‘Convenience’ Is Epicenter of Today’s Channel Blurring

NATIONAL REPORT — Channel blurring is not a new concept, but the “convenience” aspect of it — unluckily or luckily for the convenience retail channel depending on how it reacts — is getting a lot of new play.

Supermarkets, big-box retailers, drugstores and entirely new channels are claiming “convenience” as their own through concepts such as home delivery, at-store pickup, small-format/express stores, and more.

While it is still only a small percentage of total grocery sales, home delivery is growing at double-digit rates, according to Nona Cusick, senior vice president of consumer products, retail and distribution for Capgemini, a global provider of consulting, technology and outsourcing services.

The younger generation is compelling this convenience evolution.

“Millennials have grown up with the convenience of being able to order anything they want and receive it in two days or less — so, why not groceries?” Cusick explained. As a result, many of the players in metropolitan areas are now targeting same-day delivery.

“Home delivery for packaged goods, cleaning supplies, beauty products and paper products, for example, will continue to grow as the competitive landscape expands and the cost differential over brick-and-mortar continues to decline,” she predicted.

Regarding at-store pickup, Wal-Mart Stores Inc. launched its Walmart Pickup Grocery service in its hometown of Bentonville, Ark., in September. The idea is that registered customers can place an order from the website, which offers approximately 10,000 grocery and consumable products including fresh meat, dairy and common household goods, and then schedule a pickup time. The time can range from two hours to three weeks after placing the order. When they drive to one of the kiosk stations at the pickup site, they notify an attendant who brings the order to their car. There are no hidden fees or surcharges, according to the retail giant.

At least for the moment, curbside pickup outside a store is one of the digital grocery shopping options garnering the least interest in the United States, according new research released by The Nielsen Co. in late April. Nielsen’s report, Global E-Commerce and The New Retail Survey, found 39 percent of U.S. respondents to its survey are not willing to use online ordering for curbside pickup.

Of the three potentially threatening concepts to c-stores — home delivery, at-store pickup and small-format/express stores, the growth of the latter across all retail channels is the biggest danger to convenience stores, according to experts at Catapult Marketing, a conversion marketing agency that works with its clients to turn shoppers into buyers and buyers into brand advocates via insight-driven marketing.

“The role of convenience has always been to provide instant/on-the-go solutions to the consumer in close proximity to their immediate location,” stated Jeff Compo, vice president of Catapult Marketing. “Now, many big-box, grocery and drugstores are coming into the smaller format space in large numbers and are able to provide convenient solutions to shoppers whose mission is not only instant consumption, but a fill-in trip as well.”

Walmart has several smaller formats in operation today and is in the process of expanding their reach, including Walmart Neighborhood Market (613 locations as of March 31), Walmart on Campus (five locations as of late April) and Walmart to Go (one location in Bentonville). Target Corp., too, is rapidly growing its small-format TargetExpress concept. In February, Target said eight of the 15 new U.S. stores it will open in 2015 will be TargetExpress locations.

These smaller format/express stores have the opportunity to become “super convenience stores” driving more volume and larger baskets, according to Compo.

Look in the June issue of Convenience Store News for more on the “convenience blurring” trend, including tips on how c-store operators can fight back.