7 IMPORTANT FACTORS THAT WILL SHAPE THE FUTURE OF CONVENIENCE RETAIL

Jeff Williams, SVP of Retail and U.S. Industry Relations

 11-21-2019

Nielsen

Across the U.S. retail landscape, we believe convenience stores will grow faster than all other offline channels over the next five years, reflecting the hyper focus consumers are putting on expediency. Convenience stores, however, are no longer just competing against other convenience store players. Channels are blurring and C-stores now compete with an array of players that include: quick serve restaurants, smaller formats of grocery and mass and drugstores that are increasingly focusing efforts on fresh and fresh prepared/grab-and-go offerings. Additionally, digital transformation and the consumer’s growing desire for frictionless retail has raised the bar for convenience retailers and their approach to technology adoption. 

As a new decade of convenience retail unfolds, these are seven important factors that will shape the future of the convenience industry as we know it.

Prediction 1: Convenience Stores Become More Automated and Increasingly Unmanned

In China and Korea, consumers are already experiencing a whole new level of frictionless payments thanks to RFID, scanner, biometrics and sound wave technologies. In the U.S., Amazon Go has announced plans to open nearly 3,000 cashier-less stores by 2021. U.S. retailers take note, technology investment and adoption will play a critical role in deciding which C-store retailers will be threatened toward extinction and which ones will thrive in the years ahead.  

• In the U.S., expect upgraded technology to overhaul a number of things, including legacy systems. 
• Tech-enabled automation will fuel efforts toward customization. Look to examples in China, where automated baristas in stores allow consumers to order and pay through WeChat to choose their coffee type, exact temperature and taste profile.  
• Tech-enabled delivery systems will continue to roll out. And, as connected cars become a reality, we can envision technology fueling the ability to order in-store items from the pump for delivery to your car. 

Prediction 2: Convenience Store Food Service Gets an Image Upgrade 

Nielsen’s Convenience Store Choice Drivers shows that quality and variety of prepared foods are two of the top attributes that drive brand equity. With this in mind, C-store retailers are working to expand and optimize their menus, better cater to day part needs and meet the need for fast, fresh food. As the fight for “share of stomach” continues, we foresee a move toward upgrading the overall image of food service at convenience, as quality and selection of offerings continues to improve. 

Prediction 3: Increased Focus and Need for Quality Employee Training for CBD and Food Service

Many factors are influencing and shifting the traditional role of in-store retail employees, including the emergence of technology, the rise of fresh food service offerings and the federal legalization and widespread availability of non-edible cannabidiol (CBD) products. Within the coming months and years ahead, there will be an increased need to focus on quality employee training, specifically within the CBD and fresh food service sectors to ensure product questions (for CBD products) are being answered with accuracy and proper food safety protocols and standards are being reinforced.

Prediction 4: Convenience Stores are a Prime Target for Private Label Disruption 

The rise of private label within the U.S. has disrupted the traditional grocery retail landscape. Currently, only about 6% units sold in C-stores are private level, vs. 16%-23% in other channels. Given the growth opportunity, C-stores are a prime target for UPC private label disruption.  

Prediction 5: Convenience Retail Will Get Creative with Experiential Retail 

Retailers are increasingly relying on experiences to draw consumers into brick-and-mortar locations. Within the convenience store arena, experiences are growing ever more important—especially as C-store retailers fight to maintain and grow their share of stomach in an ever-crowded world of quick meal and snack options. Today, we see retailers adding seating areas and creating social gathering spaces. Within states where it is legal, we see C-stores putting in video gaming terminals. Retailers are also offering unique specialty food and beverages from grind-to-cup coffee makers. Additionally, the emergence of electric cars, and thus the rise of electric car charging stations, also reinforces this need. In order to compete with charging stations at malls and big box retailers, convenience locations will need to provide consumers with an incentive to charge there. As more consumers are drawn to experiential retail, we will certainly see a continuation of creative ideas come to life. 

Prediction 6: Personalization and Customization are the Future of Convenience

As the value of a convenience shopping experience continues to grow in importance, convenience as a channel must play into its true strengths. To be the retail channel that best services the needs of on-the-go consumers, it must connect to consumers on a personal level. C-store retailers that are able to get the right product to consumers at the right time will win. This means anticipating consumer needs and understanding and catering to day part needs at even a deeper level. Additionally, C-store loyalty plans will mature past implementation of simple reward programs. Advanced programs will emerge, appealing to the emotional side of the consumer through enjoyable experiences. In the future, transactional incentives like assortment and price will no longer be enough to maintain consumer attention and loyalty.

Prediction 7: Convenience Players Will Re-imagine Grab-and-Go Packaging to Be More Sustainable

Today’s convenience culture feeds into an on-the-go lifestyle, servicing consumers with neatly packaged offerings to literally grab-and-go. However, U.S. consumers are beginning to adopt a zero-waste mindset. In the coming year(s), C-stores will need to address issues linked to waste management, the anti-plastic movement and the rising consumer backlash toward single-use packaging. Retailers that are ahead of the game will be looking to show consumers that they are doing their part to close the sustainability loop and not contributing to the growing packaging problem.