The Convenience Store of the Future
Have you been to a convenience store lately? Chances are you have. Perhaps it was to fill up the car with gas or pick up some milk or soda on the way home. Or maybe to grab a quick breakfast or lunch, or even get some cash from the ATM.
Indeed, the modern convenience store has become a veritable mini-mall.
We’re used to going to the convenience store/gas station to get some gas and pick up everyday items. But today we also bank there, dine there, and in some cases even meet, read, and relax there. What was once a simple trip to get some gas or milk has become a multi-brand, multi-function retailing and entertainment destination.
According to Britt Peterson, partner of the law firm Cole & Weber, one of the top trends in the convenience store market is the convenience store as ‘community center.’ He notes that convenience stores are capturing an element of ‘local pride’ to build relationships with their customers. According to Peterson,
“Budweiser has special edition packs that reflect local college team pride. Casey’s General Store chain has a community donation program …and there’s BP Connect: c-stores outfitted with Wi-Fi and full cafes designed to embody ‘your neighborhood hangout.’”
On the other side of this localized experience are convenience stores incorporating other elements to transcend their own brand. That means the new world of convenience often requires a branded quick service restaurant inside the store along with a branded banking ATM. In fact, according to the recently released report, “The C-Store of the Future,” by the American Wholesale Marketers Association:
“To succeed in the foodservice arena, c-stores must develop a store within a store that includes proprietary, licensed, or franchised brands.”
So, not only will convenience stores have to localize and adapt to the unique characteristics of their communities, they will also have to attach themselves to national and global brands that people from every neighborhood have come to expect as part of their dining and shopping experience.
How are convenience stores growing to meet these new and diverse needs of today’s digital consumer? They have done it through efficient and innovative use of networks and communications technologies.
In fact, communications and information technologies are now at the core of a convenience store’s ability to gain competitive advantages and deliver a unique customer experience.
Convenience stores have long relied on communications networks to quickly and reliably clear sales at the pump and inside the stores. But now they need similar services for consumers looking for Wi-Fi connectivity for their laptops, tablets, or smart phones. Beyond that, location-based services like FourSquare™ are making the convenience store experience viral. Products (and their packaging) such as Doritos “Late Night” are adding enhanced customer experiences by providing content through augmented reality.
According to entrepreneur Jacob DelHagen, “The market [for convenience stores] is ideally situated for the introduction of strong new brands and products. These new brands are going to be strongly based on the Internet culture…”
In the future, convenience stores will need to support an ever-increasing array of services—most of them communications-based—and be able to provide them securely, efficiently, and … of course … conveniently. One example of this new, technology-based convenience store experience can be found at Smartstore in Manhattan Beach. When customers approach the deli counter:
“They are greeted by three touch screen monitors where they can enter an order for a signature or made-to-order sandwich, salad, or soup. You can even plan ahead by going to Smartstore’s website, which includes the full menu.”
Indeed, foodservice presents a large opportunity for convenience stores. According to the national Association of Convenience Stores, fast-food sales are now 70 percent of all convenience store offerings, up from 58 percent just three years ago. ‘On-the-go’ meals are also a rapidly growing segment of sales—this category is one of the fastest growing among traditional grocery stores—and companies/brands such as Chiquita and Ready Pac Foods are stepping in with new products to fit the unique needs of convenience store owners, as well.
The key to attracting customers and up-selling new products lies in building relationships and promoting goods through technology. Some of this technology is not new, such as email marketing, but the fact that convenience stores are utilizing it as a key part of their strategy to reach new and existing customers certainly is. According to Deirdre Baird, president and CEO of Pivotal Veracity, “email marketing is experiencing a renaissance as we head into the next decade.” And some convenience store retailers such as Speedway SuperAmerica, Kwik Trip Inc., and Quick Chek Food Stores are using e-mail marketing to compliment instore loyalty programs.
