Delivering Convenience — Literally

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Delivering Convenience — Literally

09/05/2015

For years, convenience stores have lived up to their title, providing accessibility, ease and speed to time-starved customers. Pay-at-the-pump made buying gas faster and easier. Point-of-sale systems decreased wait time on the checkout line.

In today’s on-demand world, however, the definition of “convenience” is changing and, without question, convenience stores need to evolve along with it.

“Consumers’ habits and preferences are changing. With Netflix, people can watch movies on demand rather than go to the movie theater, and even binge-watch a full season of a television show on demand,” said Prahar Shah, business development manager at DoorDash, an on-demand food delivery company. “Consumers can get so many things with a touch of their fingertips. It’s really an emerging trend.”

Supermarkets have been offering grocery delivery direct to customers’ doors for years, and according to a recent CSNews Online poll, 27 percent of respondents feel home delivery by grocers is the biggest threat to traditional convenience stores.

Foodservice is an evolving delivery trend as well, with new on-demand delivery companies popping up every day. AppCrawlr, an app discovery engine, recently showed 270 food delivery apps available that cater to the $67-billion takeout market.

Even Uber, known for its on-demand car service, launched UberEATS this year in Chicago, New York, Toronto and Barcelona. Originally launched as uber-FRESH in Los Angeles last summer, customers use the Uber app to view menus and place an order, and a driver delivers the order within minutes, according to a spokesperson. The company also offers courier service UberRUSH in New York, which is still in a testing phase.

“The proliferation of apps and the on-demand economy make it easier than ever for customers to get what they want at the push of a button, and businesses are working harder than ever to meet the needs of their customers,” explained Katie Bynes, spokesperson for Caviar, a restaurant delivery service based in San Francisco.

Convenience stores are just beginning to dive into delivery. 7-Eleven Inc. recently announced a partnership with Postmates, an on-demand delivery service based in San Francisco, to deliver hot foods, snacks, beverages and other store items from select locations in San Francisco and Oakland, Calif., as well as 36 locations in Austin, Texas.

On Sept. 1, 7-Eleven also launched a partnership with DoorDash, another on-demand delivery service, to provide delivery from participating 7-Eleven stores in five major metropolitan markets across the United States. Customers in New York, Los Angeles and Chicago can now order products from their local 7-Eleven stores for delivery, with service following in Washington, D.C., and Boston in the coming months.

Additionally, Casey’s General Stores Inc. is adding online ordering to 300 stores per month, with the goal of having all 1,878 of its c-stores offering the option by the end of 2015. Pizza, subs and related products are the primary items customers can order online. Several Casey’s stores also allow customers to arrange pizza home delivery online, which the company reported in June 2015 is performing extremely well. Casey’s plans to convert an additional 100 stores to offer pizza delivery in its 2016 fiscal year.

“We feel confident having online ordering in all stores,” said Bill Walljasper, Casey’s chief financial officer. “We are reaching a customer we haven’t reached before. Like pay-at-the-pump years ago, there are customers who are demanding this service.”

THE AMAZON EFFECT

Amazon.com Inc. is continually changing the way consumers think of online shopping and delivery, and has become a major competitor to all retailers, including convenience stores, according to Lee Peterson, executive vice president of brand, strategy and design at WD Partners, a retail consulting company based in Dublin, Ohio.

“Everyone is waking up to the fact that Amazon is everybody’s competitor,” Peterson explained. “Amazon is all about convenience.”

The company launched Amazon Prime, a yearly subscription that offers consumers free two-day delivery on a wide variety of products. Then in December 2014, Amazon Prime Now launched in Manhattan. Today, the service is available in Miami, Baltimore, Atlanta, Dallas, Austin, Indianapolis, Chicago, Seattle and London.

“Amazon Prime Now is one of the benefits of being a Prime member, and we offer one-hour delivery for $7.99 or two-hour delivery for free,” said Kelly Cheeseman, spokesperson for Amazon, explaining customers can place their orders through a mobile app. “They can search through tens of thousands of items — from daily essentials like bottled water and paper towels; to electronics including a big-screen television, Bose headsets; and a select amount of food items in New York and Indianapolis, including some frozen and chilled items.”

Amazon can accomplish this through its more than 50 fulfillment centers across the United States, along with dedicated teams working on Prime Now orders. As a customer purchases an item and places an order, a map pops up in the app so they can watch their courier as he or she makes their way to them, Cheeseman said, noting the company continues to hear from customers about how they love the speed of delivery.

“Time is the true commodity and only Amazon really gets that,” said Peterson. “They are taking the whole shopping trip off the table and will drop it off on your porch. C-stores need to start testing things like delivery to see what works. It’s not even just about making money. They need to try it to find out as much information as possible.”

OUTSOURCING DELIVERY

When it comes to delivery, most convenience stores don’t have the logistics in place to offer the service themselves, and many may not be interested in taking on such a large venture. That is where delivery services like Postmates, DoorDash and Caviar come into play.

“7-Eleven doesn’t have delivery trucks and coolers ready to do delivery, so it’s about finding partners that are willing to help,” said Peterson.

7-Eleven chose Postmates as one of its partners. To place an order, customers download and use the Postmates app for iOS or Android, as well as using the Postmates website. An order is accepted by one of the delivery workers in the area, and the food is prepared, picked up at a 7-Eleven location and delivered to the consumer within an hour.

