The New Definition of Convenience Retail
Thanks to time-pressed consumers, the need for convenience is paramount and retailers, in all channels, are deploying tactics to get consumers what they want as conveniently as possible. Millennials, in particular, value convenience in urban areas.
Retailers across all channels are now competing on convenience, making the environment tougher for players in the traditional convenience/forecourt retail channels. However, there are tactics that traditional convenience retailers can use to remain competitive.
With no time, consumers value convenience
Consumer-led changes involve the rise of millennials and urbanization across the country. Urbanization in the US had led to a larger group of time-pressed consumers that emphasize convenience as a key purchase factor. From 2004-2014, there was a 12% decline in the time spent shopping for consumer goods according to the US Bureau of Labor Statistics. With millennials entering their prime spending years, these characteristics that define them have a significant impact on how retailers grow their businesses.
Two of the many characteristics of millennials that are important for modern grocery retailers are their changing expectations of convenience and a shift in attitude for car ownership. Customer expectations of convenience have changed due to an on-demand culture. A rising number of customers are becoming increasingly accustomed to on-demand services (examples include Uber, Amazon Prime Now, and Grub Hub). In some cities such as San Francisco, the on-demand culture is so prevalent that people do not even need to step outside of their homes for many services.
Furthermore, there may be a shift in attitude for car ownership in the US, adversely affecting overall visits to convenience stores and forecourt retailers. Millennials seem to value having access to a car more so than owning one. The number of dollars spent on leisure car rentals as well as transportation (buses and trains) have increased since 2010 and is projected to continue to rise from 2015-2019.
All retailers compete on convenience now
Retailers, outside the convenience channel, have responded to consumer demand for convenience, blurring the line between the convenience stored/forecourt retailers and other retailers. The shift to smaller store formats as well as the rise of ecommerce and delivery services contribute significantly to these company-led changes.
Many companies built on hypermarket and supermarket formats are moving into smaller store formats. Existing small formats, such as drugstores, have started offering fresh foods and a more expansive range of prepared packaged food items, all mimicking convenience stores and forecourt retailers. Examples of companies moving into smaller store formats include Walmart with its Walmart Neighbourhood Markets and Target with what were called City Targets. An example of drugstores expanding their convenience offerings is Walgreens. In urban areas such as Chicago, Walgreens goes far beyond the typical drugstore. Services offered by select Walgreens include Nail Bars, healthcare clinics, frozen yogurt bar, and expansive food services.
Additionally, the rise of online retailers (such as Amazon) and delivery services (such as Amazon PrimeNow) has added another source of competition for convenience stores/forecourt retailers. Online retailers and delivery services are meeting consumer demands for immediacy and convenience that were previously fulfilled primarily by convenience stores.
What convenience stores and forecourt retailers can do to remain competitive
In addition to convenience stores and forecourt retailers, retailers in other channels are meeting consumer demands for convenience, blurring the lines that once distinctively identified the convenience store/forecourt retailer models. Nevertheless, there may be opportunities that these models can uniquely capture to distinguish themselves in the competitive US modern grocery market. With consumers busier than ever, the demand for convenience will not slow down, and convenience stores and forecourt retailers that best understand changing shopping missions and most efficiently meet evolving demands are best positioned to succeed.
- Reconsider product assortment and displays: Rather than simply expanding outlet count (an advantage that convenience stores and forecourt retailers already have), convenience stores and forecourt retailers should reconsider their product assortment and displays. Fuel and tobacco sales are declining and new product categories such as vapour devices and snacks/other meal replacements should be displayed up front to appeal to millennials. Store formats should be easy to navigate and products should be strategically displayed.
- Increase efforts to capture impulse purchases: Capturing impulse purchases is still an opportunity that channels outside of convenience stores and forecourt retailers cannot do as well. (Online retailing in particular will struggle with this.) By strategically utilizing product displays and great product assortment, convenience may be able to capture more of impulse purchases.
- Expand and improve food services: Key drivers of current revenue growth are found in expanding fresh foods (such as bakery/pastry items), onsite menus for breakfast, lunch, and fresh coffee that drive in-store traffic, provide higher margins and encourage purchase across categories. Convenience stores and forecourt retailers should aim to become a destination for fresh, quality, on-the-go foods (a megatrend for foodservice). This may mean giving more of the outlet space over to prepared food.
- Experiment with online shopping opportunities: Online shopping is inseparable from convenience retailing and convenience stores/forecourt retailers should seek to align themselves with the channel. A good case study is 7-Eleven partnering with Amazon to offer locker services in select stores in North America. Customers in US and Canada who either do not want or cannot have packages left on their steps or are travelling can arrange to have their online purchases delivered to these lockers for later retrieval. It is too soon to tell if this is worth the investment as it does take up space in stores although some outlets can place lockers outside the store, but convenience stores and forecourt retailers will need to experiment to integrate themselves with ecommerce.
- Provide better training for employees to provide faster services: Finally, convenience stores and forecourt retailers must ensure quick and seamless services to customers. Customers coming into convenience stores/forecourt retailers will not be patient with slow checkouts and services.