Jeff Bezos, the CEO of Amazon, in an all-hands meeting in November of 2018 very publicly proclaimed: “Amazon is not too big to fail...In fact, I predict one day Amazon will fail. Amazon will go bankrupt....”
What a strange prediction for a company that just crossed a trillion-dollar market cap 45 days prior. Were they blind to their own success? Not necessarily. Bezos was referring to the natural business cycle that all organizations must follow—first, there is the business inception, followed by a period of explosive growth, then the market matures and the leaders get shaken out from the laggards, until finally the market reaches a point of saturation and revenue starts to peak and then wain. On the back of the curve looms the decay factor that all businesses must fight against by using innovation and change.
But change for the sake of change does not equal innovation. Innovation is change that unlocks value— more specifically, the kind of value that early adopters of frictionless technology and enhanced services have been able to deliver to shoppers in the new retail paradigm, post-COVID-19. Whether via delivery, app, curbside pickup or the conventional in-store experience—convenience retailers have had to flex to serve customers when and how they want to shop in today’s environment.
Casey’s General Stores in Ankeney, Iowa, fast-tracked many of its plans to reinvent the guest experience and expand online ordering, curbside and delivery services. The chain’s partnership with DoorDash provides delivery services to nearly 600 locations across the company’s 16-state footprint. Wawa in Pennsylvania began adding curbside ordering to additional locations, providing customers with access to all items in the store—including freshly prepared foods, beverages and grocery items, without even leaving their car.
New and enhanced services are also present in contactless payment options. Pennsylvania-based Sheetz announced a new partnership with Grubhub and launched “SHcan & Go!” which allows shoppers to scan and pay for products through the Sheetz app, while RaceTrac rolled out an online platform that allows customers to select and order merchandise from their nearest RaceTrac location and pick up the order within 30 minutes via a “Grab and Go Box” pass-through window.
And yet, according to the annual shopper insight study conducted by NACS, U.S. convenience trips per week have steadily declined from 3.6 in 2014 to 2.3 in 2019. In fact, the industry may see further pressure from a post COVID-19 consumer mindset, where even the most loyal customers consolidate trips and look to avoid large groups and public places. In a NACS-sponsored national consumer sentiment survey conducted by PSB Insights in mid-May, 69% of Americans surveyed said they would delay normal work and travel. And less than one in four (23%) who commute to work said they would immediately return to their normal routines at convenience stores.
The above sentiments have led to real ramifications for fuel consumption in the U.S. Fuel gallons were down 13% during the first half of 2020. Still, fuel margins have been uncharacteristically strong—underpinning overall profitability during rocky economic times. While year-over-year transactions are also down 7%, baskets have grown significantly, signaling trip consolidation and demand for convenience in categories like lottery, tobacco and beer that were once flat to declining prior to the pandemic. Shoppers are seeking larger, future consumption package sizes to reduce additional shopping trips and stock up on essentials. The net outcome for in-store sales is an increase of 4.2% year over year, suggesting that retailers are moving forward thoughtfully and seeking resilience on the other side of chaos.