“In San Francisco and Austin, we have a full catalog in the app,” Holger Luedorf, senior vice president of business development at Postmates, said about the 7-Eleven partnership. “Customers are able to browse 7-Eleven products. We work directly with 7-Eleven to make sure they are the most up-to-date as possible. When a Postmate goes into the store, they grab the desired items, pay with a prepaid debit card and are on their way.”

Delivery is 24/7, and the company charges a delivery and service fee. 7-Eleven is the first convenience store chain Postmates has partnered with, but the company will continue to evaluate other retail partnerships across multiple verticals, and will also be expanding the 7-Eleven service to more cities in the coming months, according to Leudorf.

“7-Eleven’s founder, Joe C. Thompson Jr., used to say 7-Eleven’s mission was to ‘give customers what they want, when and where they want it,’” said Raja Doddala, 7-Eleven’s vice president of innovation and omnichannel strategy. “Through the modern-day technology that Postmates provides, we can fulfill that promise in a way we haven’t done before.”

Postmates also currently works with Starbucks, Chipotle and Apple, and surpassed 2.5 million deliveries since launching in 2012. Demand continues to grow, and the company continues to add new cities to its model — currently in 28 major metropolitan markets and nearly 13,000 Postmates delivering on the platform.

“With Starbucks, we are delivering coffee through the Postmates app. The integration with Starbucks won’t go live inside their app until early fall,” Leudorf explained. “The average delivery time for a cup of coffee is seven minutes. Because there are so many Starbucks locations, we’re able to deliver quickly.”

7-Eleven’s partnership with DoorDash, meanwhile, will include in-store marketing, local promotions and the availability of “Convenience Packs,” groups of products that make purchasing common items from 7-Eleven stores more convenient. For a limited time, the delivery service fee is $2.99.

“By working with DoorDash, we can bring on-demand delivery to more people and more places,” said Doddala. “This partnership between the world’s largest convenience store chain and a leading on-demand delivery startup can redefine convenience. DoorDash’s technology, data analytics and commitment to the customer experience impresses us and makes them a great match for 7-Eleven’s omnichannel initiatives.”

To get started with 7-Eleven delivery, users download the DoorDash app for iOS or Android, or visit www.doordash.com.

“We’re proud to launch our first expansion beyond restaurants with 7-Eleven,” said Tony Xu, CEO and co-founder of the Silicon Valley-based DoorDash. “7-Eleven has shown a true commitment to learning the ins and outs of delivery and even went dashing with our team to see DoorDash in action. We’ve worked closely throughout the testing process to ensure that their products — from convenience goods to fresh and prepared foods — are well suited for delivery.”

DoorDash’s restaurant delivery partners include Yum! Brands, parent organization of Taco Bell, which recently announced a partnership with DoorDash to offer delivery at more than 200 Taco Bell restaurants in more than 90 cities throughout Los Angeles, Orange County, the San Francisco Bay area and Dallas regions.

“Delivery was the No. 1 request from our consumers,” said Lawrence Kim, director of digital commerce and on-demand at Taco Bell. “Taco Bell has always been about value and convenience. As those definitions evolve with our consumers, it’s important our business evolves with it.”

The company is excited about the initial results of delivery; the response from consumers has been “overwhelmingly positive,” Kim said. The chain is encouraging fans to use the hashtag #TacoBellDelivery to let them know where delivery should expand next.

DoorDash — currently available in 16 major metropolitan areas including Brooklyn, N.Y., Boston, Chicago, Los Angeles, San Diego and Minneapolis, with plans to grow to 25 areas by the end of 2015 — uses a proprietary algorithm and technology that looks at where their “dashers,” or delivery employees, are where an order comes in and how long it will take the restaurant to prepare the meal in order to determine who gets the assignment so the food is delivered within the 45-minute timeframe.

“For example, if it’s an order from California Pizza Kitchen, it could take 15 to 20 minutes to prepare vs. Taco Bell, which is only five minutes. The closest dasher to Taco Bell will get the assignment, whereas for California Pizza Kitchen, someone who is 20 minutes away would be better to take that order,” Shah explained.

The consumer pays for their order via the app, and there is a delivery fee associated with every order. On the restaurant or merchant side, DoorDash takes a commission from each order. The biggest benefit to the restaurant or merchant is the incremental traffic they may not have had without the delivery service, he said.

“Delivery is a huge new revenue stream that is impacting the bottom line, and it’s an extension of the restaurant’s brand,” Shah added. “Right now, 80 percent of restaurants don’t deliver.”

And while food delivery seems to be the latest delivery trend, it’s only a matter of time before consumers are looking for the same delivery of everyday items — something Amazon is already preparing for with Prime Now.

At DoorDash, they started with food because it is the most difficult thing to deliver in terms of timing and freshness. But the possibilities are endless.

“We created our platform to be broadly structured and very agnostic so we can deliver tacos or toothbrushes,” said Shah. “We have focused on food the past two years, but long term we have a platform that can deliver anything on demand.”

“Time is the true commodity and only Amazon really gets that. They are taking the whole shopping trip off the table and will drop it off on your porch. C-stores need to start testing things like delivery to see what works.”
— Lee Peterson, WD Partners