Here are just a few offerings we see as being standard fare in the new world of the convenience store:
Guest Wi-Fi for commuter and traveler – As people become more dependent on their laptops, tablets, and smart phones, every “convenience store of the future” will need to have a strong Wi-Fi guest service. Consumers will actually seek out convenience stores with Wi-Fi so they can get maps and local information at the same time they fill up the car, grab a newspaper, and a morning cup of coffee.
Digital signage for dynamic and targeted store promotions – Whether it is outside or inside the store, the modern convenience store will use digital signage to increase foot traffic and move inventory. Menu boards will be digital and change based on the time of day and the targeted demographic. For example, during the morning hours the boards could highlight commuter breakfast options. Late morning menus will shift to items of interested to stay-at-home parents or retirees; mid-afternoon to items more appealing to after-school teenagers. Dynamic menu boards will anticipate traffic and optimize each selling moment for improved margins on sales and customer service.
In-store shopping assistant – Each store will offer patrons an in-store shopping assistant via their mobile devices. If you were to walk down the aisles of tomorrow’s c-store, you could see something interesting, take your mobile device, open your store application, point the camera, and shoot the product. From there, product descriptions, reviews, and tips/tricks (if applicable) will all be available.
Video employee learning centers – Before every shift, store employees will check in at an interactive video display area. There they will hear about the day’s promotions and get updates on the store’s activity. They will be able to text in questions and get answers back from management via their cell phones.
Multiple networks that are reliable, secure, and compliant – All that data running through multiple data streams and networks needs to be secure. Payment Card Industry (PCI) compliance requires a high level of security for each transaction and the requirement to guard against threats both wired and wireless. Information needs to flow securely and efficiently with built-in redundancy. Self-configuring VPNs and firewalls using intelligent routers will make the whole process (network headache) of becoming and remaining PCI compliant easier.
Easy to use touch screen self-serve check out – Stores will be able to expand offerings and speed sales (with less error) through the use of self-serve check out now commonly found in large grocery stores. By increasing the check out options and decreasing the number of ‘order takers,’ c-stores will be able to improve customer service without increasing personnel costs
Integrated digital training platforms – The customer experience depends on well-trained employees. Employers will meet the challenge of high employee turnover with video, mobile training, and education systems. Information will be delivered to employees in ways that are easy to access including mobile smart phones. Many c-stores will have digital training rooms where employees can learn via text, video, and audio about the latest topics from food preparation to personnel management to the latest regulatory requirements.
Automated inventory management – Managing inventory is a headache. It is particularly challenging if you are managing multiple stores in multiple locations with something as perishable as food—time is literally of the essence. In the future, all c-stores will have automated inventory racks so that management always knows what and when to order. Moreover, because future c-stores will ‘talk’ to each other, managers will be able to quickly and easily shift inventory from one store to another to make sure they optimize supply across stores.
Transaction based video to reduce shrinkage and sales irregularities – Video monitoring for security will be based on activity. For example, video capture would occur when there is a ‘no sale’ transaction at a register or when certain inventory is accessed. By making video capture activity-based, management will not have to weed through hours of tapes to find out what happened with inventory or at the cash register. This will not only reduce shrinkage, but also help gather marketing intelligence on what does and does not appeal to customers.
At Hughes, we’re working with the leading names in the convenience store and retail petroleum industry to use the network as both a brand and business growth tool. There is a reason why we are the largest and longest serving partner to the convenience store and retail petroleum market: as the need for new information and communications technologies grows, we’re delivering for our customers networks that are more reliable, higher performing, and more customized to their growth needs.
The Convenience Store of the Future
According to NACS and Nielsen’s most recent data, there are more than 150,000 convenience stores in the United States, two-thirds of which are owned by independent operators. The industry is poised for further growth as it continues to meet consumer demand for services way beyond the pump. Over the next decade, the industry will concentrate on the following game-changers: foodservice evolution, payments innovation and in-store network technology.
Food sales comprise about 55 percent of convenience store sales, and with high gas prices and dwindling cigarette sales, these profit margins become crucial. As convenience stores offer a greater variety of food options beyond fast food and grab-and-go sandwiches, the importance of proper storage and food safety grows as well.
