Stable fuel and merchandise sales, increased loyalty program membership, and the growth of foodservice options buoyed the U.S. convenience store sector in 2019.
The rosy year-end picture has given c-store operators a running start in 2020, a year in which machine learning and artificial intelligence (AI) will factor prominently across all operations, as will using customer data more effectively to improve business and marketing outcomes. Consumers’ adoption of mobile payments, however, will continue to lag behind other countries.
What other developments impacted convenience retailers in 2019, and what can they expect this year?
Healthy Sales Figures
Although final 2019 sales figures won’t be available for several months, expect solid overall results based on a NACS survey conducted in the summer. Seventy percent of convenience retailers reported that their fuel sales were the same or higher than the year before, while 75 percent experienced higher merchandise sales for the first half of 2019 than during the same period in 2018. A strong 2019 outcome would be a continuation from 2018, which saw more than 8 percent growth in overall sales to $654.3 billion. Fuel sales jumped by 13.2 percent, while in-store sales rose by 2.2 percent.
Loyalty Program Growth
Membership in c-store loyalty programs continues to expand, with 42.5 percent of consumers belonging to a c-store loyalty program in 2019, up 6 percent from 2018, according to PDI’s 2019 C-Store Shopper Report. Many U.S. convenience retailers now have a loyalty program and will benefit from a higher-value customer base. Program members spend $11.17 per visit on average — 29 percent higher than the amount ($8.66) spent by nonmembers. Fifty-seven percent of loyalty program members also make a store visit each time they gas up.
Investment in providing greater foodservice options is paying off. More consumers rely on c-stores for grab-and-go food, which accounts for 22.6 percent of in-store sales. Consumers’ perception is also changing: two in three say convenience stores offer food they feel comfortable eating. Traditional c-store fare, such as sandwiches, hot dogs and pizza, still remain very popular, but more options for health-conscious consumers, including fresh food items, are increasingly available.
Five Reasons to Be Optimistic in 2020
1. Data-Driven Loyalty Marketing Will Grow
Although data collection is widely practiced by c-store operators (72 percent collect customer data through their loyalty programs), retailers aren’t taking full advantage of that data to improve their marketing performance and better understand shoppers’ behaviors. Only 25 percent use customer data they collect to identify potential customers with similar qualities as their existing loyalty members.
While c-store operators and loyalty marketers have focused on acquiring customer data in recent years, the focus is shifting to “actionability” — gaining insights from customer data in order to drive marketing efforts. Leveraging data-driven insights to improve loyalty program performance is a priority; personalization, segmentation and providing members with rewards they value are all keys to a program’s success.
2. Omnichannel Loyalty Marketing Will Grow
In prior years, c-store loyalty marketing largely focused on customer relationship management (CRM), becoming synonymous with email marketing to engage members. That practice has given way to omnichannel marketing, which includes in-app messaging, text messaging (SMS), push notifications and other channels, in addition to email.
While omnichannel loyalty marketing offers more opportunities to engage members, it also makes marketing more complex and harder to manage without the help of a unified marketing solution.
3. AI’s Importance Will Grow
While global spending on artificial intelligence will reach $97.9 billion by 2023, the United States represents more than 50 percent of all AI spending, with convenience retailers likely to benefit across many parts of their operations. Greater applicability in fuel pricing and workforce management means that c-stores can greatly improve the efficiency of their business operations, optimize their fuel pricing and personalize their loyalty rewards with the help of AI and data-driven analytics.
AI capabilities can be particularly helpful in optimizing employee staffing and scheduling, and in providing the depth of understanding in operational issues, such as factors affecting shrinkage and transparency in accountability.
4. Foodservice Will Continue to Grow
A 2019 GasBuddy survey showed that 43 percent of millennials purchase food from c-stores. In addition, one in four consumers spends $6 to $10 a week on c-store foodservice, with about 20 percent of those aged 18-29 spending $10 to $15 per week. Expect foodservice offerings and sales to expand in 2020, thanks to younger consumers who love the “grab-and-go” convenience of c-stores.
NACS also reported that an increasing number of convenience stores across the country are offering high-end foodservice. This trend is likely to contribute in boosting foodservice revenues.
5. Mobile Payment Adoption Will Be Slow
Unlike the above trends that all forecast growth, the use of mobile payments among c-store shoppers is not expected to expand in 2020. That reflects an overall low adoption rate of less than 10 percent (of mobile payments apps in the United States).
American consumers still prefer using credit and debit cards, which are widely accepted by merchants. In 2018, 80 percent of consumers used credit cards for purchases. Among nonbank payment options, PayPal was the most popular at a 40 percent adoption rate, but it is largely used for online payments, according to Bain, a global consulting firm.
Whether it’s to buy gas, food or both, convenience is the No. 1 reason that draws consumers to c-stores. That, of course, will remain in 2020 and beyond, but the way c-store operators provide such convenience will continue evolving with the help of technology.
In a fast-paced landscape that’s increasingly becoming digital, adaptability will be key to driving business growth and success in this new year and the decade ahead.
Brandon Logsdon is president and general manager of Marketing Cloud Solutions for PDI. He oversees the company’s loyalty division, in addition to its MarketLink and data monetization services. PDI Marketing Cloud Solutions is a complete end-to-end solution that combines the secure and scalable PDI Marketing Cloud Platform with the industry knowledge and first-hand experience of the PDI Marketing Solutions Practice. Visit the PDI Marketing Cloud Solutions website for more information.
Editor’s note: The opinions expressed in this column are the author’s and do not necessarily reflect the views of Convenience Store News.