CSD: What Will Be the Future of Convenience Retailing?

Through a special arrangement, presented here for discussion is a summary of an article from Convenience Store Decisions magazine.

Looking out over the next 10-to-20 years, one thing is clear. The primary value proposition of the convenience store industry — as with all retailing segments — will have to be radically redefined or the industry will become obsolete.

"Today’s consumers are increasingly living in a world of 24/7 real-time access to a broad range of goods and services delivered through an ever-broadening platform of devices and interfaces," said Ryan Mathews, CEO of Detroit-based Black Monk Consulting and a globally-recognized futurist and consultant. "Old concepts like viewing retailers by channels — and making allowances for channel idiosyncrasies like higher price points and margins — are rapidly become a thing of the past, and it’s therefore unlikely to survive into either future."

One could make the argument that there will always be a need for emergency or last minute purchases, "but this is hardly a formula for a robust future," Mr. Mathews said.

So what might that future look like? "There is an old adage to the effect that he who pays for his food by staring into crystal balls had better be capable of living on a diet of shattered glass," Mr. Mathews said. "I’ll avoid the temptation to become too prophetic here other than to say that in a decade, successful and profitable c-stores will be doing a good deal more with customer-specific data processing. Within two decades the channel — as a channel — will likely be either almost entirely automated or will have ceased to exist."

The question he suggested convenience store retailers should begin asking themselves is: "What is the industry doing to address the potential of what some call M2M (Machine to Machine) marketing facilitated by the emerging and far-reaching capabilities of the internet?"

"For example," Mr. Mathews said, "imagine an interface of your car’s internal temperature control mechanisms and the c-store of tomorrow. On a hot day the onboard telemetrics could receive a personalized message from a customer’s favorite c-store, or one where he already has a loyalty card tracking his sales, alerting the driver to special discounts on cold beverages."

Similarly, a tie-in of weather forecasting, retail intelligence and onboard computers could alert drivers to stock up on appropriate driving aids like windshield wiper fluid and ice scrapers for snow.

While there is no end to questions about the future, Mathews concluded, one thing appears certain. "Unless things change quickly, I’m afraid discussions about the future of the channel may all prove moot," he said.

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Discussion Questions

How do you see convenience at retail being redefined in the years ahead? What will that mean for convenience stores?

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Steve Montgomery
Steve Montgomery
11 years ago

Convenience retailing has expanded beyond the c-store as other channels have learned the value of providing goods for immediate needs and/or consumption. It now clearly includes both the drug and dollar channels. It also includes QSRs, who have discovered the importance of the thirst occasion.

The c-store has evolved from a place that people bought center store goods for replacement to a place people go for snacks, immediate consumable food and refreshment. In the short- to medium-term, c-stores will become more like restaurants with a vast selection of drinks to accompany a meal or to be purchased on their own.

The technology Ryan mentions is closer than we may think. We have a client whose technology can suggest items based on what other items the person has purchased in the past. It can include the weather as an element determining what items to suggest. This can done via a mobile device or at the point of purchase.

Zel Bianco
Zel Bianco
11 years ago

Customer-specific data processing sounds sounds great for the c-store industry, but maybe they should at least start to get to where other channels have been for years first. The level of data available in c-stores is poor at best compared to other channels, and in order to be able to do execute on some of these great ideas, the channel needs to step up to the plate and take a few swings at understanding their shopper.

Gene Hoffman
Gene Hoffman
11 years ago

The successful hours of wise convenience store operators will be lengthened by their technological insights blended into human ideas.

As a sage futurist, Ryan is closely in league with the “M2M” future. He has pointed out the possible vicissitudes of tomorrow and the probable resulting trend toward automation. We are just in the beginning of the internet era and successful future convenience stores will be tied into every newly created event.

Still time, space and scarcities–time to be alone, space to move about and scarcities of product—may also play upon the future of convenience stores.

Ralph Jacobson
Ralph Jacobson
11 years ago

Here’s a thought: Isn’t ALL retail becoming “convenience” retail? People are spending less and less time in physical stores. Online will only become a larger part of all of our lives. Even shoppers who do not yet utilize mobile technology will be introduced to it sooner or later in the next twelve months.

