Convenience Channel Needs to Play Catchup in Online Ordering & Delivery
Currently, 90% of c-store retailers are in the "inactive" or "initiation" stages on the digital scale, according to a recent Convenience Store News webinar.
By Brian Berk, Convenience Store News
CHICAGO — To best compete in the future, offering online ordering and delivery is definitely something for convenience store operators to consider. In fact, online ordering is expected to grow at an annual rate of 17 percent through 2025.
Consumers who place online orders for delivery spend at least 10 percent more than those who place orders for takeout, and first-time guests account for 65 percent of all online orders, providing another opportunity for sales growth, Ryan DiLello, content specialist at Paytronix Systems Inc., cited during a recent webinar hosted by Convenience Store News.
Despite these figures, only 57 percent of retailers offer last-mile fulfillment services, according to c-store industry trade association NACS. The three main concerns retailers have regarding delivery are the cost; technology constraints in terms of apps, ordering and payment processing; and staffing concerns related to fulfilling orders.
Among convenience store retailers specifically, 90 percent are in the "inactive" or "initiation" stages on the digital scale, DiLello noted, adding that Hathaway research has revealed that 83 percent of consumers are willing to use c-store apps, but less half of the top 150 convenience store brands have a mobile app.
"There is a big opportunity, and c-stores are behind," DiLello cautioned.
It is never too late for c-store operators to get involved in online ordering and delivery, however. Even the industry's small operators can get in on the act by using technology platforms that allow them to outsource much of the work of setting up an online-ordering system without losing control over this important part of their business.
Online Ordering Best Practices
When adding online ordering to a c-store operation, it helps to first look at the demographics of the business and how consumers are ordering products. Multiplatform users tend to be what DiLello calls "Bridge Millennials," those in the millennial demographic who earn more than $100,000 per year, possess a college education, and are tech savvy.
"Many who order online grew up with technology and are now in their prime spending years," he said. "They are younger consumers who are willing to pay a premium if it saves time."
Among those who order digitally, 62 percent use a third-party online mobile application to do so. Thirty-six percent use a retailer’s own website, while one-third use a retailer’s own proprietary mobile app, and 29 percent use a third-party website, according to NACS.
If retailers set up their own app, online ordering should be tied into a loyalty program, DiLello stressed. Paytronix data shows that loyalty program mobile users spend 10 percent to 20 percent more per month, visit 20 percent to 30 percent more frequently per month, and stay active and retained in the program at a two-to-one rate compared to loyalty program non-mobile app users.
"Online ordering is second only to loyalty in terms of what consumers seek," he relayed. "C-stores that quickly adopt digital innovations from their competitors, within or across industries, will be the best positioned to build loyalty and engagement at a much faster rate than their peers."
Setting up a successful online-ordering experience requires a c-store retailer to have the proper "tech stack." According to DiLello, this consists of:
E-mail and SMS marketing
Loyalty and rewards program
Selling & Order Fulfillment
Point of sale
Kitchen display system
Online ordering solution
Food costing and menu planning
Delivery Best Practices
One of the toughest decisions for retailers when they create online ordering and mobile app platforms is whether to handle the last mile of delivery themselves or rely on a third-party service to do so.
There is no one-size-fits-all answer, according to DiLello. He says retailers should consider driver costs, gas and maintenance; what employees will do during slow days; geography for an in-house program; commissions per order or a monthly rate; and data rights and geography when selecting a third-party aggregator.
"Premiums of 1 percent to 5 percent generally works in terms of costs to your customers per a NACS/Hathaway report," DiLello said. "People are less flexible when it comes to delivery costs and more flexible on the price of the food itself, so that is something else to consider."
An ongoing problem is the supply chain shortage. Experts differ on when the crisis may end, so c-store retailers must be prepared when building out an online ordering and delivery system, the Paytronix executive stated. Labor shortages are another ongoing problem.
"Seventy-five percent of retailers considered out-of-stock situations bad or very bad," he revealed. "There are significant shortages in glass and popular non-alcoholic beverages, as well as soaring prices on food commodities."
To overcome these challenges, retailers should streamline, substitute and sell. Finding alternatives for out-of-stocks, selling local products that provide flair, adjusting prices, and using a loyalty program to move less desirable items via rewards or promotions are four ways DiLello offered to help combat the supply chain problem.
Using technology to create the proper mobile experience is also crucial for a successful online ordering and delivery business, he added. Retailers should focus on: