Virtual McLane National Trade Show Explores the Conundrum of COVID-19

TEMPLE, Texas — In today's retail landscape, the rate of change and adaption is happening at lightning speed and has been exacerbated by the ongoing COVID-19 pandemic. The global crisis has dictated consumers' mobility by way of government regulations and thrown the economy into a spiral, affecting consumers' spending behaviors.

What does this mean for the convenience store industry? Is there a path to normalization? What will the future look like?

Nik Modi, managing director for RBC Capital Markets, set out to answer these questions in his keynote presentation during McLane Co. Inc.'s virtual 2020 National Trade Show. His talk was entitled: "A Convenient Truth: What Just Happened?"

"When I was coming up with the title for this presentation, I thought it would be apropos for this audience, but as I was putting it together, I started to realize it should have been called 'An Inconvenient Truth,' because slow and steady no longer wins the race anymore," Modi noted.

The COVID-19 pandemic has created a conundrum for convenience retailers. Social unrest and rioting have forced operators to close their doors either temporarily or permanently. The economic downtown has hindered consumers' spending habits and therefore led to decreased foot traffic. And failure to adapt to shoppers' evolving demands for an omnichannel experience have left operators scrambling for a solution.

"Is staying home the new phenomenon? Consumers like staying home and COVID exacerbated that. A survey of 300 companies in the United States and Canada found that consumers are staying home because they're tired, the need to go out is lessened by them always being connected thanks to technology, and they're cocooning because psychologically and psychographically it's scary outside," Modi pointed out.

As October closes out and November approaches, many events are converging: COVID-19 cases are on the rise, election chaos is slowing down, flu season is commencing, and cooler weather is forcing many outdoor establishments to lose foot traffic.

Over the next eight to 12 months, RBC anticipates the following timeline of events based on the outcome of the Nov. 3 election:

• December to February: If President Trump wins, COVID-19 case counts will continue to rise driven by holiday gatherings, and hospitalizations will rise as confusion over flu/COVID-19 takes hold. If Joe Biden wins, tighter restrictions will be implemented, causing some schools/offices to revert to virtual; bars/restaurants will need stimulus to get them through the winter amid stricter capacity restraints; and there will be confusion over flu/COVID-19, but case counts will peak in January.
• March to May: A vaccine will get approved and begin to be distributed. There will be some social unrest as the debate is redirected toward whether or not people should get vaccinated.
• June to August: A vaccine will be available for widespread distribution. Case counts will be on the decline as herd immunity starts to take hold. The real test will be when the economy starts to fully reopen.
• Beyond: Consumers will begin to resume some sense of normalcy, although certain habits will be changed at least through the near-term, such as increased cooking/eating at home, more online shopping, etc.

"Retail sales will not change the market just because the calendar changes," Modi said.

To mitigate the impact that the foreseeable future will bring, he advises that convenience store operators must alter the "just in time" culture of the channel to a "just in case" culture. One way to do this is to rotate assortment based on the time of the year and data-driven consumer insights specific to each region of the country.

"I think c-stores have too many items," Modi expressed, pointing to a jam test as an example. In the experiment, 24 different jams were offered in a store. It attracted 60 percent of shoppers to sample them, but only 3 percent purchased a variety. Once the number of jams offered was brought down to six, 30 percent of shoppers purchased a jar. "Streamline SKUs to free up space in your stores and pivot your assortment to higher-demand products. More items doesn’t necessarily mean more sales."

Other key pieces of advice Modi has for c-store retailers are:

• Create unique partnerships to become more consumer relevant. "The industry has so much potential from a geographical and frequency standpoint."
• Offer personalized promotions and stay connected to consumers.
• Foodservice options need to evolve from reactive to proactive. "Boost your identity with developed third-party delivery services and boost your menu."
• Tap into emerging trends like health and wellness.

"When I think about the potential of this industry, I am in awe. You really are positioned to be the last mile. The inconvenient truth is that the industry has been slow to adapt. If you don't do it, someone else will. Brick-and-mortar is not dead," Modi concluded.

The virtual 2020 McLane National Trade Show took place Oct. 21-22.

Temple-based McLane is one of the largest supply chain services leaders, providing grocery and foodservice supply chain solutions for convenience stores, mass merchants, drugstores and chain restaurants throughout the United States. McLane, through McLane Grocery and McLane Foodservice, operates more than 80 distribution centers across the U.S. and one of the nation's largest private fleets. The company buys, sells and delivers more than 50,000 different consumer products to nearly 110,000 locations across the U.S. In addition, McLane provides alcoholic beverage distribution through its wholly owned subsidiary, Empire Distributors Inc. 

McLane is a wholly owned unit of Berkshire Hathaway Inc.