Mastering On-Demand Delivery

25/05/21

Convenience Store News

Third-party apps and in-house offerings for delivery continue to explode in the c-store market.

Convenience stores started dabbling in delivery, especially for foodservice items, prior to the COVID-19 pandemic. However, once mandatory lockdowns stopped customers from driving — cutting down on their need to stop for gas, or commute to work and stop for breakfast — everything changed. Delivery options started exploding in all industries, including the c-store market, at an accelerated pace. 

“We actually started in-house delivery with Vroom at one location back in March 2019, one full year before COVID hit, and didn’t expand until after COVID started,” said Krystal Rademacher, retail accounting supervisor at Quality Dairy Co., based in Lansing, Mich. The company operates 20 c-stores in the greater Lansing area. 

Quality Dairy’s entry into delivery started off slower than anticipated in 2019, Rademacher recalled, because it took time for the retailer to understand its place in the market and the relevance of delivery. But after COVID hit, things picked up. 

“COVID proved there is relevance for delivery in c-stores, and we did very well and have been doing very well during COVID,” she explained. “What has been amazing is it has given us a ton of data and we had the opportunity to understand our market much faster.”

The rise in delivery is evident in the soaring revenue of third-party delivery services, including DoorDash, Uber Eats, Grubhub and Postmates. Combined, the four companies brought in revenue of $5.5 billion from April 2020 to September 2020 — more than twice their combined revenue of $2.5 billion during the same time period in 2019, according to a report by MarketWatch. 

While some wonder if this trend will last, or slow down in a post-COVID world, it certainly has not slowed down yet. In fact, 53 percent of adults say purchasing takeout or delivery is “essential to the way they live,” and 68 percent say they are more likely to purchase takeout or delivery food now than prior to the pandemic, according to data from the National Restaurant Association’s State of the Industry report released in January 2021.

The growth in e-commerce and delivery accelerated by the pandemic will continue post-pandemic, according to a survey of more than 1,000 U.S. consumers released in March 2021 by LaserShip, the largest e-commerce parcel carrier in the United States. The survey found that 80 percent of consumers still prefer home delivery of goods purchased online. 

“I do think the trend is here, and it accelerated like crazy because of COVID-19, probably five years earlier than it would have, as it was a much more convenient option, especially with the work-from-home life where people are less likely to drive past the store on the way home,” said David Taylor, product manager at Paytronix, which offers an Order & Delivery platform for c-stores and restaurants. “Delivery is more prevalent in those situations and will likely continue to be, even with COVID behind us, because of how many people working from home will not go back.”

Outsourcing Delivery

C-store operators have a few delivery options available to them depending on the amount of money, time and resources they have available or are willing to dedicate to delivery. 

The first option, and what many operators gravitated toward in the beginning of the pandemic, is partnering with third-party services such as Postmates, DoorDash, Uber Eats, Grubhub or Instacart. 

“The potential reasons to go with a third-party include [that] there is a user base already there; it’s ease of start-up because the technology already exists; and they handle the driver management, which decreases a c-store’s risks,” said Kay Segal, founding partner of Business Accelerator Team, a convenience retailing consultant company based in Phoenix.

In April 2020, one month after lockdowns started in the U.S., Altoona, Pa.-based Sheetz Inc. announced a partnership with Grubhub to provide delivery from 390 of its c-stores, offering a variety of its MTO made-to-order menu items and Sheetz Bros. Coffee. In August 2020, both MAPCO, a c-store chain with 348 locations based in Franklin, Tenn., and QuickChek Corp., the Whitehouse Station, N.J.-based operator of more than 150 c-stores, announced partnerships with DoorDash. QuickChek began offering its entire foodservice menu through the app.

Also in August 2020, ExxonMobil connected its branded wholesalers to DoorDash, Grubhub, Instacart and Uber Eats to enable household deliveries starting that month; and 7-Eleven Inc., which has been offering delivery through its proprietary 7NOW delivery app (launched more than two years prior), expanded its delivery options by partnering with Postmates, DoorDash and Google Food Ordering. Stripes Convenience Stores, owned by 7-Eleven, also added its Laredo Taco Co. foodservice concept for delivery through Favor Delivery in Texas.

“Having other people drive your product takes a lot of the management and short-term risk out because you don’t have to worry about insurance, staff or who owns the vehicles, but the retailers have to pay for being on the service. The service takes a portion of the sale, and then the customer pays extra, too,” Segal noted. 

