C-store Operators Face a New Convenience Imperative

Delivery, pickup and drive-thru are quickly becoming necessities for the convenience channel.
Pick up orders at a Kwik Trip convenience store

NATIONAL REPORT — Food delivery and pickup started in the restaurant space years ago with a few brands offering it nationwide, such as Pizza Hut and Domino's. Over time, more restaurants jumped into the mix, and suddenly options like Uber Eats, DoorDash and Grubhub became popular for food orders. This trend continued into other forms of retail, with Amazon today enabling consumers to get almost anything delivered straight to their door — in some cases, within a couple of hours.

It was the COVID-19 pandemic, however, that took delivery and pickup, as well as drive-thru, to a whole new level of popularity. And more than three years later, it is still going strong.

"It's fair to say consumers were changing before the pandemic, but the pandemic accelerated those changes and now consumers discovered these services are nice to engage with and expect brands to have them," said Greg Franks, senior vice president of mobility and convenience, Americas at bp, based in Warrenville, Ill.

Foodservice remains an important piece of the delivery, pickup and drive-thru experience, although many convenience stores have expanded these services to include other in-store items.

[Read more: Wawa Expands Its Drive-Thru Concept to Florida]

Whether it's a coffee chain, quick-service restaurant (QSR) or a fast-casual option, consumers are conditioned for delivery, pickup and drive-thru, so c-stores offering food options need them as well, according to Kay Segal, founder and managing partner of Business Accelerator Team, a convenience consulting firm based in Phoenix.

"If convenience retailers want to truly compete with other foodservice outlets, and not just other convenience stores, these consumer-desired delivery mechanisms are a must," she said.

What's more is that c-stores have a unique value proposition to offer consumers that restaurants and QSRs only offering food and beverages do not: access to nonfood items.

"It's a massive opportunity for c-stores because they are uniquely positioned," said Carl Turner, CEO of Swipeby, a Winston-Salem, N.C.-based company that helps retailers offer e-commerce options like online ordering, pickup and delivery. "I can get my pizza, a six-pack of beer and chips at a c-store, and I can't do that at McDonald's or other food places, which is a great combo option in states where it's legal."

Diving Into Delivery & Pickup

While both delivery and pickup have been growing in popularity for years, delivery in many areas leads the way, with a 17 percent growth rate in 2021 and 2022, cited John Nelson, CEO of Vroom Delivery, a Chicago-based supplier that offers an e-commerce solution for pickup and delivery specifically designed for the convenience store market.

"Our research shows 88 percent of all orders through our platform in 2021 were delivery and in 2022, delivery made up 84 percent," he said. "It does vary, where some chains do 99 percent delivery and others do more pickup. It depends on the nature and location of the chain."

Whereas some c-stores jump into both delivery and pickup at the same time, others choose to start with one and expand as they go. The same is true for what products are offered — some start with foodservice only and then expand to additional in-store products, while others are the reverse.

"Many stores are picking one or the other first and then as they get capabilities and have data available, they move to other offerings," said Abbey Karel, vice president of business development, convenience retailing at Bounteous. The Chicago-based company partners with brands, including c-stores, to create transformative digital experiences.

At Quality Oil Co., operator of more than 50 Quality Mart stores, the retailer started earlier this year offering packaged products through the Swipeby platform. The Winston-Salem-based chain will consider expanding into food in the future.

With Swipeby, customers can place an order online via the Swipeby app or a white label app. Swipeby then processes the payment, sends the order to the store and if a customer opts for delivery, the order is sent out to the company's network of partners to fulfill it.

"The COVID-19 pandemic served as a catalyst for Quality Mart attempting home delivery and developing an in-store pickup option," said Michael Robb, the chain's vice president of marketing. "We started with packaged goods already on our store shelves but, over time, we will consider broadening our offerings to delivery of hot foods such as coffee, hot dogs or pizza."

At Vroom Delivery, the top categories for orders include age-restricted items such as alcohol and tobacco. According to Nelson, while c-stores may want to offer foodservice because it's their highest-margin category, allowing other items to be delivered not only makes the basket larger, but also may convert nonfoodservice customers into foodservice customers.

It also depends on the location and the customers in the area. "We can look at two different chains in the same state and one that is more rural with a robust foodservice offering might have 60 percent foodservice items in their basket, while one 100 miles down the road in an urban environment has 90 percent consumer packaged goods," he explained.

There are people searching online for on-demand milk delivery or on-demand beer delivery, Nelson noted, so by offering additional products outside of foodservice, c-stores can meet the needs of those consumers and then introduce foodservice products as a result.

Working With Third-Party Delivery

Companies like Swipeby and Vroom allow retailers to retain control of the ordering process and own the data from it, whereas partnering only with a third party like DoorDash does not offer these options. Retailers can choose to either do the delivery portion in-house or partner with third parties to handle only the delivery piece for them.

"In the last year, everyone we've signed up has fully opted into the third-party delivery system because it's easy to plug into and the way we have it structured with rates, it really doesn't cost them much," Nelson pointed out.

For those looking to dive into delivery quickly without investment in technology, partnering directly with companies like Uber Eats, DoorDash or Grubhub allows a c-store to get its offerings in front of a new market where consumers can order directly from these third-party apps, which also handle the delivery.

BP, which has a large dealer network of operators as well as company-owned and -operated stores, has an agreement in place with Uber Eats, which is becoming available to dealers across its network. However, the company is also investing in its own digital ecosystem to grow its internal capabilities, Franks relayed.

"We have a large network of dealers with a lot of different technology solutions and they wanted to offer delivery, so we partnered in the here and now, but plan to evolve our capabilities," he said. "Third parties have a lot of expertise and it's an 'instant on,' so it enables us to invest in the customer and provide what they want as we continue to grow our own platforms."

Among the drawbacks of third-party arrangements are higher fees (between 20 and 30 percent per transaction), a lack of control and the inability to access or own the data, said Segal of Business Accelerator Team. She believes the only real advantage is getting marketing through their network.

Also, the third-party company has complete control over where to funnel orders. If a chain signs up to give 20 percent revenue share to them, but a competing store in the area is giving them 30 percent, they will funnel people to the higher-revenue share because they will make more money, according to Turner. "They will also send people to their own ghost warehouse like DoorDash's Dash Mart stores," he cautioned.

In the future, industry experts and retailers believe c-stores will be offering a mix of off-premise options in order to compete. Those who are not yet in this space should be evaluating their options and dedicating resources to doing it right, said Vroom Delivery's Nelson.

Dabbling in Drive-Thru

In addition to delivery and pickup, some c-stores are creating new locations with a drive-thru to get food, beverages and in-store items into the hands of more customers. Convenience store retailers already offering this option include Wawa Inc., 7-Eleven Inc. and GetGo Café + Market, the c-store subsidiary of Giant Eagle Inc.

There are things to consider, however, before jumping into the drive-thru space.

For example, adding a drive-thru window in the c-store environment requires planning because of the nature of the sites. As a result, it is often easier to add the option to new construction rather than existing locations.

Adding a drive-thru to a store also often requires a larger footprint and more land, so there has to be a return on investment for a c-store to consider it, noted Bounteous' Karel.

Still, despite the challenges, there are c-stores taking the plunge and industry experts expect more will do so in the future. Convenience stores are in a great position to compete with Dunkin' Donuts, Starbucks and even Walmart, according to Turner, who also pointed out that people especially like to use a drive-thru to grab a coffee, other beverage or a bite to eat.