If there’s one word that resonated throughout the NACS Convenience Summit Asia, from the store tours to the presentations, it’s differentiation.
Along those lines, there are four strategic issues our industry is facing around the world. Depending on the country, these issues may be transpiring at a different life cycle, and we need to be paying attention to them.
1. Sea of Sameness
Over two decades ago I toured Japan with then-CEO of Seicomart, Tomoyasu Marutani. He shared with me that convenience retail in Japan was like a sea of sameness. Whether it was a 7-Eleven, a Family Mart or a Lawson store, the stores were all alike inside, selling the same products and services.
As I travel around the world, I continue to see what he was talking about. In a global industry that serves millions of people per day, it’s easy to fall into the trap of having to be all things to all people—that we have to satisfy all their shopping missions.
This sea of sameness—everyone having the same offer—over time becomes a battle of scale and margin.
2. Becoming a Real Foodservice Player
The future of our industry will increasingly rely on foodservice, especially as two of our core categories (motor fuels, cigarettes) continue to decline.
We also have to be realistic that a c-store’s foodservice business won’t quadruple by stealing foodservice sales from the convenience store competitors down the street. You have to steal it from quick service restaurants.
Look at what makes a competitor tick and what drives their model. The QSR model is driven by being famous for something. Whether it’s McDonald's or KFC, we know what they’re serving. For convenience stores, I can count on one hand the food some of our largest chains are famous for. This level of differentiation, of standing out among a sea of sameness, is a huge opportunity.
The quality of foodservice in convenience stores has been elevated over the last decade. No longer do we only have roller grills. We have exceptional food, but it’s often the same food as your c-store competitor down the street.
Another consideration is the role of technology and removing friction. If our industry is going to successfully compete with QSRs, it will be tough to do so without mobile order and pay.
To drive foodservice, we have to stop treating foodservice like it’s just another category in our stores—it is your business, if that’s what you want it to be.
3. Leveraging Real Estate
In almost every country I go to I hear from retailers who say real estate is getting more expensive, and that’s likely not going to change.
During the store tours in Shanghai, we saw examples of how coffee shops are leveraging their real estate. They’re extending their offer into an entirely new daypart by becoming bars that sell alcohol after 5:00 pm.
In Argentina, YPF opened a two-story store in Buenos Aires that competes with WeWork. At YPF, the average basket of the person renting a shared workspace is three and a half times higher than the basket of the typical shopper. That’s leveraging real estate. It costs more to go up, but there are no incremental dirt costs.
Every market is different, customer flows are different … but think about what you could do, because real estate will continue to cost more and more over time.
4. Changing Oceans
Will Rogers said, “Even if you’re on the right track, you’ll get run over if you just sit there.” We see this a lot in retail, where companies are not progressing and not embracing change.
As the world changes, not only can the train run over you, the tracks can move. An example of this is coffee. The U.S. convenience channel used to be the No. 1 channel for immediate consumption coffee. Now it’s No. 4. What happened?
Well, Covid happened, and so did a change in the consumer's path to their first cup of coffee. Convenience stores lost the morning commuters, and their first cup of coffee shifted to the home.
Here's another change our channel missed: Young people don't drink hot coffee. Cold brew, iced coffee, espresso and lattes—demand for these types of beverages changed with a younger demographic and we didn’t change with them. And not just the beverages; it’s also the health and wellness intent with condiments like soy, oat and rice creamers. The average c-store didn’t embrace these radical shifts.
There’s also a changing tide in how customers shop, where and when. It’s the difference between proximity retail and convenience retail. Convenience retail is all about immediate consumption, whereas proximity retail is about selling the merchandise your customers take home for later.
Yes, people still want to buy immediate consumption, but they also have other missions. So as our customers evolve, we have to evolve with them.
Dare to be Different
There are two competitive advantages the convenience channel has. First, we have the best real estate and the biggest footprint of any channel. The second is our unique and personal relationships with our customers.
This is why we need to be careful when we scale our businesses, and we’ve got to be careful with technology. Be careful not to convert your store into a vending machine that becomes this undifferentiated retail stop. Convenience stores offer an entire experience, from the time a customer pulls onto the lot, shops the store, purchases what we’re selling and hopefully returns the next day.
Canadian futurist William Gibson said, “The future is already here—it's just not evenly distributed.” We have to look around the world to see where part of the future is occurring, what to learn from it, and how to adapt it into our local cultures and customers' habits.
That's the value of looking around the world; to help us understand how we have to change.