What grocers can learn from convenience stores' digital transformation

Scott Langdoc leads worldwide strategy and thought leadership for the grocery chain, drug, and convenience/fuel retailing segments at Amazon Web Services. In this role, he helps fast-moving consumer goods retailers leverage technology to navigate changing customer expectations and market dynamics. Prior to joining AWS, he spent over 30 years in technology, market research, consulting, and leadership positions in the retail industry. The views expressed here are those of the author.

The very definition of convenience retailing is an experience of access and ease for shoppers. There’s no ambiguity. The experience must be convenient, period. And the convenience store, or c-store, market is huge. In 2019, 3.1% of the U.S. GDP resulted from $647.8 billion in combined in-store and fuel sales at c-stores. With nearly 153,000 c-stores across the country, just under 45% of the U.S. population lives within a mile of a c-store. In some rural regions, c-stores are the primary destination for groceries, prepared foods, fuel and other vital services.

COVID-19 has forced c-store operators to quickly react to new customer behaviors, safety requirements and evolving competition with grocers and restaurants — all while navigating industry headwinds from declining fuel sales as stay-at-home mandates and remote work have significantly reduced travel.

Related:Foxtrot melds digital and experiential for maximum convenience

By focusing digital transformation efforts on supporting emerging customer journeys, optimizing product and service offerings, and prioritizing efficiency of retail operations, c-store retailers are working with Amazon Web Services (AWS) to double down on innovation while recovering revenue and attracting new customers.

Supporting emerging multi-dimensional c-store customer journeys

The average U.S. convenience store sees about 1,100 customer visits a day, which represents a broad combination of persona-driven shopper engagement needs. These requirements involve engagement, influence and fulfillment within the store, forecourt and increasingly through a c-store chain’s digital platform. There are different product fulfillment expectations, such as a simple fuel fill-up, basic c-store snack and beverage purchases, buying prepared foods like pizza or sandwiches, a quick errand for a household necessity or a combination of those scenarios. And, more frequently, customers expect a personalized experience regardless of how or where they engage in the c-store. Here are a few examples of emerging, multi-dimensional customer journeys we’re seeing in c-stores now:

Related:7-Eleven completes Speedway acquisition of 3,800 convenience stores

While a customer pumps fuel, they order a slice of pizza at the dispenser via a voice-activated order system and use their mobile phone to pay for both the pizza and their fuel.

A shopper buys a fountain drink in a store and gets a personalized discount to buy fuel as an incentive because the customer hasn’t purchased fuel at that station in the last month.

A customer grabs the items they want to buy at an Amazon Go store and walks out without having to stand in line to pay at a traditional cash register.

The challenge in supporting this complex matrix of c-store customer experiences is that today’s convenience-focused customer expects zero guardrails impeding their use of whatever combination of touchpoint, channel, product, or fulfillment method they want to use to complete their purchase.

Optimizing in-store product assortments, stock availabilities and menu selections

While fuel remains the top selling c-store product category, in-store product sales and an extensive prepared food menu represent the largest overall sales growth categories, and on average, they are the biggest contributor to overall gross profit. The strategic focus must be on capturing the broadest spectrum of transaction details possible and applying model-driven analytics and machine learning (or managed services like Amazon Forecast) to generate hyper-accurate predictions of future demand. This transaction detail can help optimize category plans, profitable private label assortments, high-selling menu offerings, and better in-store stock availability.

The average U.S. convenience store sees about 1,100 customer visits a day, which represents a broad combination of persona-driven shopper engagement needs.

AWS recently started working with Parkland, a Canadian fuel and c-store operator that completes over 1 million customer transactions every day. Parkland is partnering with AWS to deploy a cloud-native data strategy that broadens the sources, frequency and detail of operational insight. This new digital data framework will help enhance Parkland’s customer loyalty program with more personalized offers that influence purchase behaviors. This strategy will also help Parkland optimize their product mix and pricing models to align with real-time demand signals.

Safe and efficient store operations

The challenges and complexities of operating a c-store location (never mind an entire chain) have only become more complex in the world of COVID-19. Establishing protocols and processes for employee and customer safety, as well as social distancing, must be added to the list of core needs such as managing store labor, preventing loss, ensuring food and forecourt safety, and managing inventory. Aggregation of real-time store transaction data, device and video data and forecasted demand data can be blended into valuable operations intelligence that allow simultaneous assessment of current store performance while recommending adjustments to fine-tune financial levers, such as labor scheduling, product ordering or kitchen production. A major national convenience store retailer is using both AWS edge computing and cloud services to support its next-generation retail operating platform. This custom solution is used by store associates to provide flexible checkout and frictionless payment methods for customers, real-time integration between store, forecourt, and enterprise processes, as well as automation of category management and product ordering processes.

The bottom line

Convenience retailers who invest in a complete digital innovation strategy are better equipped to weather the current tumultuous retail environment and are poised to evolve as leaders in the industry. This theme was proven again and again in 2020 as retailers witnessed firsthand the limits of status-quo operations. As the industry comes up on one year of our “new normal,” those who quickly pivoted to meet customer needs will separate from the pack of those who were slower to adapt. For c-stores, maintaining the intersection of the access and ease market while leaning into AWS services to innovate this service model for current and future demands will make all the difference in this year and in years ahead.