Improving Operations & Driving Revenue With Technology-Led Strategies
Convenience store operators face some serious headwinds, with broader competition and rising costs complicating an already difficult economy. The customer base is still there, despite inflationary pressures and changes brought on by online purchasing and delivery services.
A large majority of consumers (83%) say shopping convenience is extremely or very important to them and, even as product prices climb, 65% of in-store customers report typically leaving with items they didn't initially plan to purchase. Although speed of service and convenient proximity to their usual travel paths continue to resonate with shoppers, online options and other retailer segments have chipped away at c-stores' foot traffic.
To overcome these and other industry challenges, convenience stores will soon need to pivot their focus toward new revenue streams and enhanced customer engagement strategies. Many operators will also feel the push to optimize their resources more efficiently than they have in the past.
Accomplishing these new goals will require c-store brands to transform their technology infrastructure. Improvements in the technical, operational and customer experience realms will be critical to long-term success, and operators should put the right tools and infrastructure in place to support a growing variety of point-of-sale and other data streams, enable faster actions based on analytics, and protect a wider range of digital assets against cybercrime.
Data warehouses and data lakes enable the real-time ingestion of structured and unstructured data. The normalization and visualization of data enable operators to view the entirety of their operations on a single pane of glass. Natural language process (NLP) tools democratize the ability for all employees to operationalize data. Integrated, managed detection and response (MDR) cybersecurity solutions enable c-store operators to focus on their business without the complexity or responsibility of integrating, operating and maintaining disparate technologies.
Convenience Store Sector Sees Challenges From All Sides
The foundations of the c-store industry are in flux. Cigarette sales are being cannibalized as customers increasingly explore vaping and other alternative products. Not only do 46% of store operators anticipate a further drop in cigarette sales this year, but 62% believe unit volume will continue to decrease as well.
On the fuel front, improved mileage among newer automobiles and ongoing advancements in electric vehicles are eroding fuel demand. Total c-store fuel sales decreased by $532.2 billion in 2023 and while fuel sales accounted for just over 67% of c-store revenue, the forecourt brought in less than 39% of profits.
The challenges looming for c-store brands aren't limited to issues within the various product categories. Customer behaviors and expectations are also changing. Operators report foot traffic has fallen and they face increased competition from other retail sectors, including grocery, dollar stores and quick-service restaurants. The myriad challenges of those industries — everything from finding new ways to drive customer engagement to securing customer data against increasingly sophisticated hackers — are c-store challenges, too.
Together, these factors signal a need for a pivot, but it could be a tough road for many c-stores. Technology will be central to transitioning in-store offerings away from sagging categories and encouraging foot traffic with a more compelling in-store experience.
Unfortunately, c-store brands are often technology laggards. For those businesses that haven't yet built a solid technology footing, an industry reinvention could significantly stress and perhaps outstrip the capabilities of the technology architecture and tools that are in place today.
Technology's Role in the C-store Evolution
To get in front of shifting consumer purchase behaviors and product category disruptions, c-stores need to rethink their operations. Developing capabilities around the expanded and more complex application of data analytics enables store operators to leverage data more effectively.
Basic questions such as "Why does one store significantly outperform another store with similar inventory, demographics and traffic?" cannot be answered without insight into what is happening in the store.
Computer vision solutions, which were previously used to detect fraud, are also being used to measure employee performance and store operational efficiency. This can position business owners to potentially mitigate some of the effects of rising operational and labor costs. Rather than working weeks (or potentially even months) behind the data curve, the right tools allow c-store operators to analyze current data and quickly take action on those insights to control costs better.
Technology also empowers c-store brands to leverage opportunities with artificial intelligence operations (AIOps). These innovative tools allow for targeted automations to help offset increased labor costs and offload manual, repetitive or time-intensive tasks, thereby freeing staff for other activities. AIOps can improve operations, too, by anticipating and addressing problems before they occur.
A well-crafted technology strategy results in a greater understanding of store-level performance and the ability to direct resources most efficiently. However, these advanced technologies need the right environment to work correctly and securely.
New technologies, such as AI and machine learning (ML), and Internet of Things (IoT) devices like equipment sensors, are becoming more prevalent in the c-store sector. To understand where energy efficiency opportunities exist, for example, you need to have the technology to monitor your coolers. Providing a visually stimulating in-store experience means deploying digital signage that's easy to update. Ensuring you control access to all those assets is equally important and requires cybersecurity protections.
Shape Your Business Strategy to Leverage Technology More Fully
Now is the time for c-store operators to align their business strategy with technology to drive customer engagement and capitalize on new cost control and revenue-tapping opportunities.
A clear focus on the significant advantages of convenience starts with making every location inviting and efficient to attract and delight customers. One example is the use of digital signage to create a bright, appealing and more modern environment that brings people into the store and engages them. Digital solutions allow operators to leverage strategies that include delivering personalized loyalty messages and directing shoppers to alternatives if in-demand items are out of stock.
Implementing and using these technologies effectively can be daunting for businesses that lack the necessary resources and expertise. That's where a managed service provider (MSP) can make all the difference. Finding an experienced MSP partner gives c-store operators access to the latest technological knowledge and support.
An MSP will work with you to implement cybersecurity measures that protect your network against intrusion. You'll also have guidance to help you confidently navigate the next phase of c-store evolution, including deploying innovative technologies that augment your existing staff, bring shoppers back into the store, engage new customer segments and deliver visibility into your operational state.
Dan Rasmussen is senior vice president and general manager, North America Enterprise Division at Hughes Network Systems. He is responsible for leading the organization that supports Hughes' large enterprise, small business and government customers. He has been with Hughes for more than 27 years. Rasmussen holds a Master of Business Administration, a Master of Science in Electrical Engineering and a Bachelor of Science in Electrical Engineering from Georgia Institute of Technology.
Editor's note: The opinions expressed in this column are the author's and do not necessarily reflect the views of Convenience Store News.