There was an aspirational flavor to 2019.

From presentations and publications to late-night conversations at industry gatherings, the topic of technological innovation was imbued with a sense of possibility. Amazon Go stores were operational, and China’s retail technology resembled science fiction, but the U.S. fuel and convenience industry’s aging tech stack was a problem that still had time to be resolved. For many, the discussion was focused on big ideas, including 5G and the onset of the fourth industrial revolution.

But COVID-19 changed everything.

Rebuilding the Foundation

Opinions vary on the specifics of habit formation, but it’s safe to assume that many Americans were locked down long enough to disrupt their normal routines and form new ones. Longtime brick-and-mortar customers suddenly became accustomed to ordering groceries online and getting curbside pickup at home improvement stores.

This should be concerning for a convenience industry that thrives on routine. For many, the early morning coffee run was replaced by a trip to a coffee maker down the hallway. Data from the PDI and NACS weekly COVID-19 reports of consumer behavior indicate that the morning daypart remains the hardest hit.

For all the talk of when we might return to normal, it’s worth pointing out that the concept of normalcy was in flux even before the pandemic. The percentage of Americans working from home had grown for years. According to the U.S. Census Bureau, the 13.4 million Americans reporting from home offices in 2010 represented a 4.2 million increase from 1997.

The challenge is that COVID-19 accelerated this and other trends to levels not experienced for many years. Estimates suggest that nearly two-thirds of Americans were working remotely by April 2. It was enough that Shopify CEO Tobi Lutke announced the end of office centricity a month later: “As of today, Shopify is digital by default."

Shopify is not alone. From Facebook and Barclays to Nationwide Insurance and others, this appears to be a trend rather than a bubble. Mastercard recently announced that it is re-examining the office footprint and considering consolidating operations.

The biggest mistake we can make is treating pandemic issues as one-off concerns instead of fixing the foundation that caused them.

This is concerning for many retailers. According to a 2018 report from Visa and PYMNTS.com, the work commute facilitated the movement of 135 million Americans and $212 billion in commerce. This has implications beyond fewer coffees and pastries. After all, cars parked at home are now measuring fuel efficiency in miles per week rather than miles per gallon.

“The new normal is that we’re not making trips,” explained Gray Taylor, executive director of Conexxus. “We hypothesized that footfall fell off in previous years because people weren’t going to the mall, but now it’s telecommuting that’s going to hurt us. Retailers need to have a home delivery offer. The frequency of eating away from the home will be less.”

It’s true that many retailers were able to pivot quickly in the early weeks of the pandemic. New channels opened up beyond the physical point of sale. As many soon realized, however, the economics of delivery are complicated. “The margins of most convenience products don’t work for third-party services that were built to serve restaurants,” said John Nelson, the founder and CEO of Vroom Delivery, an e-commerce platform designed for convenience stores.

The reliance of convenience retailers on age-restricted products is problematic for those companies, and delivery areas are designed around high-density urban environments at the exclusion of others. It’s also difficult for platforms like Grubhub to accommodate the variety of SKUs, frequency of price updates and types of promotions that are common at the average convenience store.

Even where companies like DoorDash offer fulfillment programs, there remains a need to build front-end e-commerce solutions to accept a form of payment. Perhaps the convenience industry wasn’t prepared for these issues. “We built a tech stack around a very prescribed operational process,” explained Taylor. “It was about selling Cokes and smokes to people who show up, pay with cash or a card and walk out the door. Now we have an environment where some don’t want to interact with you.

“Why can’t an order be injected automatically like Starbucks? The problem is walled gardens of data and a bad tech stack. The biggest mistake we can make is treating pandemic issues as one-off concerns instead of taking a step back and fixing the foundation that caused them.”

Now That We’re Here

Beyond the point of sale, COVID-19 exposed other fundamental concerns. “The pandemic created a perfect storm where you not only have safety issues but you have an impact on fuel demand,” said Tim Tang, director of enterprise solutions at Hughes. “Traffic is down, and when customers do come, you have new rules about how you can engage with them. Retailers need to compensate by becoming more efficient in order to drive profitability.”

The problem is that many retailers had been hesitant to evolve their business model in prior years. There were of course outliers like Maverik, Sheetz, Wawa and others; but as a whole, much of the industry continued to operate as it did a decade earlier. “We’re now in a position where you need to sell more stuff to fewer people at a higher margin,” said Tang. “The situation is ripe for innovative technology solutions.”

