NEW YORK — To succeed in today’s environment, convenience store retailers need to focus on four winning strategies, according to a new report, "What Convenience Stores Should Know — and Do — in 2017," from consulting firm AlixPartners.
"The competitive landscape is growing more complex, presenting both challenges and opportunities for some c-store chains," according to the report from the New York-based firm. "C-stores are well-positioned to operate effectively in this landscape. After all, many have prime real estate locations, and their offerings cover multiple dayparts as well as other major categories such as fuel, which can add value even as a potential loss leader. But to succeed in the future, they’ll have to build on those advantages and adapt to the trends shaping their industry."
The four winning strategies identified in the report are:
1. Enhanced execution of foodservice programs;
2. Improving the customer experience;
3. Pursuing organic and acquisition-based growth strategies; and
4. Developing comprehensive enterprise productivity programs.
In Part 1 of this series, we examined the first strategy: enhanced execution of foodservice programs. Now, we turn our attention to the second strategy: improving the customer experience.
Offering unparalleled convenience and ease of delivery goes a long way toward enhancing customers’ experiences with food products, as well as in-store merchandise, according to the report.
Capitalizing on digital technologies such as mobile loyalty programs and mobile payments can further help operators attract and retain c-store customers.
Mobile loyalty programs are top of mind for consumers, especially millennials, said Eric Dzwonczyk, co-head of AlixPartners’ restaurant, hospitality and leisure practice, and a managing director of the firm. Mobile loyalty programs shape consumers’ decisions about which c-stores to patronize and can generate valuable consumer data to inform operators’ strategic decision-making.
The report cites Atlanta-based RaceTrac Petroleum Inc., which recently launched a 100-percent in-app loyalty program. The program comprises several tiers and as customers move up the tiers, the list of items for which they can redeem rewards expands, as does the number of free items available to them. An enhanced store locator shows RaceTrac customers the locations of the nearest stores, as well as their prices and amenities. The app scored 250,000 downloads in just four weeks following its launch, according to the AlixPartners report.
Other technologies such as mobile payments are less important now to c-store operators, but continue to grow, Dzwonczyk noted. Many millennial and Gen X respondents in AlixPartners’ consumer study said they had used a mobile device to pay for products at a convenience store in the previous 12 months. The total value of mobile payment transactions in the United States is expected to reach $62.5 billion during 2017.
To improve the customer experience, the report predicts retailers will explore new offerings to drive throughput, including delivery and drive-thru options. Innovations such as curbside pickup will gain more importance and smart retailers will develop an integrated digital platform to serve customers.
The report also predicts that alternative distribution channels could alter the convenience store landscape in the near future.
Amazon.com, for example, is planning on opening small brick-and-mortar convenience stores where consumers can order products online and have them delivered to their vehicle outside. Other convenience stores are reportedly considering expanded curbside pickup as well. In a consumer survey, millennials and Gen Xers said they were particularly interested in curbside pickup service.
In terms of delivery services, Sheetz Inc. recently announced a partnership with OrderUp, a restaurant food delivery service, and is piloting delivery at two of its stores for its signature MTO (made-to-order) products. In addition, 7-Eleven Inc. has partnered with Flirtey to test drone delivery, with a recent successful attempt in Reno, Nev.
In Part 3 of this special four-part series, we’ll look at AlixPartners’ advice on pursuing organic and acquisition-based growth strategies.
To view the full AlixPartners’ c-store study, click here.