For C-stores, specifically, the impulsive reasons people shop those stores provides opportunity to leverage technology to provide targeted offers in a timely manner that only mobility can handle. The C-store format will survive long term. It will integrate more and more technology, like every other format of retail. However, the “I need it now” mentality of so many of the shoppers of this format isn’t going away any time soon.

Mark Heckman
Mark Heckman
11 years ago

Fuel, cold and hot beverages, lottery tickets, quick meals and accessible restrooms are long-standing key consumer drivers of the C-store. As long as fossil fuel propels our vehicles, and Mayor Bloomberg doesn’t find a way to outlaw big soft drinks nationally, I find it hard to envision a world without fuel stations and their corresponding convenience stores. (Although as I write this I received an email blast that Hess is leaving the retail side of the business)

Certainly more co-branding with establish QSR operators, like Taco Bell, McDonald’s and the like appears in my crystal ball, but the techno marketing that Ryan Mathews speaks of is the most intriguing opportunity going forward. Fuel pumps and automobiles are being increasingly equipped with computer technology that is certainly capable of speaking to the other.

Forays into the techno-communications have thus far met with little success, but someone is bound to crack the code on content and devices that connect the traveler to c-store loyalty content that modifies behavior and drives incremental business. C-stores that integrate content and offers with the travelers, GPS, mobile phone or the vehicle’s inboard computer seems inevitable to me.

It’s getting harder and harder to keep one’s eyes on the road!

Bill Hanifin
Bill Hanifin
11 years ago

While we wait and see if machine to machine marketing takes over the convenience retail channel, there are big improvements that can be made now to defend the channel by store owners.

With a continually shifting competitive set and more product innovation beyond the “cokes and smokes” legacy model, convenience retailers should adopt a fresh approach to customer loyalty, using location based promotions and mobile channels to engage customers on the go.

Look for more aggressive co-branding of food and desert brands with convenience retail in the year ahead. Valero has partnered with Dunkin’ Donuts in some locations and I would not be surprised to see a national pizza franchise co-located in C-stores soon.

One key issue that cannot be overlooked is the overall image of the business. If convenience retailers wish to preserve their turf, it behooves management to get ahead of the curve on sensitive social issues to avoid unnecessary regulatory oversight as well as public smudging of the reputation.

Convenience retail should take the high road on social issues, partner with the right brands, and engage more “contextual” loyalty. If they do, they’ll find growth and profitability in 2013.

W. Frank Dell II, CMC
W. Frank Dell II, CMC
11 years ago

Historically, a convenience store had its highest sales the year it opened, then downhill from there. The business was based on beer, chips and cigarettes, which all have declined in sales. The next move was to prepared food, yet the majority of merchandise collects more dust than gets sales. Convenience stores now have direct competition from drug stores, which are open 24/7 and stock food items. Drug stores are now realizing that their prices must be closer to supermarkets’ than to the manufacturer’s suggested retail.

I suggest the majority of customers just purchase gas and never even go into the store. What the industry must do is identify and merchandise to a target market as step one. Then they need to create an interface with these customers that’s more than just a cup of coffee. They must be competitive for the fill-in milk, bread and egg items. They need private label and promotions. Last they will need a real frequent shopper program, not just tiered pricing to help interact with the consumer. What about being a pick-up point for items purchased online? They must think out of the old box.

Lee Peterson
Lee Peterson
11 years ago

I think it’s a Top 5 retail opportunity of the next 20 years. C-stores own prime real estate, the drive-by awareness is incredible and the brands are not totally denigrated. So, they need to keep doing what they’ve always done; give people what they want right now. In the past, is was ‘Coke’s & Smokes’, but now, it’s shifting to something else. Some neighborhoods may want fresh food to go, others may want a pick up spot, some may want both, but in any case, it’s much easier to make the necessary morph with the assets they have versus having huge boxes at the end of a parking lot expanse.

So I think they’re in position to address the challenges ahead; the real question would be, do they have the visionary leadership to get there?

Kenneth Leung
Kenneth Leung
11 years ago

I think c-stores are going to be more than traditional fulfillers of immediate needs like food and gas. Another area is to be fulfillment pick up points for e-commerce and day-to-day delivery like dropbox/locker services and other revenue models. If you treat c-stores as a connected, small footprint retail real estate network, with storage and payment options, you can open up new business models.

Jerry Gelsomino
Jerry Gelsomino
11 years ago

More automation, self-service, vending machine operations with home delivery or take-it-with-you options.