For many consumers, a mobile app is unlikely to even be part of the experience at their local convenience store. Solutions exist at some retailers, but adoption is far from ubiquitous across the industry as a whole. “We need universal adoption of technology for our customers to know they can use a mobile app when they come to our stores,” said Kevin Smartt, CEO of Texas-based Kwik Chek. “Everyone is fragmented. How many of the more than 150,000 stores in our industry have a mobile app?”

But it’s interesting to see how the pandemic has changed the conversation about the mobile app. Before, the discussion focused solely on loyalty or the checkout process—such as scan-and-go solutions—and more often now, the app is being viewed more comprehensively as a concierge. It’s a way to meld e-commerce with the in-store shopping experience.

“Checkout is the wrong focus,” said Richard Crone, founder and CEO of Crone Consulting. “Checkout will be replaced with a check-in strategy. Retailers need to know who their customer is and be able to understand their intent. That’s what allows you to personalize the experience. If you’re not personalizing, you’re commoditizing by default.”

A check-in process creates the ability to drive new efficiencies. As Crone explained, the one who enrolls is the one who controls—meaning consumers can be guided through a personalized shopping experience with targeted offers and a payment solution. Rather than paying 30% fees to a third-party delivery service or giving control of SKU-level data to another company, a check-in strategy ensures retailers can maximize profitability in an environment that is theirs to control.

Retailers need to exercise their data rights and build their own platforms.

“There were early adopters,” explained Crone, “but the petroleum brands are the ones who are enrolling and building the databases. They’re the ones with the system of record—not the convenience store brands. Retailers need to exercise their data rights and build their own platforms.”

There remains, of course, a question of access. Bifurcation in retailer capabilities was already an issue prior to the COVID-19 pandemic. Large brands were in a position to invest in “nice to have” technologies, while single-store operators and small chains often had more immediate concerns. “We’re going to witness the haves and have nots in society but also within the industry,” said Tang. “When we think of a post-COVID world, everyone suggests three similar policies for retail: masks, social distancing and partial occupancy. The problem is they all do the same thing—reduce the amount of business that retailers can do from an operational efficiency standpoint, especially for a business that was operating on thin margins.”

Where Do We Go From Here?

Perhaps it’s wise to be responsive rather than reactive.Consider curbside pickup. It’s a major trend, but there’s also the question of whether it adds friction to the convenience store model—especially without a seamless check-in process. The needs of retailers and consumers also vary depending on where they’re located. According to Smartt, Kwik Chek’s rural locations have experienced the strongest recovery, while those in Austin, Texas—with a tech industry that has continued working from home—have recovered to a lesser degree.

“I think we really need to figure this out,” said Smartt. “What do consumers want? We have to understand this before rushing in with expensive solutions that change operations, marketing and everything else.”

Indeed, a recent survey gave Smartt reason to pause. When asked about preferences for delivery and curbside, 42% of Kwik Chek’s loyalty members said they were unlikely to use delivery, and 46% said they were unlikely to use curbside pickup. “We felt a lot more certain in the pre-COVID environment,” said Smartt. “Now we’re trying to be slower and understand what the new normal will be like.”

Moving forward, however, it’s clear that analytics will become a bigger part of the effort to understand the customer and make wise decisions. “The changes to online ordering and the changes in behavior—less fuel and fewer but different purchases—have driven a lot of our customers to take a closer look at analytics,” said Stewart. “The big brands already had in-house capabilities, but the smaller retailers wanted to know what was on their shelves that could support online and curbside. There’s a big push to get analytics to smaller operators who previously lacked the capability.”

As they say, there’s no time better than the present. The pandemic has accelerated certain trends to a level not expected for three to five years, and sometimes the evidence of this change is staring us right in the face.

“Our competition will be the grocery stores,” suggested Taylor. “At my local H-E-B, half of the customers are professional shoppers. They know where everything is. Instead of asking an employee for help, I look for the person from Instacart.”

Dive Into the Issues

This year, the Conexxus Education and Strategy Conference has transitioned to a two-day virtual event. Typical attendees are those who are passionate about Conexxus initiatives and the technological changes facing the c-store and fuel industries—like many of the issues mentioned in this article. During the online event, new tech companies will present their research, products and services aimed toward bringing convenience stores into the future, and educational content will focus on the industry’s most pressing issues. Getting solution providers and retailers on the same page, through events like the Conexxus Education and Strategy Conference, helps the industry move faster to deliver improved experiences for customers and employees.

For more information and to register, visit www.conexxus.org.