The c-store today is the resultant of smart entrepreneurship and its ability to adapt to the environment it ’lives’ in. The red line throughout the history of c-stores is that retailers kept innovating to meet major societal and cultural changes. When a network of regional and interstate roads was built in the 50s in the U.S., c-store owners chose to be situated along those corridors. In the 60s, people across Europe and the U.S. started to migrate to suburban areas as there was more space, and c-stores opened up there as well. In the same decade, more and more convenience stores stayed open 24 hours a day to support the working suburban families, meeting the needs of people working late night or early morning shifts. And during the 70s, c-stores started selling gasoline as self-service at the pump, responding to an increased need for fuel on-the-go as more people now owned a car and drove longer ranges.
Today, the convenience store is still very much a vibrant concept in Retail. The c-store is favored by many for its flexible opening hours, its gasoline sales, its broad palette of items on stock, and its convenient location. Yet, several societal and cultural shifts are unfolding, which (again) will trigger changes in the way c-stores are set up and run. Let’s have a look:
Trend 1: Shifts in Demographics
In 10 years, the global population will look very differently from how it looks today. The UN predicts the world population to reach 8.6 billion by 2030 and almost 10 billion by 2050. Overall, the world population is ageing fast, and the middle class is growing. People will be increasingly living in urban areas, with an estimate of 68% of all people living in urban areas by 2050. Also, single-adult households were the fastest-growing household profile between 2009 and 2021. Today, 2 out of 5 households in Europe are run by a single adult, who have only limited time to prepare a meal or go grocery shopping.
Trend 2: Shifts in Employment
While baby boomers are rapidly going into retirement, the share of Gen Zers and millennials in the workplace is rising. The number of Americans primarily working from home tripled between 2019 and 2021 to 18%. In Europe, 12% of the employed now work from home. Especially for younger employees, expectations about life and jobs are changing. They will expect to “float” between teams, roles, and employers. Employers (including retailers) must therefore assess their working practices to see whether they are offering this changing workforce the working environment they need – one that offers greater flexibility, a better work-life balance, and a meaningful connection with the brands they work for.
Trend 3: Spur in Digitization
The World Economic Forum estimates that 70% of the value created over the coming decade will be triggered by the rapid digitalization of economies around the world. Most companies see innovation as critical for their business, and 80% think their current business models are at risk of disruption. According to a recent McKinsey survey, by 2023 most companies will need to build new digital businesses to stay economically viable. And with digitization comes access to a wealth of data, which is seen as driver of change in many industries.
Trend 4: Focus on Sustainability
By 2030, global demand for food, water, and energy will grow by roughly 35, 40, and 50 percent, respectively, due to an increase in global population and an expanding middle class. In the same report, the National Intelligence Council states that “Climate change will worsen the outlook for the availability of these critical resources (…) We are not necessarily headed into a world of scarcities, but policymakers and their private sector partners will need to be proactive to avoid such a future.”
Back to the Future
Fast-forwarding to the next decade while taking into account these developments happening today, what adaptations to the c-store could we expect to see happening?
Demographics
- an ageing population will increase demand for multi-service hubs that conveniently offer a one-stop-shop not only for daily groceries, but also pharmaceutical services, basic medical treatments, dental services, and car services;
- more single-adult households leads to higher demand for quick shopping, both for daily groceries and top-up shopping, and self-service and semi-autonomous stores were preferred by this group of customers seeking efficiency.
Workplace & employment
- shift in workplace environments will increase the need for flexible offices along the way. Especially those working from home sometimes needed temporary office and meeting space when travelling. These spaces were part of the multi-service hubs.
Digitization
- digital appetite keeps growing because of habit (we’re accustomed to the convenience of e-commerce and m-commerce) and because of lack of time (mostly for Gen Z, millennials and single-adult households). This appetite will spur demand for integrated online-to-offline-to-online (O2O2O) shopping journeys. Consumers will no longer accept to be restricted defined by the walls and opening hours of the store;
- with the usage of digital technologies during shopping journeys, the amounts of data collected rapidly increases, and retailers need to look for ways to maximize the value derived from these data.
