What Will Convenience Retailing Look Like A.C. (After Corona)?

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What Will Convenience Retailing Look Like A.C. (After Corona)?

By Don Longo - 03/30/2020

As the nation reels from the immediate impact of the COVID-19 coronavirus pandemic, it’s not too soon to consider some of the longer lasting effects on convenience retailing after COVID-19 passes.

Terms like containment, mitigation, flattening the infection curve, and social distancing have surreally become part of the everyday lexicon. Empty store shelves, city streets, restaurants, bars, and sports and entertainment arenas are part of what many are calling “the new normal.”

Convenience stores have stood up impressively in this crisis. Operationally, most have tightened and improved their cleaning, personal hygiene and sanitizing procedures. Many eliminated self-serve foodservice and drinks, banned reusable cups, and some have installed plexiglass barriers at their checkout counters. Importantly, they’ve also communicated these enhanced safety policies to their customers, and encouraged them to keep a safe distance from one another (6 feet) within the store.

Social distancing has sparked increased usage of drive-thrus, ordering by app, curbside or on-lot pickup, contactless payment, mobile payment, and delivery services.

Impressively, many convenience retailers also have committed to safeguarding and rewarding their frontline heroes — their store employees. In addition to hiring thousands of new employees to serve customers during the COVID-19 crisis, several retailers are showing their appreciation and support for their employees by giving both full- and part-time team members raises of $2 to $3 per hour, bonuses, enhanced emergency sick leave, and paid time off.

Many others have been taking care of their local communities, too, such as providing free food to hardworking healthcare workers at area hospitals and free beverages to first responders.

So, when the panic buying and sheltering-in-place subsides, what will happen?

Convenience store retailers should expect to see some behaviors that parallel previous recessions, as well as some things that are unique to the current pandemic. Here’s what they should plan for:

  • Consumers have already started to exhibit recession behaviors, according to IRI. They are switching to value brands, turning to private label, and focusing on cost vs. convenience. This could affect several c-store categories, from cigarettes to beer.
  • Speaking of tobacco, Owen Bennett of Jeffries Equity Research cites a recent McKinsey survey that found consumers would spend only slightly less on tobacco. “This does not mean consumers won’t smoke. It may just mean they downtrade or move to illicit items,” said Bennett.
  • Convenience stores are seeing an increase in shoppers who typically would go to supermarkets for their grocery needs, according to an exclusive study by Convenience Store News’ parent company, EnsembleIQ. This may change when the panic-buying spree ends but, if c-stores are smart, they’ll embrace these new shoppers by enhancing their offerings of basic essentials like milk, bread, eggs, and health and beauty items.
  • Health and wellness products — already on the rise at c-stores (especially CBD products) — will become even more important post-corona as consumers will have a heightened attention to products that support their overall health and wellness.
  • Fuel volumes will take a big hit this year. The economic contraction caused by the coronavirus and the suspension of agreed-upon production cuts among OPEC and Russia have resulted in decreased demand and increased supply. Daily price changes for the U.S. benchmark crude oil West Texas Intermediate (WTI) have been extremely volatile, according to the Energy Information Administration. The end of the pandemic won’t solve the over-supply issue.
  • Foodservice (and alcoholic beverage sales) are getting a boost from the pandemic-related closure of thousands of restaurants and bars. I believe c-stores will win over and keep many restaurant customers post COVID-19.
  • Home delivery — a trend that c-stores have been slow to jump into until recently — has accelerated during this crisis. I believe home delivery will continue to grow in the c-store industry.
  • Locally grown and locally manufactured products will be in greater demand. Consumers and retailers will want to buy products, especially food, from less risky sources.
  • Similarly, early efforts to trace the source of supply chains — such as the blockchain efforts going on in the grocery industry — will become more important to the convenience retailer and supplier communities. This will enable consumers to see where their food and other products come from, and give c-store retailers greater confidence that they can react faster to sourcing issues arising from contamination and similar supply problems.
  • Expect more retail consolidation. Let’s face it, even with the massive infusion of government money into consumers’ and businesses’ pockets, some small retailers will not be able to survive this massive economic upheaval. Look for larger, healthier convenience channel retailers to accelerate their acquisition strategies.
  • Social distancing has been a boon for ghost kitchens, where restaurant-quality meals for home delivery are produced without a brick-and-mortar location. This trend will accelerate.
  • Cashierless stores, self-checkout and scan-and-go technology will move out of the experimental stage and become mainstay features of convenience retailing.
  • C-stores’ need to communicate with their frontline employees got a lot more important and complex due to the COVID-19 pandemic. I would expect to see more retailers invest in communication software to deliver timely guidance of procedures and guidelines to their stores.

When COVID-19 quarantines lift beyond the country’s most-affected hotspots, and life starts to return to normal, people will return to daily routines (work, school, etc.), but operate with a renewed cautiousness about health, according to Nielsen.

Many more lasting effects of COVID-19 are possible. I’d love to hear your thoughts for a follow-up column. Please send them to [email protected] and I will summarize the best of the responses.

There will be life and retailing A.C. (after corona). But how we live and shop will be changed forever.

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