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10/21/2022

Three Trends Are Disrupting C-store Shopping Behaviors

Retailers should embrace rapid, continuous innovation in response to evolving consumer habits.
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Self-checkout at Flying J in Tucumcar, N.M.

STATE COLLEGE, Pa. — The convenience store industry is facing numerous challenges that affect consumer shopping and purchase behaviors, such as inflation, supply chain issues, the labor shortage and more. However, three mega trends in particular are poised to have an increasingly consequential, long-term impact on industry dynamics: working-from-home (WFH), electric vehicles (EV) and autonomous checkout.

The potential impact of these mega trends is significant enough to alter the basic financial equation for a c-store operator, according to VideoMining. C-stores that lack a targeted strategy to adapt their products and services may face an existential threat as the shopper behaviors and technologies continue to unravel.

Working from home — Companies may still be debating the efficacy of a remote workforce, but all indications are that remote and hybrid work will remain an integral part of the corporate world. WFH is here to stay and will continue to be a major factor in c-store performance in many locations.

The immediate impact of WFH on c-stores is the loss of store traffic from the corresponding decline of commuters. Continued WFH makes this loss more permanent. Effects will vary based on location of the c-store; some locations that were heavily dependent on commuters have already shut down. The c-store channel as a whole has to reconcile with the fact that store traffic will continue to be affected by WFH and seek out alternate growth opportunities.

The breakfast daypart (6 a.m. to 9 a.m.) is most impacted by WFH. Although the morning mealtime has begun to recover from the impact of the COVID-19 pandemic, WFH contributes to a slower-than-expected recovery. Some categories in the after-work daypart (4 p.m. to 7 p.m.) has also been negatively affected.

WFH is also influencing the time of day that c-store shopper trips take place and shopper demographics for some locations.

Electric vehicles —The good news is that the majority of c-store shoppers come directly to the store for something other than fuel, which will help minimize the impact EVs have on in-store sales. There will still be a loss of revenue from gas, but the higher profit margins of in-store sales should help retailers weather that storm.

VideoMining noted that while an obvious competitive response is to repurpose c-stores to serve EV charging needs, retailers will be competing with many other charging options at home, at work or at multiple other retail outlets. Additionally, while c-stores are well positioned to fulfill EV charging needs, the high capital costs for fast charging stations and the relatively low consumer fees per charge also present a significant barrier.

As the EV space evolves, there may be multiple choices for other viable business models, including ones that involve advertising dollars, such as large digital media networks that engage consumers while they charge their vehicles. Government funds may also help with the financing.

The "bring them in for fuel and sell them in-store" business model may need to be tweaks as EVs rise in usage, as the average time at the fuel pump is 4.5 minutes while the fastest EV chargers take 30 minutes. C-stores should consider additional value-added services and convenient seating areas. Additionally, the pump-to-store conversion rate is relatively poor and there is no guarantee charger-to-store conversion rates will be better. In addition to evolving the EV charging strategy, it is important to evolve workable strategies for "monetizing" the EV charging trips through behavioral insights.

Autonomous checkout —The checkout process at c-stores has been changing rapidly, driven by rising labor costs and available technologies. The majority of retailers have been experimenting with and are in various stages of considering/deploying some form of cashier-free checkout process including self-checkout kiosks, mobile checkouts or frictionless checkout using computer vision and machine learning, the last of which is being pursued by at least a dozen technology companies using a variety of sensing technologies.

Autonomous checkout most obviously reduces labor costs while potentially improving the shopping experience by cutting down or removing the wait times, but it also has a big impact on front-end purchases. Incremental impulse sales are very important to c-stores given the short, mission-oriented trips that they attract, and autonomous checkout especially impacts high-margin categories like candy, gum and energy shots.

Without appropriate changes to merchandising strategies and display designs to match the changing behavioral patterns associated with autonomous, there is a substantial risk of losing high-margin impulse sales. Changes to merchandising strategies should not be an afterthought to the implementation of a new checkout technology, but rather, they should evolve with each such change.

These three mega trends will affect all c-store operators, but there is unlikely to be an approach that works for all retailers or even all of one retailer's stores, according to VideoMining. The competitive responses must be very targeted and matched to the shopper base for a given geography. Now more than ever, to compete successfully in the transforming retail landscape, there is a need for rapid and continuous innovation supported by fact-based insights.

State College-based VideoMining helps retailers and consumer packaged goods companies optimize retail performance and experience by decoding in-store behavior.