In fact, being part of the third-party apps can get “pretty expensive,” especially when participating in more than one, according to Paytronix’s Taylor. Therefore, it is important for retailers to do research and figure out which apps are the most popular in their region.

“Make sure there is a good regional presence and usage of the brand and, in some cases, it might be better to choose a local provider rather than a big name,” he said. “What is the point of having your brand on Uber Eats if only 1 percent of your surrounding area uses it?”

A big benefit of using third-party apps is the opportunity to tap into a new customer base that a c-store chain may not already have. In many cases, these apps have loyal users and with COVID, there has been a huge spike in their usage. However, the challenge for a c-store operator becomes turning these new customers into loyal customers who come back for more. 

“Think about these programs as customer acquisition tools — it’s a new set of eyeballs that wouldn’t normally see your brand, and since retailers are paying a decent amount of money to be on these platforms, there needs to be a plan in place to convert them to come to your website or store directly,” Taylor advised.

For example, if a chain is using DoorDash for delivery, employees should add a flyer
to every bag that either directs the customer to the chain’s own website for ordering if that’s available, or offers a discount code or coupon for the location, he said.

One of the downsides of not taking on e-commerce for delivery in-house is that the customer and the data are owned by the third-party provider, as Matthew Carinio, vice president of strategy and consulting at digital growth agency Hathway, pointed out.

“The challenge with third-party is the loyalty between the c-store and their customers goes away and that loyalty relationship is now controlled by the third-party service,” he said. “Strategically, the biggest value of digital is data, but if a third-party is acting as the intermediary, that data never gets to you, so you are losing the long-term value of that digital channel.”

 

Outsourcing Drivers Only

There is another option that allows c-stores to take the e-commerce piece in-house and only outsource the actual delivery piece, as many third-party companies are now offering white label delivery, including DoorDash’s Drive. 

“Several third parties actually have white label fulfillment-only solutions where you use your own e-commerce platform to source the customer and payment, and they are just picking it up and delivering it,” said John Nelson, CEO and founder of Vroom Delivery, which offers e-commerce solutions for c-stores and other small markets. “They do this for [a] fixed rate, and this has been rolling out in the last year.”

DoorDash Drive allows chains to keep their branding front and center, and advertises that 75 percent of orders through Drive are delivered within 30 minutes, with an average customer rating of 4.5. This service enables c-stores to not only own the customer and make more money on their delivery orders compared to running them through the DoorDash app, but also allows them to own all the data and remarket to those customers
for repeat visits.

“At least with a solution like DoorDash Drive, you still own the customer,” Taylor said.

 

In-House Delivery

Instead of outsourcing — or in addition to — some c-store chains have decided to take the entire delivery process in-house, which is what Quality Dairy did, using Vroom Delivery technology for the e-commerce piece. For those already offering online ordering and pickup, the only other piece to be added is the driving and delivery. However, it is possible to start from scratch and still get up and running fairly quickly with the right technology.

Quality Dairy chose Vroom Delivery for the e-commerce side, which is automated and offers the technology infrastructure from the customer-facing menu to the tools in-store to the back-end management to maintain pricebook, transactional history and more, according to Nelson, who said c-stores can be up and running “in a matter of weeks.”

Foodservice selections are only available at two Quality Dairy locations — one has a pizzeria and the other has a deli kitchen, as well as pizza. While the chain started delivery at just a single location, it not only expanded the service to all locations once the pandemic hit, but also started offering all products in the store for delivery.

“Vroom has a suggested selling feature and we gave them groups of items for it. So, if someone is buying milk, the system will suggest cereal or bread, and if they are buying bacon, it will ask if they need eggs,” Rademacher shared. 

The retailer offers tobacco and alcohol products, too, which top delivery sales. Customers start at the Quality Dairy app and then are taken to the Vroom app to place their order. If they are ordering tobacco or alcohol, they are told at the time of purchase that delivery will require an ID.

“When the items are delivered, the driver takes a photo of the ID and it’s attached to the receipt,” Rademacher noted. 

One of the biggest challenges the chain faced was staffing drivers, as most drivers make their money through tips. When just starting out, if there are not enough orders for delivery, there can be a high turnover with drivers. “We had a hard time maintaining drivers, but now we have employees [who deliver] when we need to fill in gaps,” she said.

