ALEXANDRIA, Va.—Seeing that consumers are demanding faster service and a reduced friction way to get their essential goods, grocery stores are taking a page from convenience stores’ handbook, according to Modern Retail.
Grocers, such as Walmart, Albertsons and Aldi, among many others, are offering fast delivery and pick up on certain convenience items in order to gain more market share and win smaller basket trips from consumers that shop convenience stores.
According to NACS State of the Industry data, the average in-store basket size increased 6.3% in 2021 to $7.59 and has grown 22.4% over the past two years. Much of that growth could be attributed to pandemic-era shopping when customers wanted to get in and out quickly and chose c-stores to fulfill that need as opposed to larger, more crowded grocery stores. Those types of trips have stuck around for c-stores post-pandemic, and now grocers want those customers back.
“Shoppers now have more expectations for greater levels of speed and just more convenience overall,” Rachel Dalton, head of retail insights at Kantar, told Modern Retail. “It’s a big opportunity for that more traditional convenience store channel. But that takes [share] away from grocery stores.”
Walmart has said it is homing in on delivering convenience to its customers. The company’s pickup and delivery capacity grew 20% last year, and it plans a 35% increase this year.
“We’ve watched in real time as people foundationally changed their shopping habits, spurred not just by a global pandemic, but by the expectation for availability to also mean convenience,” wrote Walmart. “That need for convenience led to six times the number of customers using delivery in the fourth quarter compared to pre-pandemic levels, signaling a huge change in how our customers shop.”
In June, Walmart Canada launched a virtual convenience store for customers in the Greater Toronto Area, called Walmart Now, and orders are received in as fast as 30 minutes, powered through Instacart and facilitated directly through existing Walmart stores.
In February, Albertsons teamed up with DoorDash to offer express grocery delivery in less than 30 minutes. Aldi recently announced it was testing a new online food and grocery shopping experience that will offer one-hour pickup and delivery. Even dollar stores are offering fast delivery and pickup. Last November, Dollar Tree partnered with Instacart for same-day delivery in a quick as an hour from 7,000 locations.
“People have many different shopping needs, often in the same week, and the goal of Instacart’s technology and fulfillment solutions is to help retailers best serve their customers, whether that’s through delivery in minutes, ‘No Rush’ next day delivery, or pickup,” Instacart told Modern Retail via email. The company added that its “convenience offering has grown significantly in the last year as retailers look to serve their customers in all the ways they want to shop.”
However, grocers are entering this space during a time when ultra-fast delivery companies face headwinds. The pandemic fueled the upstart of many “quick commerce” grocery delivery companies, promising products to consumers in 15 minutes from dark stores or warehouses, and investors backed them heavily. But with inflation hitting consumers hard, the capital from investors is starting to run out, and many of these companies have shifted from expansion to retrenchment.
Modern Retail reports that grocers are looking to enter the space that these ultra-fast delivery companies are leaving.
“Grocery is much more focused on winning the in-between stockup trips,” Ben Wynkoop, global industry strategist for grocery and convenience at Blue Yonder, told Modern Retail “If you think about the way shoppers shop groceries historically, they do a pantry loading trip once a week or twice once every two weeks … and then in between they do a bunch of quick trips of $35 to $50.”
Dalton believes that grocers are going to start broadening their assortment of items to those that are traditionally offered in the convenience channel. They’re also altering their spaces for convenience as well. Midwest grocer Meijer is introducing a new condensed format grocery store, opening two locations in Southeast Michigan. The concept is called Meijer Grocery, and according to the company, the stores “will provide convenience for customers who are looking for a simplified shopping experience, while providing communities easier access to fresher foods.”
“I think we’re gonna see a lot more evolution in this space,” Dalton told Modern Retail. “It is a real opportunity to continue to elevate the meaning of convenience for consumers.”
(Look for NACS Convenience Voices research findings on how customers are looking to c-stores to be their one-stop shop in the upcoming January issue of NACS Magazine.)
In addition to grocery stores, convenience stores could be taking market share from quick-serve restaurants. Food sales at c-stores have increased to over 20%, according to research from Cardlytics, and the industry’s share of food sales has increased from 18.42% to 21.39% since 2019.
According to NACS State of the Industry data, foodservice accounted for 22.5% of in-store sales in 2021—significantly higher than the 16.8% reported a decade ago. Foodservice now makes up 35.5% of in-store gross profits, compared to 29.2% in 2011.
The convenience factor is an influencing reason on the industry’s increased market share in food sales. “As c-stores upgrade their foodservice offerings to be on par with QSRs, consumers may be more likely to choose the option that is most convenient for them,” writes Forbes. “Speed is one factor, but so is location (consider that 7-Eleven footprint) and additional offerings, like gas or beer. For the latter, the scale will always tip in c-stores’ favor.”