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Convenience Stores Face Headwinds – Now is the Time to Innovate

By Cheryl Sullivan, President, DemandTec

The convenience store industry, already experiencing a slight downturn in 2019, headed into early 2020 under considerable pressure. Increasingly fierce competition continued to encroach from both online and physical retailers. Younger Americans were growing less likely to get driver’s licenses leading to a truck driver shortage, reduced traffic and therefore, shopping trips.

Then came the COVID crisis, and the impact on C-stores was immediate and severe. Beginning in mid-March, in-store trips fell by double digits in just 4 weeks. Revenues from fuel sales continued to falter. Pre-COVID, fuel prices were already at or near historic lows, and as economic activity went into free-fall, fuel demand collapsed, reducing both overall revenues and store visits. The just as traffic was slowly beginning to recover in late June, a second wave of pandemic outbreaks reduced trips by another 4%.

Meanwhile, shopper behaviors and sentiments sharply evolved as well. In the COVID era, even historically resistant customers flocked to online channels, and already heightened shopper sensitivity sharpened. A recent shopper study found that 34% of shoppers rank price as the most important factor contributing to their overall shopping experience, regardless of store format. At the same time, 41% report having a lower income than pre-COVID. Even after the pandemic, 27% of shoppers expect their incomes to remain lower than in pre-COVID days.

In a challenging environment, retailers can keep doubling down on the same old way of doing business, and risk becoming more irrelevant than ever, or they can take bold steps to realign their business for agility and shopper relevance, leaving their competition behind.  Today is the perfect time for convenience stores to implement AI-based price optimization technology that gives them accurate, timely insight into shopper demand signals and price sensitivities. Leveraging these science-based solutions enables C-stores to know exactly where they need to price aggressively, down to the item-store level, and – equally important – where they can safely recover margins to meet their target business goals.  

These science-based capabilities also yield critical information about item affinity and drag. As C-stores struggle with reduced car trips nationwide, they have the opportunity to capitalize on the fact that many shoppers are opting for quick in-and-out stops locally rather than lengthier grocery store visits. Because convenience stores are within easy access, often even on foot, for the majority of Americans, understanding halo effects enables merchants to entice drop-in shoppers to buy more items and enhance critical market basket averages.

In the face of a high challenging and rapidly changing environment, it’s more important than ever for C-stores to get their prices right and know exactly what their shoppers want, including their price sensitivities at the item level. At a time when many C-stores and their competitors are consumed with tactical, day-to-day pricing approaches, innovators have the strategic opportunity to opt for streamlined, automated approaches to pricing that deliver vastly superior results to slow, flawed human-centric processes. The science based approach gives convenience stores the ability to offer their shoppers a true win/win: prices that engage shoppers on the items they care most about, while recovering margins elsewhere to structure a long-term, healthy business operation.