The Future of C-Stores: Delivery Systems

echnology is causing major disruptions in the convenience store industry.  While the traditional business model relied upon customers coming into the store to purchase food and household items, consumers have now come to expect the same level of service and product quality delivered straight to their door.  Despite seeing a 1.6 percent decline in the number of c-stores nationwide, the demand for home delivery is at an all-time high.  

Unfortunately, many companies are struggling to catch up with the trend of expanding retail home delivery.  It’s important for c-store operators to understand what factors that are playing into this shift and what the future might look like for c-store delivery systems.  

Drivers Increasing the Demand for Delivery Services

As technology has advanced, many businesses have looked for ways to stay competitive.  One of the earliest to adopt delivery services was 7-Eleven when they signed a deal with DoorDash to provide at home delivery in select cities in 2017.  Of course, no one could anticipate or prepare for the COVID-9 pandemic that was lurking in the near future.  

“When 7-Eleven began offering delivery in 2017, we certainly didn't foresee a pandemic accelerating on-demand ordering platforms from convenient to essential.”  Chris Tanco, Chief Operating Officer, 7-Eleven

When the pandemic struck in early 2020, many businesses shut down or sent their employees home to work remotely.  This caused a major shift in people’s everyday habits.  With fewer people commuting to work, this significantly reduced the amount of foot traffic that c-stores had enjoyed for years.  People were also more likely to make food at home instead of picking up a snack or quick meal at a fast food restaurant or convenience store.  

Pre-pandemic projections showed delivery services as a potential new frontier for convenience stores.  However, the pandemic has forced c-stores to embrace this faster than anticipated.  In the last quarter of 2020 alone, convenience store home deliveries more than doubled and this trend shows no signs of slowing.  

Current Situation with C-Store Deliver Services

What was once viewed as a service to give customers options, retail delivery systems are now a requirement to be successful.  A lot has changed in the last few years and has created a new environment that many operators no longer recognize.  

• Market Consolidation of Delivery Services – In 2020, the food delivery industry experienced a major consolidation of c-stores leveraging a handful of delivery service apps.  Since this was new to many businesses, they chose to select just one partner to get started.  This has resulted in four main delivery providers controlling 75 percent of the current market share - DoorDash, Postmates, Uber Eats, and Grubhub.  Of the four, DoorDash holds 60 percent of the home delivery market alone.  
• Market Expansion of Delivery Services – Now that many companies are more familiar with delivery services, they have begun expanding to other platforms.  7-Eleven has fully embraced this strategy which allows them to now offer delivery services for 90 percent of its locations.   This trend is likely to continue leaving the door open for new or smaller delivery services to capture market share from the “Big Four”.
• Alternative Delivery Methods – With less foot traffic entering convenience stores, some companies like FlavTrip in Kansas City, Missouri have been testing out alternative methods of product delivery such as drive-thru windows at their stores.  This is a great option, especially for older consumers who are less tech savvy.  
• Specialization – Some companies have chosen to embrace home delivery in different way by specializing in the delivery of only certain products.  For example, Speedy’s Convenience has decided to focus more on alcohol products in partnership with Drizly, an e-commerce platform that facilitates the delivery of adult beverages.  

Current Challenges Impacting Convenience Store Delivery

There are a lot of benefits that come with offering delivery services.  However, c-store operators should be aware of some challenges that could affect their business.  By understanding these challenges, businesses can work to mitigate or eliminate any possible negative impacts.  

• Increased Competition – C-stores have been successful at maintaining their competitive edge through convenience.  The increase popularity of delivery services is blurring the lines between c-stores, restaurants, and traditional grocery stores.  Now, consumers can expect the same level of convenience from each business type through home delivery.  
• Consumer Options – Many food and grocery businesses utilize the same delivery service.  This gives consumers the option to easily view and select goods from a competitor.
• Order Accuracy – About 40 percent of customers who use a home delivery service report having issues with the accuracy of their order. This can be problematic since those consumers are more likely to blame the store for mistakes even if the 3rd party delivery service was at fault.  
• Communication – Customers expect to be informed of the status of their order, especially when it comes to estimated delivery time.  Most delivery services have a robust tracking and communication process.  Unfortunately, there are often delays due to drivers picking up and coordinating multiple orders at once.  
• Regional Preferences – Some delivery services are more preferred over others in certain markets.  For example, Uber Eats might be more popular in the Atlanta area while Grubhub could be more popular in New York City.  Nationwide brands could struggle in certain areas because they chose to work with only one delivery partner.  

What the Future Holds for Retail Delivery Systems

Even as the pandemic subsides, many companies will likely begin returning their workers back to their old routines.  However, c-store operators should be cautious to assume that things will simply go back to normal.  The pandemic has endured long enough to form significant permanent changes in buying habits for consumers.  Delivery systems and services are here to stay, but they might look a little different in the future.

Some delivery services have decided to start offering their own convenience store delivery models.  For example, DoorDash recently launched its DashMart which gives retailers the ability to sell convenience store items direct to consumers.  For major partners like 7-Eleven, this could be concerning and seen as a direct competitor.  As a result, 7-Eleven has launched its own platform called 7Now.  It’s likely that other brands will eventually need to invest in and develop their own delivery platforms.

C-stores chains will also likely explore new markets and product offerings in the QSR (Quick Service Restaurant) space.  One example of this is 7-Eleven’s expansion into Mexican cuisine with the Laredo Taco Company.  

Finally, home delivery service could allow companies to expand into new markets without having to build a brick-and-mortar location.  Orders could be delivered directly from a warehouse or centralized distribution center.  

There is no doubt that delivery system changes are transforming the convenience store industry.  The question is whether c-store operators are ready to embrace this new world.