In the 1980s, U.S. convenience stores had a dilemma: embrace pay-at-the-pump or not?
Those in favor argued the self-service technology made life easier for people looking to fill their car with gas and go. Those opposed worried it would prevent customers from entering the store, where they might purchase a bag of Twizzlers or can of Dr Pepper—items with higher margins than fuel.
Jeff Lenard, vice president of strategic industry initiatives at the National Association of Convenience Stores (NACS), described the debate as “extremely contentious.”
Ultimately, the industry remained faithful to the values of ease and efficiency. It adopted the new system, which is ubiquitous today.
As it turns out, the decision also benefited people wanting to dash inside to buy a pack of gum or bottle of mustard, since they no longer had to wait in line behind someone wanting to put $10 on pump No. 3. Now they, too, could grab and go.
“It actually enhanced convenience for everyone,” said Lenard.
Modern disruptions
Throughout their existence, which NACS puts at around a century, convenience stores have had to innovate. They’ve kept their doors open longer than traditional businesses. They’ve stocked an assortment of household goods while maintaining an accessible, hassle-free shopping environment.
In the 1960s, 7-Eleven became the first national retailer to sell coffee in to-go cups, offering people a way to get caffeinated without having to brew it at home or sit down at a restaurant.
Today, however, the industry is up against new shifts in society.
What, for example, is more convenient than ordering snacks and a drink via smartphone from the comfort of your couch, then having someone bring it to your front door? The rise of electric vehicles also presents a problem for stores that depend on customers to stop by for gas—which is about 80% of them. And long known as places to buy cigarettes, hot dogs and lottery tickets, convenience stores don’t exactly have a reputation for being sources of fresh food and family fun. There’s a reason, after all, the Texas-based chain Buc-ee’s brags about having the “cleanest restrooms in America” on its website.
Although convenience stores have seen a rebound in sales and foot traffic following a dip during the Covid-19 pandemic, larger changes in consumer behavior point to a future that’s different from the past. If the industry loses sight of what convenience means in 2023 and beyond, the dip could return and eventually turn into a decline.
Online delivery
During the many months of lockdown following the Covid-19 outbreak, companies delivering everyday essentials from ice cream to toilet paper saw a spike in demand. Activity has cooled since the peak, but the moment provided many consumers with the experience of getting what they want in a matter of minutes—with as little effort as possible.
Online delivery startup Gopuff, for example, reached a valuation of $15 billion during the summer of 2021. Daniel Folkman, Gopuff’s senior vice president of business, explained people’s expectations are changing in a way that’s positioning the category for long-term growth.
“Consumers want to continue to live their lives uninterrupted,” said Folkman.
Delivery is very difficult to execute.
Jeff Lenard, vp of strategic industry initiatives, NACS
In Adweek’s email exchange with Marissa Jarratt, 7-Eleven’s chief marketing and sustainability officer, she described delivery as a “key strategic initiative for us to provide convenience to our customers, whenever and however they want it.”
7-Eleven debuted its proprietary delivery app 7NOW in 2018. Sales soared during the pandemic, and 7NOW is currently available in 45 cities across the country. To increase the retailer’s online presence, 7-Eleven has also partnered with the likes of DoorDash, Postmates, Grubhub, Instacart and Uber Eats.
Still, the economics of delivering a chocolate bar or bag of potato chips aren’t great. Plus, if consumers have to pay double the price to cover tips and fees, the total cost can alleviate impulse buying.
As Lenard put it: “Delivery is very difficult to execute.”
Electric vehicles
Last year, U.S. convenience stores generated $814 billion in sales. Two-thirds of that came from fuel.
With electric vehicles now accounting for more than 5% of new car sales in America, many experts see mass adoption coming down the road. Sure enough, a recent survey from Pew Research Center found around 4 in 10 Americans are likely to consider an EV when purchasing their next vehicle.
The trend spells trouble for convenience stores in two ways. First, many EV owners are likely to charge their vehicles at home, meaning there’s no need to visit the local station. Second, chains wanting to attract consumers with EVs will need to invest in building the infrastructure necessary for charging them.
“Gas is going to become less of a revenue source, so they need to find ways to replace that revenue stream,” said Katie Hansen, a senior analyst covering retail and ecommerce for market research firm Mintel.
Although still in the early stages of transformation, 7‑Eleven and Alimentation Couche-Tard, parent company of Circle K, have began rolling out charging stations across the United States in recent years.
On this front, however, Circle K has an advantage. Through an acquisition made in 2012, the company operates hundreds of charging stations in Norway, a country with a high density of EVs. This gives it a head start on solving the challenges that come with supporting the change in how people get around.
“They probably have worked through all of the problems they could run into as you get the infrastructure right,” said Diana Rosero-Pena, a consumer staples analyst at Bloomberg Intelligence.
Kevin Lewis, Alimentation Couche-Tard’s CMO, called the company’s presence in Norway a “living laboratory.”
Fresh food
“Consumers are making more conscious decisions about their health and want to be able to select better-for-you options wherever they shop,” reads a recent industry report from Mintel.
The complication for U.S. convenience stores looking to exploit this opportunity is that, in a big-picture kind of way, the public doesn’t consider them champions of organic produce and natural ingredients. They’re places to buy processed, packaged goods.
And if the food item isn’t designed for a long shelf life, such as an egg sandwich or cup of sliced carrots located in the refrigerated section, consumers still have their doubts. When was it made? Who made it? When was it delivered?
Gas is going to become less of a revenue source, so they need to find ways to replace that revenue stream.
Katie Hansen, senior analyst, Mintel
“While there is a desire there, it’s clear convenience stores still have a fair amount of work to do in building trust between consumers,” Hansen said on the issue.
But they are trying. In June, Casey’s, the nation’s third-largest convenience store by number of locations, announced a three-year strategic plan. One item on the list: Invest more in fresh food.
“Prepared food is a core capability for Casey’s, and as the fifth-largest pizza chain in the U.S., our fresh, handmade pizza is our crown jewel,” Tom Brennan, Casey’s chief merchandising officer, said in a statement.
With new kitchen facilities designed to accommodate regional differences, Circle K also aims to boost its sales of fresh and prepared food.
A major benefit of getting it right: Fresh food delivers big margins. “This is the most profitable part of the business, so it’s something they’re concentrating on,” said Rosero-Pena.
Last year, prepared food and dispensed beverages represented 18.8% of the industry’s in-store sales, up two percentage points compared with 2021.
A convenient future
Like most businesses, convenience stores are always exploring ways to evolve.
Not long ago, for instance, Circle K began experimenting with checkout-free technology in select Arizona locations. It already plans to rollout AI-enabled self-checkout systems, which allow customers to ring up items without using barcodes, to thousands of stores in the coming years. “We sell time, at the end of the day,” said Lewis. “Our job is to make your life easy, so if I could build time machines, I would.”
In June, 7-Eleven updated the look of its signature Slurpee drink. The new direction took inspiration from the company’s Brainfreeze Collective, a customer research panel consisting of 250,000 members the company formed in 2021. “We’re always talking to our customers,” said Jarratt.
Again, while putting consumers first is important for all brands, it’s especially crucial for an industry built on giving people what they want, whenever they want it.
“When you define convenience as how you solve your problems as a retailer, you’re not going to go as far as innovators who are constantly thinking about the customer,” said Lenard.
This story is part of the “Building a Better Agency” special feature.
