IRVING, Texas -- The retail sector is abuzz over disruption. It’s Amazon’s and Wal-Mart’s daisy-cutter strategy as they and others jockey for digital and brick-and-mortar supremacy.
Disruptors—category-killing agents of change—offer consumers new and suddenly essential products and services in a way that is so transformative that it displaces traditional providers or renders their traditional products and services obsolete.
What does this retail disruption mean for convenience-store retailers who are attempting to access what effect, if any, recent developments—including Amazon’s pending Whole Foods acquisition, its Amazon Fresh Pickup grocery delivery and its cashierless convenience Amazon Go experiments, and Wal-Mart’s various forays into the convenience format such as Wal-Mart Pickup With Fuel—will have on their channel?
The c-store industry has been seemingly resistant to disruption, with its captive audience of commuters, soccer parents, errand runners and traditional consumers bound to brick-and-mortar stores by their vehicles and by the needs of their stomachs.
“Our industry’s perspective early on was that we were somewhat insulated from what was going on,” Joe DePinto, president and CEO of 7-Eleven, recently told CSP magazine. “It’s the last area that they haven’t been able to fully crack.”
- Click here to read the CSP June cover story 7-Eleven: The Original Disruptor, as well as the cover stories on Amazon and Wal-Mart. The features are part of an ongoing CSP focus on how disruption affects the c-store industry.
DePinto takes disruption seriously. At 7-Eleven Inc., Irving, Texas, he and his team have a chart that tracks disruptors across all retail sectors. “It had been my perspective that some of the disruptors would zero in on immediate consumption,” he said. “So having a strategy, and moving quickly and aggressively, is very important.”
Read more about DePinto’s views on disruption and convenience in this exclusive Q&A …
Q: How do you view disruption as it affects the c-store channel?
A: It’s a dynamic time right now in the convenience-store industry. And it will continue to be. I don’t see it slowing down; in fact, I think it’s going to be the absolute norm, driven by millennials and smartphone technology. We need to be part of that value chain.
We have to keep up with the pace of change. Our entire team here sees it. We see things changing quicker than we’ve ever seen, and more dynamic, with more impactful change. Real, substantive change. It used to be somewhat incremental. Now it’s happening in big bites.
Q: Where do you see disruption coming from?
A: I think it’s going to come from a lot of different areas. Amazon is one of the e-commerce retailers that obviously has been very successful. Wal-Mart in some sense is a little bit behind but catching up. The challenge that Wal-Mart has is that they’re brick-and-mortar sites, and they needed to get into the delivery business, which they’re in now with their acquisition of Jet.com. They’ll continue. They’ve also redeployed a lot of their resources into supporting their digital efforts.
But it’s not just Wal-Mart and Amazon in the retail space. Disruption is coming across all sectors of business, all channels of retail.
Q: What is 7-Eleven’s strategy to deal with these forces?
A: Our strategy has been first and foremost to understand the customer. Today, at 7-Eleven, over 50% of our customers are millennial generation. They are really leading this whole change. For us, it’s how to be more convenient. For the millennials, what we see is that they are more on the go, more time starved, they’re eating differently, they tend to be moving toward more urban areas, they’re looking for more … they’re not shopping brick-and-mortar as much, and when they do, they’re looking for more of a one-stop shop. And they’re getting pretty demanding and discerning around quality and what they’re going to pay for that quality. And so all of that has really led us to try to be more convenient to them, and that means figuring out this "last mile"—quite frankly, it’s really the "last several blocks"—and deliver convenience in the way they want.
We see ourselves as a neighborhood store. And we’re trying to be closer and more convenient to the customer. That’s our strength, that our inventory is very close to the customer in a time when they are seeking more convenience than ever. With channels blurring the way they are, margins are going to get compressed, and so scale is going to be important. We’ve been involved in acquisitions. The industry has been consolidating, and we’re going to continue to take part in those in a measured and disciplined way.
- Click here for details on 7-Eleven’s recently announced acquisition of more than 1,100 company-owned c-stores from Dallas-based Sunoco LP.
As fragmented as the industry is … consolidation will continue, and we’re going to be part of it. We’re going to be smart and disciplined, looking for the right assets.
Q: How do today’s consumers want convenience?
A: That could be in the form of order and pickup—stop in if you’re passing by or it’s on your route or part of your normal pattern … deliver product to them … and then allow them to pay how they want. That will be table stakes to get in the game. I do believe that convenience stores are perfectly positioned to deliver on those consumer demands. It’s because our inventory is so close to the customer. In the delivery and click-and-pick business, that is going to be very important. It’s why you see all of the big boxes trying to move toward smaller boxes, to get their inventory closer to the consumer.
Q: Besides smartphones, what other technology will come into play to deliver that convenience?
A: Drone delivery is going to happen; it’s just a matter of time. It will be a convenience service. And it will allow for very quick delivery of product. For us, it’s R&D (research and development), and understanding it, being prepared. But I can tell you that it does resonate with the consumer. The timing of that I can’t tell you, but in five years, we’re going to see more of them, and in 10 years … I don’t know when it’s going to be mainstream, but it’s going to happen.
Whoever can deliver product fastest to the consumer is going to win, and drones are going to be part of it. It’s kind of an evolution from the grocery delivery companies of the dot.com era. Now that has evolved into the shared services, the shared economy with the Ubers and Lyfts and Postmates. And at some point, it’s going to go to unmanned drones.
We haven’t done [autonomous vehicles] yet, but those will play a big part also. For us, it’s about building this whole ecosystem around who we partner with and what digital resources they bring and how we can play a role in that. Partnering with the major automakers and Lyft and Uber is going to be important because are we on their touchscreen in their car? Can they quickly know where there’s a local 7-Eleven?
Q: As Southland, 7-Eleven practically invented convenience in the 1920s. Is 7-Eleven itself a disruptor?
A: I tell our folks "don’t chase the competition. Have your own perspective, understand the external environment—not only the entire landscape looks like, but where the consumer is going—and then have your own point of view and plans and strategies about that, not where the competition is going." In that sense, I do think that we’ve been a bit of a disruptor. It’s not our goal to disrupt. It’s our goal to deliver on what the consumer wants, but some have been slower to do that than others. In that sense, I think we have been a disruptor.