Another option for c-stores looking to add the driver piece to an in-house system is a starter product by Paytronix that offers drivers a portal to manage things and upload photos for age-restricted products. Taylor describes the offering as “a starter kit to help people test if a homegrown delivery force would be right for them.” 

“It lets drivers log in, so they can see a list of outstanding orders, look at their bag in front of them, click into it to see the details, a map app, and a place where an image can be saved for the order if there are age-restricted products,” he explained. 

 

Menu & Pricing Best Practices 

When offering delivery, some c-store chains are sticking to foodservice items, even focusing on a slimmed-down menu for delivery, while others are making their entire foodservice menu and all the products in the store available for delivery. 

Hathway’s Carinio believes a limited menu could be the better option, especially for foodservice.

“We are starting to see that in the foodservice space, it’s more effective to be tailored toward a limited menu for delivery,” he said. “Traditionally, brands would offer the entire menu, but now we are seeing them start to streamline it specific to delivery.”

Things to consider with delivery are what food travels well, the operational cost to maintain the digital inventory for specific locations, and packaging, Carinio explained, noting that retailers can then decide what products in the store they might also want to offer. 

In many cases, people who are ordering online and opting for delivery are different than those who come into the store, so not only will their needs be different, but they are also often willing to pay more for the convenience of delivery, which Quality Dairy discovered.

“We assumed we needed to offer the same pricing and promotions on our website as we do in the store, so we tried to align everything perfectly in the beginning,” Rademacher said. “But we discovered when people go to the website, they are already willing to pay the fee for delivery and pay more for the convenience. They are not as concerned about what they are paying, so operators should keep that in mind, even if they start offering the same and then change it later. They don’t want to cost themselves profit they could be making.”

In general, most industry experts agree, and research continues to show, that online shopping and delivery — of both foodservice and grocery items — is not slowing down any time soon and in many cases, the pandemic may result in permanent changes. 

“I look at c-store e-commerce as a subset of the grocery space and all the data is showing

changes coming from the pandemic are pretty permanent,” said Nelson. “People buying groceries online for curbside pickup or delivery went from 1.2 billion a month to over 7 billion per month, and consumer buying habits have permanently shifted.”

In fact, the ability to sell anything from inside the store and work that into a delivery model will help c-stores stay more competitive, according to Segal. 

“Delivery may tail down for a while and then settle into a ‘new normal,’ but I think it’s most important to continue to home in on consumer behaviors in your market area,” she said. “C-stores can provide meal kits, and I think curbside will continue to be strong, as well as drive-thru because of its ease of acquisition.”

Marketing Homegrown Delivery

Convenience stores that launch in-house delivery initiatives for foodservice, c-store products or a combination of both need to get the word out to their customers that these options are available. 

Unlike working with third-party apps, which offer a built-in customer base, c-stores need to rely on their existing customers and potential new customers to use their e-commerce systems.

When Quality Dairy Co., a chain of 20 c-stores based in Lansing, Mich., launched its delivery program, the first line of attack was flyers and training the staff to talk to customers about it, starting two weeks before the launch. Next up was social media, according to Krystal Rademacher, retail accounting supervisor for Quality Dairy.  

“We already had an ordering solution for our large selection of baked goods, so we also started placing links on our website about this. It was in a visible place where people were used to placing orders with us,” she explained. 

Quality Dairy works with Vroom Delivery for its program, and also has an internal loyalty program and a company app. Vroom collects data on Quality Dairy’s customers when they log in or sign up, so the retailer is able to align that data to send direct marketing through its company app, as well as direct email marketing to customers. 

“We find email marketing less successful than the app push notification,” Rademacher noted.

The chain is also considering offering coupons and discounts, and this would be one of its first plans of action if the customer base starts to decrease post-COVID. One option would be to send a direct push notification to a customer who has stopped ordering and offer them $5 off delivery or a coupon for an item they’ve purchased in the past.

Another way to get the word out is through social media. Instagram and TikTok are both “food-oriented apps,” according to Kay Segal, founding partner of Business Accelerator Team, a convenience retailing consultant company based in Phoenix. 

Segal also recommends geofence Google ads around store locations to raise awareness.

“Make sure you are also marketing and giving unique benefits to customers who use your online ordering platform,” advises David Taylor, product manager at Paytronix, a provider of customer engagement solutions and loyalty programs to c-stores. “Have suggestions that pop up based on behavior or what is in their current basket to add more items to their cart.”