The COVID-19 pandemic completely upended the retail sector and three years later, companies are still feeling the effects. Supply chains haven't fully recovered, consumer preferences and purchasing patterns have shifted, and labor issues continue to hinder retailers' growth.
To overcome these challenges, leaders are increasing investments in digital capabilities — from customer-facing technologies like augmented reality-enabled store displays to enterprise technology like IoT sensors in storefronts and fulfillment facilities. However, without a strong data foundation to enable cutting-edge solutions and provide real-time and predictive analytics, some enterprises are finding their digital transformation strategies have fallen short of expectations.
This is especially true in the gas station/convenience store segment. Chains in this particular division of the broader retail sector have their own unique set of challenges — beyond supply chains, shopping trends and staffing concerns — which have collectively catalyzed a new era in c-store digital transformation. These challenges include:
New regulations mean new inventory: For decades, tobacco products have been a staple on the shelves of gas stations across the country. However, federal and state legislatures are causing leaders to rethink their inventory mix. In some states, e-cigarettes and legalized cannabis products have opened new streams of revenue, but gas station/c-store chains cannot entirely rely on these goods either, given the murky regulatory waters. This presents an opportunity for c-stores to bring additional product lines onto their shelves.
Store of the future: Like every other retail segment, gas stations/convenience stores are introducing in-store digital enhancements to appease tech-savvy consumers. Many experts have coined this as the "store of the future." These storefronts will have mobile in-store payment capabilities, facial recognition technology to identify shoppers and provide them with product recommendations in real time via mobile applications, and smart shelf solutions using IoT sensors to provide inventory insights.
Decreasing foot traffic: The spike in gas prices last year led to a drop in c-store station footfall and, therefore, sales. If consumers are filling up their tanks less, they're also visiting gas station storefronts less. Given the cyclical nature of the economy, this issue won't last forever. However, another potential footfall issue, or opportunity, is right around the corner: the electric vehicle (EV) revolution. BloombergNEF projects that more than half of cars sold in the U.S. will be electric by 2030. And with residential charging stations and a host of commercial charging stations at retail, dining and entertainment establishments, gas station storefront footfall could dramatically decrease over the next decade if leaders don't adjust their business models and incentivize in-store shopping and EV-related offers.
Lock in loyalty: The inflationary market is also bringing loyalty programs to the forefront of modern, digitally driven business models. Capgemini found that 64 percent of shoppers have favored hypermarkets and discount stores over specialty grocery stores and convenience stores due to increased prices. Yet, if companies help consumers through the cost-of-living crisis, 74 percent of customers say they will purchase more products from those stores in the future. Some gas stations/convenience stores have already honed their loyalty programs, with two chains earning top 20 places in Newsweek's "Best Loyalty Programs 2023" ranking.
Four Capabilities to Strengthen Your Data Foundation
These trends, in some way or another, fundamentally necessitate enhanced technology and analytics — and as previously discussed, that's only possible with a strong data foundation.
Gas station/c-store leaders looking to improve their data foundations should include the following capabilities in their strategies:
- Demand sensing — Chains need to strike a balance to avoid stock outs (and therefore lost sales opportunities) while keeping their inventory carrying costs low. Of course, it's important to remember that while planning with precision, there could still be external events that could surge or reduce the demand for a short period of time. In these cases, businesses may want to consider just-in-time fulfillment for unplanned demand. C-store business leaders should consider factoring in demand and fulfillment via delivery aggregators, which became another channel for last-mile fulfillment during the pandemic and now has become a mainstay in planning.
- Workforce optimization — While cost efficiency plays a key role in optimizing the workforce, this tenant is also key to ensure seamless consumer and employee experiences. Gas stations/c-stores can leverage touchless and self-service solutions to provide a heightened in-store checkout experience and allow employees to focus on other important responsibilities, such as assisting shoppers with requests and verifying identification for age-restricted, regulated products.
- Macro-space modeling and assortment optimization — Per Harvard Business Review, don't trust your gut with assortment planning. A retailer deleted 20 percent of its SKUs in one category to make way for SKUs in another category. Sales declined 40 percent and the retailer is in bankruptcy. While all the deleted SKUs had low sales, when customers couldn't find them, they elected to shop elsewhere.
- Purchasing patterns and personalized recommendations — Personalization goes beyond promotions. It is about delivering an experience to the consumer that promotes brand loyalty. Just like one shoe does not fit all, every category or department needs its own specific approach to personalization. With evolving customer preferences, new products and changing demographics, convenience store chains need to get a strong hold on their consumer data and install the appropriate consumer-facing technologies while complying with privacy regulations. Enterprises therefore will need to build robust, yet responsive, foundational data and analytics capabilities to stay relevant in the c-store subsector.
The broader retail market is evolving. Quick-service restaurants took the lead in modernizing their data estates, and c-stores need to follow suit.
As organizations navigate through their data journeys, it is important to keep in mind what Peter Drucker said: "Culture eats strategy for breakfast." Thus, to be successful, leaders need to embrace a data-driven culture and incentivize their workforce in the adoption journey.
By tapping into new product lines, enhanced shopping experiences and tailored loyalty programs, gas stations/convenience stores can remain agile and reposition their brands in the broader retail sector. However, this transformation all begins with data.
Leaders who have not begun investing in data-driven capabilities and enhancing their overarching data management strategies are arguably behind the curve.
Anurag Pal is a senior manager with Capgemini’s Insights & Data Global Business Line where he is responsible for the North American retail and restaurants market. Dinand Tinholt is a vice president with Capgemini’s Insights & Data Global Business Line where he is responsible for the North American consumer products, retail and services market and globally responsible for Capgemini’s Data & AI Strategy offer. For more information, visit capgemini.com/us-en.
Editor's note: The opinions expressed in this column are the authors’ and do not necessarily reflect the views of Convenience Store News.