War for Convenience: The Question of Delivery

A quarter of consumers are visiting c-stores less and using delivery more

CHICAGO -- For retailers, home delivery can be like falling down a rabbit hole. But instead of psychedelic tea parties, retailers are met with questionable economics and scalability concerns. During its fourth-quarter earnings call, executives with Ankeny, Iowa-based Casey’s General Stores said it would scale back home delivery of pizza or hours of operation by 100 stores this past summer. Casey’s had introduced the service to 790 stores since its launch in 2011.

Unfortunately, regardless of the issues that c-store operators are having with home delivery, they may have no choice but to succeed. According to the Technomic report, a quarter of consumers overall and 43% of millennials agree that they are visiting c-stores less and using delivery more. Yet 52% of millennials say they would purchase from c-stores more often if they offered delivery.

If that’s the case, c-stores would be wise to learn from a brand that has been able to grow up alongside many millennials: Domino’s. Tim McIntyre, executive vice president of communication, investor relations and legislative affairs for the Ann Arbor, Mich.-based pizza giant, says that when Domino’s was founded 58 years ago, the pizza joint exclusively opened near college campuses and military towns filled with people who were hungry at odd hours. “Domino’s was literally built around the idea of delivery,” he says.

If convenience stores offered delivery, I would purchase items from these stores more often.

In the early 2000s, the company decided to make a massive investment in its own proprietary ordering and delivery platforms and mandated that every location adopt the systems.

When the smartphone came into the mainstream a few years later, the restaurant already employed hundreds of programmers and data scientists who could quickly integrate the brand into the technology. Today, Domino’s promotes Ann Arbor as the Silicon Valley of the Midwest and underlines its tangible project innovations to attract techies.

“Domino’s was literally built around the idea of delivery.”

With every point-of-sale (POS) in the Domino’s system connected to the same network and database, pizza purveyors no longer have to make decisions based on opinions alone—all opinions are now based on data, McIntyre says.

What types of items do you purchase via third-party delivery services?

In the past several years, Domino’s has launched pay by text, tweet and Facebook, as well as no-click ordering. Rather than using addresses, Domino’s focuses on GPS coordinates, which has enabled the company to deliver to 200,000 landmarks around the country. More than 60% of Domino’s sales come from digital platforms, McIntyre says.

Speed often drives usage of these services. About half of consumers who opt for online or app ordering over drive-thru or kiosk say it is faster to order this way, according to the CSP/Technomic report.

Of course, most c-store retailers don’t have the resources of Domino’s, which generated $2.8 billion in revenue in 2017.

How have your delivery orders from grocery stores or supermarkets affected your convenience-store visits?

That said, third-party delivery providers are entering the scene with potential solutions for retailers. John Nelson, president of Chicago-based online delivery concept Vroom Delivery, says that with the right technology, building out delivery and e-commerce capabilities is not that difficult.

“Every pizza joint in this country has been able to figure it out,” Nelson says. “It’s not an insurmountable problem, and it’s not even one that requires that many more hires.”

Vroom advises retailers on the best delivery model for their stores and creates a proprietary service through its platform.

Retailers can manage delivery fees, set their own delivery coverage areas, modify orders that include out-of-stock items and turn off delivery services altogether.

Of all retail channels, c-stores may have the most to gain from considering home delivery, Nelson says. Vroom’s secret weapon: alcohol sales. Nelson says alcohol is his platform’s best seller. “Alcohol can be used to drive those higher-margin food products,” he says.

Next: Considering Payment Options

Click here to read the complete War for Convenience report.

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