5 Keys to the Future of Convenience

Lean into innovation, safety, technology, service and experience to align with consumers new mindset, NACS research chief says.

May 17, 2021

NACS Director of Research Lori Stillman at 2021 NACS Leadership Forum

By Kim Stewart

KANSAS CITY, Mo.—Lori Stillman, NACS vice president of research, took convenience retailers and suppliers gathered in Kansas City, Mo., for the NACS Leadership Forum last week on a fast-paced journey through the generational turning points, mindsets and behavior shifts that are having a transformative impact on the retail landscape in this next new normal.

After more than a year of pandemic life, convenience retailers are thinking differently about how to meet shoppers’ needs because consumer expectations of convenience and how they engage with brands and stores has undergone a sea change.

“The world shifted tremendously over the course of the last year, and I don't know about you, but for me it wasn’t just like the day the earth stood still, it was the year that the earth stood still,” Stillman said, reflecting on the past year in her keynote: Realigning to the New Consumer Definition of Convenience.

All the while, retail accelerated five to 10 years into the future over the course of just one year. In that giant leap into the future, Stillman said, “we’ve unlocked tremendous new potential and new learning for our industry.”

Retailers had to “throw away the barriers that have held us back from doing the things that we sat in board rooms talking about doing, and just dive into the deep end of the ocean and change time and time again. We’ve proven that we have the resiliency and the ability to take the things we know and implement them very quickly,” Stillman said.

That’s one of the themes running through the NACS Leadership Forum: The industry has fast-forwarded to the future and implemented thinking-fast innovations as a matter of necessity. Stillman described it as the “disruptive force that blew it all up and gave us an opportunity to start to think differently about everything.”

Understanding Generations
Stillman shared insights into consumer age demographics to help retailers understand how the industry must flex to serve the needs, views and purchasing power of four key generations: Baby Boomers (born 1946 to 1964), Generation X (1965 to 1980), Millennials (1981 to 1997) and Gen Z (1998 to 2010).

Stillman said Gen Z in particular is going to be forever affected by the pandemic year that they’ve spent behind screens and social distanced from friends and extended family. “It’s going to change how goods are consumed, how people interact,” she said.

Boomers have the most spending power, shelling out $60.69 on average per transaction, followed by Gen X at $60.36, according to research by Epsilon-Conversant. Gen Z isn’t far on their heels with an average spend of $58.30, more than Millennials’ $54.91. Across the generations, an average 80% of their total discretionary spending is concentrated in food/convenience/drug retail, restaurants and other retail.

Baby Boomers spend more than they save, especially when it comes to travel and home improvement. They are most loyal to banks, cellphone companies, credit cards and clothing retailers. Their annual spending power reaches $550 billion.

Gen Xers are in their prime spending years and are the top spenders in groceries, retail, drug and entertainment. They are open to technology and active on social media and also privacy aware. Their spending power is about $357 billion a year.

Millennials are establishing careers, having families and paying off student loan debt. Most are concerned about securing their privacy and prefer to shop online, Stillman shared. They are very loyal to coffee shops and QSRs, “two categories where we must find ways to capture their attention and earn their loyalty,” she said. They represent $323 billion in annual spending power.

Members of Gen Z spend what they have and shop often. They primarily spend at retail, restaurants and entertainment—immediate consumption. They prefer technology, self-service and personalization. They also lead in adoption of voice-based technology, making voice-based search a critical area that the convenience industry needs to figure out, Stillman said. Gen Z has $44 billion in annual spending power but influences more than $140 billion in the spend of older generational cohorts.

“This is a group that’s going to reshape how we must connect with them in the future,” Stillman said. “We need to be relevant and accessible to them to capture their spend.”

Capturing Trips
The key question: How do we meet the (future) needs of these shoppers in convenience? Stillman asked. It comes down to five focus areas: innovation, safety, technology, service and experience.

Pay attention to innovation, which necessitates looking at the challenges the industry faces differently. All generations care about safety, so visible hygiene and cleanliness, along with good lighting, are table stakes in being relevant to their needs.

“We cannot forget experience,” Stillman said. “As our world becomes increasingly digital, the importance of delivering an enjoyable experience cannot be dismissed.” Stillman shared insights from a 2020 Klarna study that reinforced the role experience plays in increasing both trip frequency and larger transaction sizes. “With one out of three shoppers telling us that they will return more often—and spend more when they shop—we cannot afford to not make great experiences a priority."

NACS Convenience Voices surveys indicate that shoppers are making 1.3 fewer trips per week over the past five years than during prior periods, and when it comes to foodservice, convenience stores are leaking trips to quick-serve restaurants. In fact, 36% of shoppers in the 2020 Convenience Voices program said they had plans to go to a QSR within 30 minutes of leaving a c-store.

With the average spend at a QSR pegged at $6 per trip, convenience stores can gain over $13 billion annually by winning back just 10% of current leakage, Stillman said. “These are customers who are already in our stores going somewhere else to get their needs met.”

The industry needs to not only win the last mile but also capture the significant opportunities that come from winning the first mile: expanding the basket ring of the customer already in our store. Food plays an important role in this effort. Consumers are already shopping c-stores to quench their thirst—nearly half of shoppers come inside stores because they are thirsty, NACS Convenience Voices data show.

“Our foodservice offer is very well connected to our packaged beverage offer,” Stillman said. Think about food-to-go offers, take-home meals and comfort foods like mac and cheese and banana pudding—things that consumers showed during the pandemic that they were willing to buy from convenience stores. Americans have been cooking at home more but also have menu fatigue, so think about providing simple ingredients for shoppers to take home and make. Or suggest food pairings with  beverages and desserts.

Stillman noted that 85% of consumers don’t know what’s for dinner at 4 p.m. “What are you doing to catch that shopper who is driving by your location on their way home? How do you trigger them to turn around, come in and grab something from you?”

Continue to meet shoppers where they are and give them lots of options, she advised. Whether that’s private-label food and beverage items or taking friction out of the checkout process with technology  like scan and go. “A big opportunity to emerge from the pandemic is contactless experiences,” Stillman noted. For example, 65% of consumers surveyed by Visa in early 2021 prefer contactless payments. Only 16% of shoppers surveyed said they planned to revert to pre-pandemic payments.

Aesthetics come in to play, too. As we emerge from the pandemic, provide opportunities and experiences for customers to stay and linger if they desire. Think about making spaces aesthetically pleasing and flexible, whether indoors or outdoors. Also think about making shopping fun and experiential.

“How do we reimagine the store experience to meet needs?” Stillman asked. Part of that is digital signage to promote impulse items or great new offers in foodservice. Daypart relevant digital signs can remind people of what stores have to offer now and put our offerings into their consideration for future occasions. “How do we use the walls inside and outside the store to catch their attention and get more items in their basket?” Stillman asked.

“Make sure that we’re thinking about all the ways that technology can transform the experience. Of course, experience will always be the most important piece in our industry,” she said.

“Service is so important—it’s at the heart of what we do,” she said. “The masks are coming off,” and as they do, “We’ve got to get our staff engaging with shoppers” and make every customer interaction meaningful. As Stillman noted, “We have 165 million chances every day to offer a friendly smile and wish people to have a better day.”

Hear more insights from Stillman in Convenience Matters Episode No. 283, “Outlook Ahead: Convenience Priorities.” 

Kim Stewart is editorial director of NACS and editor-in-chief of NACS Magazine. This was her second NACS Leadership Forum.