The Pandemic Was a Wake-Up Call for Delivery

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The Pandemic Was a Wake-Up Call for Delivery

By Terry Handley, Former CEO, Casey’s General Stores Inc. - 10/07/2020

History has a way of repeating itself.

Years ago, many convenience store operators — Casey’s included — were concerned about the introduction of pay-at-the-pump technology. We feared customers would purchase fuel by swiping a credit card at the pump and depart without ever stepping foot inside the store. Not only would this negatively impact in-store customer counts and the sales of higher-profit products, but the costs of implementation were also steep.

In the end, we quickly learned that customers demanded the convenient option of paying at the pump, and anyone who resisted the trend would be competitively disadvantaged. End of story.

We now find ourselves at a similar crossroads with delivery. It’s fundamentally a matter of convenience and customer service. By their very definition, convenience stores cannot afford to fall behind in this swiftly changing landscape.

The advent of a delivery service can appear daunting and is most certainly complicated by the presence of third-party aggregators. As the recent news about DoorDash’s dark stores should make clear, these companies are not friends of the industry. What DoorDash did is similar to Amazon’s own private label strategy — collect data on their partners, analyze it, and deploy a competing offer.

Retailers will come to understand delivery in time. I suspect the solution will also be more sophisticated than “we’re on DoorDash.” During my 38 years in the c-store industry, I was amazed and impressed with the entrepreneurial spirit of so many retailers — regardless of the number of stores under their banners.

Industry leaders have adapted to changing competitive landscapes, economic adversity, and diverse customer expectations. It’s not always easy; however, those who failed to act didn’t survive for very long.

As you consider the question of delivery, there are a few things I encourage you to keep in mind:

COVID-19 Was a Wake-Up Call

We forget that the industry was already challenged by the growth of ecommerce.

These past few years, it can be argued that convenience retailers have been negatively impacted as shopping malls and department stores witnessed a decline in overall visits. If I’m not getting into my car to go shopping because I’m ordering products on Amazon or other ecommerce providers, then I’m also not stopping at the convenience store for fuel and other high-profit items.

Delivery represents an entirely different challenge if this industry fails to act. While grocers are chasing larger baskets, there’s an entire segment of consumers who just want specific grocery items, snacks, age-restricted products, and foodservice brought to their home. They don’t want to be bothered by order minimums or large fees. GoPuff has successfully expanded across the country for this very reason. If retailers fail to be proactive, then companies such as goPuff will be just another competitor that they failed to recognize.

There’s been a blurring of the convenience channel over the years. Grocers, dollar stores and pharmacies are all in the convenience business. We had to pay attention to those developments and be aware that the game was changing. Delivery is no different.

The sudden arrival of the pandemic earlier this year was a wakeup call for many of us. Almost overnight, many retailers realized the gap in their ability to sell products to customers quarantined in their homes. Some signed partnerships with third-party aggregators in order to reach customers who were suddenly reluctant to come into the store.

Retailers must recognize that delivery is not a fad. As with many pre-existing trends accelerated by the pandemic, it’s here to stay. The good news is that convenience retailers are positioned to succeed in this competitive landscape.

It’s Time to Overcome Reluctance

Third-party aggregators are not true partners. They view your customers as their own. Given the chance, they will even compete directly with you, as DoorDash now does.

I believe strongly that retailers need to shift to a model of conducting their own deliveries. But I also understand the general reluctance to do so. Cost is most certainly front of mind. Looking at the economics, many lack the necessary data to make an informed decision. Others lack awareness about who can help and provide guidance.

But convenience retailers are often ignoring their own advantages. Not only do they have the necessary real estate, but they also have hyper-locality. Convenience retailers occupy the best corners of the busiest intersections across America. They can also service rural communities that the third-party aggregators ignore.

This, of course, means staffing for deliveries. Retailers will have to overcome this hurdle by being creative and mindful of costs. You may need to add a person who performs additional duties but drops everything the moment a delivery order comes through. Cross-training will become a necessary part of store operations.

Domino’s provides a notable example of a top-tier, first-party delivery provider operating in a highly competitive environment. The pizza company leverages innovations to enhance its primary business model and gain a competitive edge. From online ordering to mobile apps, the Domino’s Tracker to delivery insurance, Domino’s has set the bar high for competitors to emulate or exceed. During the height of the COVID-19 pandemic, the company has witnessed a significant increase in both sales and profits, while other restaurant operators have been negatively impacted.

While I don’t suggest that convenience retailers need to meet the lofty heights of the Domino’s experience, I would argue that they can provide key elements to better serve their customers. Delivery is a prime example. Retailers can use available technology, manage their operating costs, retain key customer data points, and extend their reach to a population that was otherwise unavailable.

This is not an issue to be pondered or tabled to see what others will do first. The risk is being outperformed at the convenience game. The growth of third-party delivery proves there is a growing expectation amongst consumers everywhere for enhanced services, and someone else will meet those needs if retailers fail to act. Disruption creates adversity and an opportunity to be proactive in an effort to grow market share and gain new customers.

Convenience retailers will ultimately solve the question of delivery. That’s the beauty of the convenience store industry — the entrepreneurial spirit of its members, whether they be national chains or local owner-operators. Even the smallest retailers can fortify themselves against the goPuffs and DoorDashes of the world if they understand the technical side of delivery, manage the costs of operation, and leverage that proven entrepreneurial mindset of success.

Terry Handley is the retired president and CEO of Casey’s General Stores Inc. He served in various roles during his 38-year career with the company, including vice president of foodservice, senior vice president of store operations, and chief operating officer. He currently serves as an advisor to the board of directors of Vroom Delivery.

Editor’s note: The opinions expressed in this column are the author’s and do not necessarily reflect the views of Convenience Store News.