way of engaging, where the loyalty and perks programs are highly customized based on that customer’s habits and their unique preferences.
Offers and promotions can be tailored to the daypart, location, even the need state of the consumer in terms of where their order is being placed and how they are paying.
“So you think of next-level loyalty program apps that are going to know if the customer is just a quarter mile away from the store,” Crecca said. “Maybe they’re placing an order for a cup of coffee they’re going to run in and pick up, but could we be enticing them in real time to add a specialty doughnut?”
Or, if the customer is ordering lunch for the home office, the app can suggest adding a past favorite for dinner to the order, she said.
This customer intelligence available via these new technologies takes suggestive selling to a whole new level, Crecca said, but it will require investment in technology infrastructure, systems and talent, “and that might be a reach for some organizations.”
All of this is happening as some key categories are evolving rapidly, including foodservice.
“The foodservice revolution has been going on for a few years and has continued through the pandemic,” said Crecca, noting the Technomic has been tracking the continued elevation of quality, flavor and craveability of core menu items as well as of limited-time offers at c-stores.
“We’re finding the consumer demand for unique and craveable items didn’t dissipate during the pandemic,” she said. “In fact, it actually increased. Unique, craveable items I can’t make at home are important in determining the store of choice for consumers for 67% of consumers overall, up 5 points from 2019.”
Shift toward dinner
Crecca said Technomic sees dinner as a daypart ripe for expansion as the consumer need states are evolving. While the morning daypart has been impacted by changes in routines, consumers also need more solutions around dinner.
“We were tracking the fact that c-stores have increased credibility and awareness of the dinner daypart prior to the pandemic, so put those two things together and I think there’s a big opportunity at dinner, and several chains have really gotten into it and gone after the dinner daypart,” said Crecca said, noting great taco dinners offered by Kwik Chek.
Finally, brand identity is a crucial component for a retailer's customer base.
“You want to create that emotional connection to your brand that drives trust and keeps you top of mind for the foodservice occasion,” Crecca said.
Read the second part of this discussion by clicking on "Next slideshow" below.