SEATTLE -- In 2017, a host of former giants of the brick-and-mortar retail industry—Macy’s, Sears, J.C. Penney, Gap, Payless Shoesource, Kmart and more—closed more than 5,000 stores among them across the United States. As of August 2018, more than 4,000 additional stores have closed.
There’s no denying the revolutionary impact of e-commerce on the traditional world of retail. While it’s not the only reason large and small retailers alike are struggling, most of the recent closures, bankruptcies and major restructuring efforts can be traced back to traditional business models and leadership that was too slow to recognize and adapt to new customer expectations.
This is now known as the Amazon Effect, named for the e-commerce superpower that has both shaped and benefited from those new expectations. A study published by SOTI Inc. cited the following trends:
- 76% of consumers have a better in-store experience when retail sales associates are armed with technology.
- 92% of shoppers prefer stores that offer mobile experiences.
- 73% want mobile POS for quicker checkout times.
- 65% want location-aware coupons.
- 61% would choose using a kiosk over speaking with a sales associate.
- 53% prefer self-checkout.
- 47% expect personalized service.
All of that is well and good for the Barnes & Nobles and Macy’s of the world. But how is the Amazon Effect affecting convenience stores? And what can current and prospective c-store owners and managers do to counteract the trend?
Convenience Stores Stand Strong
When Netflix appeared and grabbed widespread market share incredibly fast, the end of Blockbuster Video and its ilk was basically a foregone conclusion. Thus far, Amazon and other e-commerce giants haven’t had that effect on convenience stores. Unlike physical retail locations that sell clothes, books and similar items, the inherent value proposition of every c-store can’t be mimicked and improved upon via a digital catalog and fast shipping … yet.
What c-stores offer is a fast, conveniently located source for gas, basic groceries, snacks and a limited stock of other products that people are likely to pick up on the go. It’s primarily based around two realities of human nature: laziness and impulsivity.
This may sound bad at first, but let’s be honest: We’re all inherently lazy in certain situations.
If you see a quarter on the ground in front of you, you will most likely bend down to pick it up, probably with a momentary smile on your face. Nearly all of us would. But if you spotted that same quarter through the grate at the bottom of a storm drain, would you consider going through the effort to get your hands on it?
Of course not.
So in this case, we’re not talking about a negative personality trait. We’re talking about a practical laziness that guides most people toward the path of least resistance.
It’s that kind of laziness that keeps commuters swinging into their favorite corner convenience store to grab milk and bread on their way home, even if they know prices are lower and there’s greater selection elsewhere. The store is on the way home, and getting in and out is fast and easy, so they don’t even need to think about it.
Whether you consider this trait to be good or bad, the business model of convenience stores is built around it.
Consumers walk into a store with one item in mind, but when they’re hit with the sights, sounds and smells of a thousand intriguing, helpful and/or tasty products, there’s a high chance they’re going to walk out with more than they anticipated. This human tendency is enhanced by hunger, mood, time of day, day of the week and numerous other factors unique to each customer. When you add the effect of strategic marketing, signage, product placement and store layout, the c-store thrives on impulse buying.
Despite these factors, even c-stores are beginning to feel the pinch of e-commerce capabilities that seem to increase in speed, value and reach on a daily basis.
With its acquisition of Whole Foods in August 2017, Amazon put the entire grocery industry on notice: Technology has risen to the challenge of turning the weekly trip to the grocery store into a frictionless, digital experience customers can enjoy while curled up in bed.
No, it’s not perfect yet. The supply chain still creates some snags for fulfillment, and the bulk of grocery-buying American households haven’t yet moved to a strictly digital format for food purchases.
But Amazon also isn’t the only player on the field. Mobile apps have taken advantage of the gig economy to make local shopping an outsourceable task. Many other services, such as Blue Apron, are cutting down on shopping trips by supplying ingredients and recipes in simple and convenient kits that are shipped to your door on a subscription basis. And hundreds of different sites offer prepackaged, shelf-stable and nonfood goods (which we used to buy at the grocery store) at highly competitive prices.
Falling back, once again, on our human tendency toward laziness, we must admit that having our peanut butter shipped from a fulfillment center is easier than going out to the store.
All of these factors will reduce the need for commuters to swing into the nearest convenience store on their way home from work, because the nonperishable products are likely to be sitting on their porch at home (in a smiling cardboard box).
And because they’re still just as lazy and impulsive, buying online satisfies those tendencies just as well as, if not better than, the convenience store can.
Right now, there’s no need for c-store owners and managers to succumb to any gloom and doom.
There’s no way Amazon can package and ship gasoline to every American’s home, and the move to electric vehicles is going to be a slow and steady one by all indications. The same is true of alcohol and tobacco products, as well as highly perishable items such as milk.
But that doesn’t mean convenience stores can sit back feeling safe. After all, let’s not forget that three Amazon Go physical stores have already opened in Seattle.
It’s vital for any store that wants to remain relevant in the minds of the customers to embrace the new expectations the ecommerce revolution has fostered and deliver on those expectations flawlessly. Here are some tips for doing just that:
- Invest in a mobile app. The largest c-store chains have had apps for years, and as development cost has dropped and customer usage has skyrocketed, even smaller chains and independent stores should explore the benefits of going mobile.
- Accept mobile payment. The convenience of tapping a phone on a payment device rather than swiping a card or counting out cash means more to customers now than ever before. Failing to offer the most popular mobile payment options today is like refusing to accept debit cards 15 years ago: a bad idea.
- Get with the (loyalty) program. Loyalty programs are incredibly effective at keeping customers coming through the door. By offering a solid loyalty program that’s as fast, simple and seamless as possible, your store can cash in on that effectiveness.
- Put up digital signage. The more interactive your signage (and all your marketing efforts), the more effective it will be. Both inside and outside your store, take advantage of the relative low cost and high residual value of digital signs that can be easily customized and even integrated with apps to create personalized, intelligent experiences.
- Consider self-checkout and/or kiosk services. While the initial investment may be higher than other items on this list, grab-and-go is the future of retail, so it’s really just a matter of time before self-checkout and ordering kiosks are everywhere. At this point, the fully mobile and touchless environment of an Amazon Go store has a thousand bugs to be worked out. But offering your customers the speed and convenience of self-checkout (like Walmart’s Scan ‘n’ Go registers) and kiosk-based ordering (such as Sheetz) are well within most c-stores’ reach.
There’s no way for modern retailers to eliminate the Amazon Effect. It’s simply the direction retail is heading. But by understanding the drivers behind it and how they affect your store, every convenience-store owner can get ahead of the Amazon effect and stay relevant well into the future.
Bruce Hakutizwi is the U.S. and international business manager of BusinessesForSale.com.
Photograph courtesy of Shutterstock