Convenience stores have been a staple of towns and cities for decades. Recently, we published an insight into Deliverloo’s physical storefront to provide consumers with more choices. With that said, is it time for convenience store owners to reimagine how the customer experience should change based on the ever-changing consumer lifestyle choices? This insight discusses key revenue generators of convenience stores and how they need to be evolved.
Table of Content
Introduction
I can’t communicate enough how urgent it is for convenience stores to change their business model. Shoppers primarily go to c-stores because they’re the only place to buy fuel, with tobacco as a close second and a lesser bump from convenient product grabs between grocery runs. But these drivers are declining, hurting convenience stores’ profits.
Revenue Generators
Tobacco
Tobacco: U.S. Tobacco sales have dropped 70% since the 1980s, with 2022 use at its lowest level since 1965. Even vaping products are struggling with multi-state bans, flavor bans, and the FDA’s outright ban of all U.S. JUUL products, as well as a current Federal proposal to lower nicotine levels in all U.S. products. Some convenience store owners enjoyed a short-term boost in tobacco sales but that uptick was due to new customers acquired when most major grocery and drug stores downsized or exited this category entirely. As sales have continued to shrink, those convenience stores feel it, too.
Fuel
Fuel: By 2030 the majority of vehicle sales will be electric. And 80% of those electric vehicles will be charged at home. Public chargers are already being widely distributed across city streets, shopping centers, office complexes, and retail stores. As a result, only a tiny fraction of drivers will think of convenience stores as a place to recharge.
Percentage of electric vehicles being charged at home over convenience stores/gas stations?
0Convenience
Convenience: At the same time larger retailers (like the Target in this photo I took) are installing self-contained convenience stores by their front entry, including the requisite ICEE machine, making a trip to Target as easy as a trip to the c-store. And Uber Eats or Walmart’s rapid delivery service can bring anything you need to your door.
Some convenience stores are amping up fast food offerings to entice more shoppers. But think about it – if you aren’t purchasing fuel, charging your electric vehicles, buying tobacco, or in need of snacks, why would you choose convenience stores’ fast food when a dozen QSR options are just as convenient?
Next Steps
As a retail strategist, I typically help companies develop executable stepping stones to sustainable long-term success. For example, a shopper will spend 68% more with a retailer in year 3 of their relationship than year 1, and enticing new shoppers are far more expensive than keeping existing ones happy, so building stepping stones around loyalty drivers are smarter money for a retailer in the long run. But today’s global challenges mean retailers need to be more cautious in what they choose to fund. In 2023 retailers should focus on solutions that include three key attributes:
1. Shorter payback windows
2. Simultaneous boost to both top and bottom-line revenue
3. Contributes to blending online and offline channels.
Solutions with these attributes will allow convenience store owners to justify new programs to investors without long-term overhead dragging down profits should global recession, war, pandemic, supply shortages, or other uncontrollable events make sudden changes necessary.
Technology has become an essential part of the retail experience, but choose solutions that support your path to long-term profitability yet won’t weigh you down if events force quick pivots. This is the tightrope walk that 2023 will bring.
Final Words
The convenience store’s biggest value is its location deep within local communities. Instead of centering revenue around waning goods and services, why not explore how to leverage your locations to become gathering spots to pick up or return products, remote work, host local businesses, telemedicine services, and more? Become the link that is currently missing between communities are the larger world.
Excerpts of this insight were taken from DeAnn’s LinkedIn posts from the week of December 6, 2022.
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