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With trips down considerably, convenience stores (C-Stores) look for new ways to bring shoppers inside.

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The convenience store industry has been on fire for the past several years. Boosted by a 6.2% increase in trips, dollar sales surpassed $160 billion in 2019, up 3.3% versus the year before – compared to a gain of just 2.0% for the rest of the market, according to Chicago-based market research firm IRI (iriworldwide.com). And while c-stores brought in nearly 20% of total CPG dollars, they drove almost 30% of GPG growth.

But that all came to a screeching halt in March when coronavirus landed in the United States. Panicked shoppers filled pantries and freezers with enough food to last for months, driving record gains at supermarkets, club stores and mass merchants. At c-stores, though, not so much. Of course, there were strong gains off of very small bases in non-traditional categories such as hand sanitizer and paper goods, but except for the ice cream category, edibles were a bust. Even the winners were losers.

“Normally, we’d be really excited about a 9.2% gain in frozen pizza sales,” explains IRI’s executive vp of consumer and shopper marketing Larry Levin, citing one of the biggest c-store gainers. “But it was nothing compared to the rest of the market.” As a result, the channel is losing share to other formats, even in categories such as energy drinks and bottled water that it has traditionally dominated.

Why didn’t C-Stores enjoy the same pandemic bump as supermarkets? With schools shuttered and non-essential employees working from home, no one was driving anywhere anymore. So there was no need to gas up the car or grab a cup of coffee and a snack for the road. Some stores pivoted quickly to meet new needs, for example, adding larger pack sizes of products such as beer and offering curb-side pickup. But even five months into the crisis, trips during the two weeks ended Aug. 9 remained down 13.4% versus the same period a year ago, while the all-important weekday morning rush sat at just 85% of the prior year’s traffic.

Not only does it represent 63% of total sales, “Fuel is a main driver for the convenience store channel,” confirms Simon Johnstone, director of London-based Kantar’s global discounter/c-store unit. “But with road trips, commuting and general travel down, c-stores have been struggling to get shoppers into stores.” As a result, “They need to lean on other categories and services to help develop new shopper routines and cater to evolving consumer needs.”

The problem is that, compared to other channels, c-stores are behind the curve in digital engagement, which is critical to success in the new normal, says Gary Stibel, founder and CEO of The New England Consulting Group, Westport, Conn. “Supermarkets had prepared themselves to do business in an increasingly digital world,” he explains. “They developed very effective apps, loyalty programs, online ordering, pickup and delivery, etc. As a result, they really changed the way consumers experience their brand. But c-stores missed the boat. They failed to notice that the definition of convenience changed from stopping along the way to ordering it from home or having it delivered to where I am. That’s the new definition of convenience.” He adds, “Even the chains that are doing a good job today are still playing catch up.”

C-STORES BUILD TRAFFIC WITH DIGITAL

So what’s it gonna take to get c-stores back in the game? “With the dramatic decrease in regular commuters and interstate travelers, c-stores can remain top of mind only on digital platforms,” answers Johnstone. “Regular communication and promotions via loyalty programs can help maintain relevancy,” he explains. But it requires implementation of both operational and promotional strategies.

On the operational side, says Johnstone, c-stores need to make shopping as efficient and safe as possible by leveraging online ordering and contactless pick-up. For example, he says, “[Atlanta-based] RaceTrac lets shoppers pre-order products online and then pick up in-store items at grab-and-go boxes within 30 minutes, eliminating the need for any human interaction.”

As far as digital promotions, it’s all about keeping c-stores top of mind even when customers aren’t there every day, says Johnstone. For example, he reports, Dallas-based 7-Eleven recently partnered with the Washington Football Team to offer a virtual draft experience that culminated in a virtual draft party during which participants could order discounted food and wings for delivery. Genius!

Johnstone also suggests c-store operators rethink their assortments. Whether due to out of stocks at the supermarket, fear of crowds at big box stores or shuttered restaurants, “There are opportunities for c-stores to pick up the slack by making non-traditional convenience store categories more accessible,” he says. In fact, a National Association of Convenience Stores (NACS) study from late March through early April showed that 52% of c-stores were adding more cleaning and toiletry items, 31% were emphasizing ready-to-heat meals, and 28% were showcasing bulk items.

Wawa just started testing a new dinner menu, including six heat-and-eat meals merchandised in its grab-and-go kiosks.

There’s also an opportunity for urban c-stores in particular to cast themselves more as “corner stores” where consumers can pick up staples such as eggs, milk and fresh fruit instead of venturing out to a crowded supermarket, says IRI’s Levin. Perimeter growth is already strong, he adds, but there’s still plenty of white space. Levin is also bullish on expanding better-for-you offerings. Sales of “healthy” edibles grew much faster at c-stores last year than at all other outlets, he reports, suggesting operators are responding to the needs of older millennials in particular, whose spending in the channel continues to replace what Levin calls “bubba” dollars.