When it comes to monitoring and control over the quality and freshness of food in a convenience store, operators currently tend to employ one of two methods: manual monitoring by employees or use of controls that are part of larger HVAC systems. Unfortunately, neither method is 100 percent reliable and easily lends itself to mistakes, misreporting and compliance problems.
In order to meet the back-office demands of expanded foodservice offerings, operators will, out of necessity, seek out better technology to ensure food quality for their customers, protect their business and meet Hazard Analysis and Critical Control Points guidelines.
This is where cloud-based foodservice monitoring comes into play. By offering continuous monitoring and recording of cold storage and preparation equipment, operators can use cloud-based foodservice monitoring data to analyze performance and identify degrading equipment before a complete failure occurs, thus saving thousands of dollars in inventory and emergency service calls. Additionally, cloud-based continuous temperature monitoring enables operators to better maintain safe temperatures using as little energy as possible, offering a significant reduction in energy costs.
Just as convenience store foodservice experiences an evolution, the world of payments is undergoing an unprecedented wave of innovation, especially in mobile technology. However, the question many convenience store and other retailers ask is: Which option is right for my business?
Currently, there is a glut of offerings in the marketplace, but there is simply not a clear winner among consumers as most still cling to traditional methods of payment. Because of slow consumer adoption, retailers are also challenged with respect to implementing mobile payment solutions at their point-of-sale.
According to Berg Insight, the mobile wallet market will reach $35 billion by 2017. A segment of this is likely to come from the convenience store industry, but it will still be a small percentage of transactions in comparison to credit and debit cards.
So, what will it really take for consumers to swap cash and credit cards for their smartphones, and for retailers to meet the demand? Because many mobile solutions either aim to benefit the consumer or the retailer, rarely both, one of the best ways to combat this challenge is to look for solutions that provide incentives and additional value for both parties, such as combining innovative loyalty and reward programs with mobile payments and applications. Integrating loyalty and personalized applications with smartphones will be the true driver of mobile technology in the convenience store space.
Operators looking to invest in any mobile payment or loyalty solution should ensure they have a viable and usable solution that allows them to meet Payment Card Industry compliance, expand their offerings, increase their bottom line, stand out from the competition and, most importantly, meet the demands and needs of their customers. In this chicken or the egg situation, it’s important to note that consumers will only be sold on the concept of mobile technology when retailers are as well.
In-Store Network Technology
As c-stores become even more reliant on technology to facilitate in-store traffic, many operators will come to the realization they need to upgrade their infrastructure. By investing in a sophisticated managed network, operators will increase their efficiency, ensure security, save time and money, remain competitive and, ultimately, increase their profits.
With cybercrime running rampant, network security is of utmost importance. First, each operator should determine what security features they need to protect their business from threats such as skimmers and hackers. This is where the expertise of a network provider can be crucial. Second, they must ensure their network complies with all Payment Card Industry Data Security Standard requirements and that the cardholder data environment is segmented from the rest of the network for greater security. Operators should also establish the right firewalls, as well as a system that logs and monitors all network events.
Lastly, c-store operators must educate themselves on the U.S. implementation of EMV (Europay, Mastercard and Visa), a smartcard standard for secure debit and credit card payments. EMV chip-based payment cards contain an embedded microprocessor and are protected by various security features. Although not mandated, the recommended deadline for implementation begins in October 2015 for in-store transactions.
The Bottom Line
The key to becoming a convenience store of the future lies in setting priorities; understanding market conditions, customers and business environments; and ensuring each and every technology investment solves a key problem. Because of the number of technology partners vying for a piece of the c-store pie, operators have the luxury of evaluating and piloting different solutions to ensure they are getting the best possible return on their investment.
Editor’s note: The opinions expressed in this column are the author’s and may not necessarily reflect the views of Convenience Store News. By Michael Youngkin, Heartland Payment Systems Inc.