In the past five years, more than half of the 20 largest c-store chains have gone through some sort of merger or acquisition. According to the NACS 2020 SOI Report, there are 150,274 c-stores in the US, a 1.6% decrease from 2019 primarily driven by the decrease in single-site operators. During 2020, the industry also saw some of its largest mergers in addition to witnessing dozens of smaller chains exit the market because of the changing industry conditions.
Strong economic growth is a key contributor to the consolidation trend, along with strong competition surrounding wallet share and profitability. Convenience is one of the few retail channels that continues to produce year-over-year growth. According to the National Association of Convenience Stores (NACS), inside sales per transaction grew more than 18% in 2020, driven by gains in merchandise sales and overall sales growth of 1.5% despite less than desirable market conditions.
To account for this rapidly evolving environment, savvy convenience retailers have focused on closing the gap between what consumers expect and what retailers can deliver. Here are four key steps you can take to help level the playing field for your business.
1. Focus on Service
Outperforming your competitors in customer service is an effective way to gain new customers and retain their loyalty. According to NewVoiceMedia’s 2018 Serial Switchers report, businesses lose $75 billion a year due to poor customer service. The same report found that nearly 70 percent of consumers are willing to change brands if they have a negative customer service experience.
Whether you’re ensuring your stores are adequately staffed during peak traffic times or that your wholesale customers are getting the products they need when they need them, customer service is a key differentiator for today’s consumers. Use this to your advantage by building a customer service-focused culture and delivering exceptional experiences during every encounter.
2. Take the Tech Leap
For small or regional petroleum wholesalers or convenience retailers, technology is a great equalizer when going up against larger competition. For example, ERP software can automate time-consuming manual processes and centralize operational control while delivering valuable data that reveals consumer buying habits so you can build more effective promotions. Fuel pricing solutions can help you optimize pricing strategies and maximize your margins. Lottery management software can reduce shrink and ticket inventory management workload, helping your employees focus on providing great customer service. The key takeaway is that investing in technology today sets your business up for ongoing success with nearly endless opportunities.
Contactless payment options are yet another big opportunity. According to NACS, 65% of consumers report that contactless payments are their top preference. While payments previously involved a choice between paper money or plastic credit card, retailers can now manage payments in a variety of electronic formats—including chip-based, proximity-based, app-based, and even wearable options. Similarly, customers now present electronic coupons and “e-wallets” with uncompromising expectations. This evolution provides a superior customer experience and positions you to compete head-to-head with otherwise very powerful disruptors.
3. Incentivize Customer Spend
As reported by NACS State of the Industry data, the convenience retail industry saw an overall growth of 1.5% in 2020 despite a 13.9% decline in total transactions (thanks to an 18.4% increase in basket size). Consequently, convenience retailers must find creative ways to get consumers to spend more during each visit, such as a loyalty program that incentivizes shoppers to spend more by offering them savings and rewards.
According to the 2019 PDI C-Store Shopper Report, Loyalty program members spend 29% more per visit than non-members. Fifty-seven percent are likely to make a store visit each time they gas up, 42% more likely than non-members. The NACS SOI data reveals that nearly 60% of consumers participate in a loyalty program, yet 40% fail to see the relevance of the incentives connected to the program. There is tremendous opportunity to capture c-store shoppers with a thoughtful loyalty offering.
4. Grow Your Foodservice
Another way to increase customer spend is by improving your merchandise offerings in the store. In addition to replacing decreasing revenue from declining categories, you can invest in new revenue-generating categories. In particular, foodservice is an area that continues to see phenomenal growth year over year. No longer is c-store foodservice relegated to candy and beverages—the amount of fresh and prepared food has exploded in recent years. International retail is leading the way when it comes to uncompromisingly healthy choices and options that appeal to vegan/vegetarian shoppers.
While 2020 caused a disruption in foodservices profitability trends, this category remains an essential ingredient for competing in the convenience retail space. In fact, NACS reported that foodservice percentage of sales increased 1.7% to 66.5% despite the pandemic. Partnered with the right automation tools, foodservice offerings can drive more than 40% of a site’s revenue.
You Can’t Afford to Wait
As consumer behavior fluctuates and market dynamics rapidly shift, convenience retailers need a modern business strategy and an agile technology infrastructure to keep pace with the competition. Start by following these four tips and continuing to make smart investments in your digital transformation.
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