Stibel believes reimagined assortments should also include more frozen items, whose dollar sales were up only 4.6% during the 12 weeks ended July 12 (unit sales actually fell 8.3%). “Obviously, foodservice is a far bigger opportunity for c-stores,” he says, “but for those times when the line is long and time is short, frozen could offer a quicker alternative. Why can’t c-stores be a place where consumers can heat up a Hot Pocket, grab a soda and be back on the road in minutes?” There are no labor costs and frozen food never gets stale or has to be tossed at the end of the day like the pre-made sandwiches, adds Stibel. So the only thing holding operators back is the lack of a good microwave and a better assortment.

Stibel would also like to see c-stores offer more premium private label items. “I think there’s a big opportunity there to improve the value proposition” – not to mention enhance differentiation and margins. Ice cream is an obvious choice (think 7-Eleven’s Go Yum! pints), but what about frozen pizza or plant-based milks? He also believes operators should look for more ways to partner with local suppliers, especially in the premium coffee category where many c-stores have failed to keep up with competitors. “Every market has high-quality coffee roasters with products you can’t get at Starbucks or Dunkin,” he says. Partnering with them would be a brilliant way to demonstrate ties with the community and also offer the kind of premium coffee program that draws in the afternoon crowd.

Partnerships with local businesses can also help “drive legitimacy” in foodservice for chains with less-than-stellar reputations for reputations for good prepared food, says Johnstone.

C-STORES GOING AFTER FOODSERVICE

Industry observers agree that continued growth on the foodservice side is one of the keys to c-store success. “Foodservice is a profit-driver,” says Johnstone. “Replacing low-yield categories with high-margin foodservice offerings makes financial sense.” And it answers a need. Increasingly busy consumers continue to look for alternatives to home cooking, but with restaurants shut down or limiting seating due to the pandemic, there’s a big opportunity for c-stores to fill the gap. In fact, the National Restaurant Association predicted in March that the industry could lose $225 billion and between 5 and 7 million jobs in the next few months.

Johnstone says c-stores looking to grab a piece of that business are enhancing their foodservice offerings in several ways, starting with more space. For example, he notes, sit-down areas are becoming standard, but tailoring formats and services to the target audience is key. Baltimore-based Royal Farms, which operates in a number of rural areas, dedicates about 55% of its stores to foodservice and seating and in many communities serves as an integral spot for both dining and alcohol purchases, reports Johnstone. Meanwhile, Media, Pa.-based Wawa alters menus, space and promotions depending on location, store size and target shopper.

C-stores are also revamping their menu offerings to mount a more direct challenge to fast food, says Johnstone. For example, Wawa just added kids meals that look an awful lot like McDonald’s Happy Meals while The Pride, Springfield, Mass., offers a value menu priced similarly to fast-food competitors – except its food is made from scratch with fresh ingredients, including fresh bread from its own bakery. “Multiple locations even feature a drive-thru for on-the-go shoppers,” says Johnstone, highlighting another c-store trend that borrows from fast food. In fact, Wawa recently announced plans to open its first drive-thru-only location in December.

Sales in c-stores during the 12 weeks ended July 12, according to Chicago-based market research firm IRI (iriworldwide.com). Percent change is versus the same period a year ago.

Other c-stores are keeping pace with QSRs by offering more healthy items and options for shoppers with dietary restrictions. “Both Sheetz, Altoona, Pa., and Rutter’s, York, Pa., have branched out into the plant-based space, matching QSRs like Burger King and Dunkin that recently added plant-based meat substitutes to their menus,” says Johnstone. “And Des Moines, Iowa-based Kum & Go has joined with Partnership for a Healthier America to offer not only healthier menu options but also lower prices and more promotions on healthy menu items and grocery items.”

Beyond QSRs, some c-store chains are targeting higher- end, sit-down restaurants. For example, Wawa just started testing a selection of customizable dinner items (angus burgers, pasta meals, rotisserie-style chicken, entrée platters with two sides, etc.), which will be available for order via touch screen after 4 p.m. Six pre-packaged heat-and-eat meals will be offered all day. They’re not yet available for delivery, though the chain says that’s next.

Services such as delivery represent the final piece of the puzzle for c-store foodservice success, says Johnstone. Some chains offer a combination of pickup and delivery via their own apps or third-party providers, giving shoppers numerous options to choose from when ordering on the go. But there’s still work to be done.

“They’re all moving in the right direction but way too slowly, particularly given the opportunity presented by the pandemic,” says Stibel.

REASON FOR OPTIMISM

While c-stores were among the hardest hit by the pandemic, Levin says market shares are almost back to pre-COVID levels. During the past 24 weeks, c-store share of total CPG dollars was hovering around 18%, but during the last couple of weeks, it was back to almost 20%. The spike may be temporary, tied to summer vacations (people still taking them were definitely driving, not flying), but Levin says it’s a good sign nonetheless.

“I’m confident the channel will return to power in time,” he says. “It’s still the best channel for on-the-go consumption. But if working from home is the new normal, it will have to adapt.”

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