Weighing the Pros & Cons of Offering Third-Party Delivery

ALEXANDRIA, Va. — Earlier this year, the challenges of stay-at-home orders accelerated the demand for omnichannel experiences. From mobile ordering to delivery to curbside pickup and personal shopping services, convenience stores quickly adapted their stores and technology to get products to customers in frictionless and contactless ways.

During the "Driven to Delivery" education session as part of the NACS Crack the Code Experience, speakers discussed a test-and-learn approach, and what retailers should consider to maintain a foothold in the digital commerce space.

At the onset of the COVID-19 pandemic, consumer adoption of technology exploded. Two key indictors were smartphone usage and online search history. For consumers aged 18 to 49, smartphone usage peaked at 96 percent while in March, online searches for online ordering, pickup and delivery rose a whopping 200 percent.

These pandemic-induced behaviors are only expected to continue, explained Kay Segal, founding partner of Business Accelerator Team, a consultancy that provides business-development proficiency to the convenience retailing, foodservice, CPG and petroleum marketing industries.

"Consumers want delivery, and retailers want to do delivery. If only it were that easy," Segal said. "Amazon has worked tirelessly for the past 15-20 years to integrate its delivery process. Retailers cannot begin at the end, but there is a right order for us."

One convenience retailer that jumped into delivery taking a test-and-learn approach is Loop Neighborhood. As the coronavirus pandemic began sweeping across the United States, the San Francisco-based operator of 133 locations across northern and southern California began feeling the effects. Fuel gallon volume dropped; it was forced to shut down its foodservice operations; and foot traffic dropped as consumers began working from home.

To combat this, Loop launched partnerships with three third-party delivery services including Door Dash (in April), Uber Eats (in July) and Postmates (in August). Currently, 38 Loop-branded sites are offering delivery of 155 menu items available from major categories, such as foodservice, candy, snacks, dispensed and packaged beverages, ice cream, and alcoholic beverages.

The learning curve for third-party delivery has proved challenging, acknowledged Pervez Pir, chief operating officer for Loop Neighborhood. The operational headwinds associated with the partnerships have included long wait times to receive tablets; a complicated process to add alcohol items to the platform; the inability to change menu items from the website; slow activation processes; high associated costs; and slow reaction times from the onboarding team.

However, there have been some tailwinds, Pir noted. Collectively, Door Dash, Uber Eats and Postmates offer easy reporting, while individually the platforms provide ease in adding stores, having navigational websites, and fast response times from account managers.

"Third-party order and delivery works, but there are trade-offs," Pir said. "When looking at a third-party partner, consider what markets and cities are served, what your brand's exposure will be in a competing app marketplace, what the service fees are, and what other brands are on the platform. Have a roadmap or plan in place."

Another perhaps not-so-obvious consideration for convenience store retailers is knowing what the legalities are in their marketplace. Chiefly, who owns each transaction and how does delivery work for the driver — especially when delivering alcohol.

"In 2013, Jiffy Trip, who has long been a provider of drive-thrus, began providing in-house delivery services. We employed the drivers, owned the vehicles, took orders over the phone and accepted payment at the drop-off. However, one accident proved we weren't ready for the risks," shared Mark Holloway, chief information officer for Hammer Williams Cos., operator of the 28 Jiffy Trip stores throughout Oklahoma.

If third-party delivery services can properly integrated and executed, c-store retailers can provide consumers with accuracy, control and speedy service, Holloway concluded.

The NACS Crack the Code Experience was a five-week digital event that brought together convenience store industry retailers and suppliers virtually in lieu of an in-person NACS Show this year. The event concluded Dec. 4.