Seven Predictions About the Future of Convenience Retailing

12/04/2019

CSNews

NEW YORK — With consumers focused on expediency, Nielsen predicts that convenience stores will grow faster than other offline channels over the next five years.

However, lines will continue to blur between the c-stores and other retail channels — like quick-service restaurants, and small format grocery, mass and drug. In addition, digital transformation and the consumer’s growing desire for frictionless retail has raised the bar for convenience retailers and their approach to technology adoption, according to Jeff Williams, senior vice president of Retail and U.S. Industry Relations at Nielsen.

With a new decade beginning in less than a month, Williams outlines seven factors that will shape the future of the c-store industry:

1. C-stores Become More Automated & Increasingly Unmanned

In China and Korea, consumers are experiencing a new level of frictionless payments driven by RFID, scanner, biometrics and sound wave technologies. In the United States, 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,” Williams said. 

Additional points to take note of, according to Williams, include:

• In the U.S., expect upgraded technology to overhaul a number of things, including legacy systems.
• Tech-enabled automation will fuel efforts toward customization. 
• 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.

2. C-store Foodservice 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. Convenience retailers are working to expand and optimize their menus, better cater to daypart 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 foodservice at convenience, as quality and selection of offerings continues to improve,” Williams said. 

3. Increased Focus and Need for Quality Employee Training for CBD & Foodservice

The traditional roles of store employees are shifting under the influence of emerging technology, the rise of fresh food offerings and the 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 foodservice sectors to ensure product questions (for CBD products) are being answered with accuracy and proper food safety protocols and standards are being reinforced,” he explained.

4. C-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 percent units sold in c-stores are private label vs. 16 percent to 23 percent in other channels. Given the growth opportunity, c-stores are a prime target for UPC private label disruption. 

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 c-store industry, experiences are growing 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, according to Williams.

“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,” he said. “Retailers are also offering unique specialty food and beverages from grind-to-cup coffee makers.”

Electric vehicles (EV) and EV charging stations also reinforces this need, he added. 

“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,” Williams said.

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 to its 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,” Williams explained.

This means includes anticipating consumer needs, understanding and catering to daypart needs, and evolved loyalty plans.

“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,” he said.

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

The convenience culture falls in line with the on-the-go lifestyle, giving consumers 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,” he said.