Sustainability
- sustainable consumption patterns will urge c-stores to offer (more) environmentally-friendly produced items including local produce. Moreover, c-stores with a lower ecological footprint will be preferred by (especially) younger consumers concerned about the depletion of natural resources;
- call for more sustainable energy consumption is already increasing the need for publicly accessible electric vehicle (EV) charging and hydrogen stations. C-stores are well-suited to provide EV charging services since they are located along main corridors and offer additional services like meals, top-up shopping, parcel pick-ups and more, to leverage the dwelling time needed to charge EVs.
EVs: an Imminent Threat for the C-Store?
Talking about EVs: What does it mean that electric vehicles have reached the tipping point? The early majority of more pragmatic consumers now have started buying EVs. Boston Consulting Group estimates that once EVs really take off, as much as 80 percent of the fuel retail market could be unprofitable by 2035. Should demand for gasoline completely disappear, many c-stores would be at risk of going out of business. If they’re not able to sell fuel, they would struggle to make money since people typically buy products in the store while they’re filling up.
However, just as big a challenge for c-store owners is the intense competition from other public EV charging providers. According to the Department of Energy, in the U.S. there are currently more public chargers located at hotels, parking lots, shopping centers, and government buildings than there are at gas stations and convenience stores. This poses an additional risk of losing c-store traffic and “missing out” on the opportunity.
To adjust their business model for the EV era, some convenience retailers are now installing level 3 hyper-chargers, capable of delivering 15 to 20 miles of range per minute, alongside their current gas pumps. This makes charging a battery almost as fast as filling up a gas tank – and more importantly, will strengthen the c-store’s competitive position against shopping centers who typically offer slow charging services (which is also more in line with the shopping centers’ business model of keeping customers in as long as possible). Hyper-charging is promising technology, although not all EVs are ready for these power “bumps” yet. And the same goes for the electricity grid (and specific for the U.S., the very high energy costs for retailers due to the demand charges pricing structure).
Convenience retailers also must look beyond the competition how they can best monetize the longer dwelling times of EV drivers. Reliability of service (“always-on EV chargers”) and smart ways to connect EV charging with in-store loyalty programs could lead the way here. In addition, the physical site and store building itself would need to adjust to 20-minute charging times over the quick-fill-and-drive-off. Likely, the c-store could (or should?) become more of a destination hub offering a unique experience to keep drivers and their families entertained.
Long story short: EVs will seriously impact c-store business, and retailers basically do not have a choice but to adapt. However, EVs do not necessarily pose a threat, they also offer opportunities – and governments are willing to subsidize this energy transition right now. EVs are here to stay, and we will see that c-store owners also here will apply smart entrepreneurship and develop adjusted store concepts that maximize profits and retain customers.
Concluding remarks
This article represents my personal view and is meant to stimulate the thinking process about the future of the c-store. I don’t have all the answers, but one thing is certain: the c-store we know today will have to adapt like it has done over the last 95 years, or it will lose its relevance and vanish – and other retailers will gladly fill the gap. The future of c-stores may for the next couple of years boil down to shifting the dependency on selling gas and providing a “snack driven” in-and-out-the-store experience to a much broader, redefined view of convenience using a blend of new technologies and hyper-convenient, digitally inspired shopping experiences.
For sure there will not be “one single future store concept” that has it all: older people will look for different services than fast-paced, single-person households, and EV drivers may spend more time at the c-store than gas-powered car drivers. Also, there will be regional differences, and retailers should carefully look at what their main clientele really need, yet be flexible enough to adapt as soon as they see a significant shift in consumption patterns for their particular stores.
Whatever you decide for your stores, the ultimate question should always be: What makes life more convenient for my customers? Stick to your roots but be flexible enough to adapt to trends that will continue to shape the future no matter what!
By Reint Jan Holterman, Diebold Nixdorf
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