Shopping Outside of the Box
Convenience stores always seem to be fighting for share from bigger industries with fewer stigmas and stereotypes. But as grocery sales move online and technology and related services innovate, c-stores may find themselves with distinct advantages. Here’s a look at the latest trends in online grocery and some innovations on the fringe.
Los Angeles-based research firm IBIS World predicts $9.4 billion in revenue for online grocery in 2017, a total
of 9.5% growth since 2012. More than 1,600 retailers hit the scene between the launch of online grocery delivery service Peapod in 1989 and the 2012 IBIS study, and more have entered the arena today, including several c-stores.
Last July, 7-Eleven Inc. began a partnership with delivery service Postmates, dispatching groceries, cold drinks, hot foods and other items to customers in several urban markets in California and Texas. Irving, Texas-based 7-Eleven plans to expand to major Midwest and East Coast cities later this year in a partnership with online delivery service DoorDash.
These app-driven ordering services are part of a flood of food delivery apps, more than 270 cited by app discovery engine AppCrawlr, and are notably focused on urban markets where grocery and food delivery have long thrived.
Steve Montgomery, president of c-store consulting firm b-b Solutions, Lake Forest, Ill., says urban c-stores would do well to pay attention to the online delivery space, but rural c-stores need not invest.
“I don’t see it being practical, for two reasons,” Montgomery says. “First is the lag time between ordering and delivery, and second is the cost. The fewer deliveries the service has in the car and the further they have to drive, the more they need to charge.”
But Tim Laseter, professor of practice at the Darden School of Business at the University of Virginia and author of the book “Internet Retail Operations,” says different markets have different value propositions. Even in markets with low population density, online grocery and food delivery might be worth a look.
In urban markets, you’re competing on freshness, expense and speed. “When you turn to suburban markets, the value turns to convenience, not having to wander around a big store to get what you need,” Laseter says, citing the launch of Wal-Mart’s curbside grocery pickup, by which same-day orders are delivered right to customers’ vehicles.
With rural locations, the value proposition shifts again. When stores are far away, customers become interested in stocking up on items such as dog food and toilet paper through subscription-based services, including Amazon Prime Pantry.
“You have different models in different markets that are all dealing with different things,” Laseter says. “Convenience vs. speed vs. variety vs. costs, price, category, shopping occasion and so on. As a c-store, you just have to look at the market you’re in and ask yourself which combinations you’re competing against.”
If You Can’t Be Amazon …
You don’t always have to play by the big boys’ rules.
“In the last decade, Amazon has trained consumers to pay an annual subscription fee and then one-click shop on small orders as they need them,” Laseter says.
But club store Jet.com, an online version of Costco or Sam’s Club, is trying to reprogram consumers. The site encourages them to wait longer for their purchases by bundling basket items over time to reduce shipping costs. They’re the deliberate antithesis of the “speed-equals-convenience model Amazon has trained people to expect,” Laseter says.
Likewise, c-stores can also make their own rules in the online grocery game. Not all consumers define “convenience” the same; no matter the definition, c-stores will always have a certain advantage with customers. “Convenience stores have a couple of big things going for them,” Laseter says. For starters, “a lot of people aren’t advance planners.”
Chicago-based Food Genius supports this claim, showing that when asked at 4 p.m., more than 70% of people still don’t know what they’re having for dinner.
“The fact that you can drop in [to a c-store] and get something, even at a premium price, is worth a lot,” Laseter says.
This ability to support spontaneity is especially valuable as online grocery proliferates. “Traditional grocery stores have a high degree of loyalty. People get into a routine with them, and on the Internet, habit is very hard to develop,” he says. “Convenience stores get the benefit of that lack of habit.”
Continued: Center-Store Shrink