Convenience Matters Introduction:
[Music] You’re listening to Convenience Matters, brought to you by NACS. Whether it’s for food, fuel, drinks or snacks, about half of the U.S. population shops at a convenience store every day. We’ll talk about what we see at stores and what the future may hold for our industry.

Jeff Lenard:
The pandemic has accelerated what we’ve seen over the last few years of decline in trips, but at the same time, our sales in 2020 actually increased inside the store because market basket size increased. We’re going to talk about those dynamics, what took place in 2020. And what does that mean for 2021 and beyond, as we look for what the future of convenience is and sales in our channel

Jeff Lenard:
Welcome to convenience matters. My name is Jeff Lenard with NACS.

Chris Blasinsky:
And I’m Chris Blasinsky with NACS.

Jeff Lenard:
nd Chris and I are talking to Lori Stillman today. She is vice president of research at NACS and leads our research efforts and looking at all the numbers related to trips, baskets, trends, et cetera. So, welcome Lori.

Lori Stillman:
Hey, thank you for having me here. It’s always great to be a part of these conversations.

Jeff Lenard:
So you’ve been at NACS for almost two years now. And in that time, if there’s one thing I’ve learned from you, is let’s focused on the trips because trips literally drive sales. So, do you want to talk a little bit about what you’ve seen and the importance of trips in really looking at our industry and its future?

Lori Stillman:
Yeah, I mean, absolutely trips continue to be the most important thing as a barometer of how we’re going to grow our business. And we’ve seen trip declines over the last five years, certainly as shoppers have turned more and more to online, e-commerce and certainly we saw that accelerate during the height of the pandemic. We have risks in a couple of ways, right? They’re not driving past our store, so they might not be stopping in for a quick snack on their way to their next destination. They’re consuming less fuel. So therefore those trips that are driven by the need to purchase fuel start to get spaced out a little bit further, and it really becomes the focus to how do we drive people into our stores without having it be a reason that they’re on their way to something else, but we are in fact, the destination for the needs that they have. And I think we continue to see retailers do some really cool things to start to communicate what that offer is, whether that’s digital displays on the forecourt or better using their social media platforms. But we have tons of opportunity that we really need to get laser focused on. And in a post-pandemic world we have opportunities to capitalize on some of the gains that we made with shoppers, who came into our stores that might not have been in there before that we now need to turn those trials into repeat purchases.

Jeff Lenard:
And I would imagine some of the decline and trips over the last couple of, in addition to online is when I drive around in the area, I always look who selling snacks, who selling drinks when you go into other stores and not just competing markets, but anyone you go to Track Auto and there’s a cooler. There you go to the Home Depot and there’s a cooler and they’re selling candy bars. Pet Smart does not just sell food for pets if you go up to the register. So I would imagine over the last few years that has also eaten into some of the trips that we normally would get that people have found that they’re just going to get that drink or that snack somewhere else that they already are. And, and that’s another reason that we’ve seen the decline in trips over the last few years.

Lori Stillman:
Absolutely. Right. So I think everybody has realized that there’s an opportunity to capitalize on the immediacy of need that shoppers have and some of the categories, which are our core categories, salty snacks, candy packaged beverage. Well, there’s lots of opportunities for other retailers to have an offering in that space might be a limited investment for them to do that. And if it’s giving back the shopper or a couple of minutes of time and a little bit of a treat in the midst of an otherwise unpleasant task or pleasant task as however it might be, then yeah, those are trips that we might not be getting. And so we have to think about how do we communicate what we have and how do we make it so preferred that even when they are presented with opportunities to buy candy or snacks at their local fabric store or at their local automotive store, that they still prefer to come into a convenience store because of the depth and breadth of what we offer.

Jeff Lenard:
And I think our big differentiator in all of this is the prepared food offer the coffee the salads, the sandwiches that we’ve taken years to build up because I’m pretty sure that people aren’t going to say, you know what, I’m going to go get that salad from Home Depot or while I’m getting my oil changed, I’m going to go get that sandwich at the lube place. So they still have a lot of work to do in terms of if they’re serious about food, or if it’s just somewhat of a niche just to satisfy that quick snack and that seems to be one of the big opportunities in how do we maintain those trips. And particularly, I believe we’ve seen an increase in trips as we go later on during the day that it’s, it used to be trips were essential in the morning. And now we’ve seen with the pandemic coming with, with people either not commuting on a regular basis and then getting out of the house a little later or picking up things on the way back, as opposed to the way out that we’re seeing, just to kind of a shift in some of the trips, too.

Lori Stillman:
The, the whole conversation around day parts. And certainly the quick service restaurant side of the competitive set they live and breathe dayparts. That’s how their menus are arranged, how they serve up offers. That’s how they do their advertising. And we have lots of lessons. I think that we can learn from how that channel interacts with shoppers in terms of making sure that we too are being relevant in the day part that the shopper is in the store, as well as suggesting to them things that might be relevant to the next day part. I think about going to a very famous Seattle-based coffee shop and knowing that while I’m there, I can pick up lunch when I’m buying my morning cup of coffee. And we too need to think about ways in which we can either bounce people back later in the day like that coffee chain does with their happy hour coffee pricing. And later in the day with a receipt from that morning, or just simply training our sales associates in store to be better at suggestive offers. You know, one of the things that we recently gleaned out of the Convenience Voices study that next did last summer was the leakage associated with food service in convenience stores. And so for as great of a job as our industry has done and really evolving and expanding our food service offerings, we still are leaking 30% of our shoppers who tell us that when they’re in a convenience store in the next 30 minutes, they’re going to stop at a quick service restaurant. And the math on that is pretty mind blowing when you look at 165,000 or 165 million transactions a day and a $6 average ring at a quick service restaurant we’re literally leaking over a hundred billion dollars a year. Now, if we just win back 10% of that, that’s a $10 billion plus that’s some nice wind to put in our sales. And I think for us, a couple of things we have to do, one is I think we have to really be cognizant of the increasing sophistication of the consumer when it comes to food service offers, right? Our industry is not necessarily a consistent in terms of healthy, fresh, quality offerings. And I think that we see consumers more and more picking destinations based on the health kind of forwardness, if you will, of the offer, they may not actually buy that, right. I might go into McDonald’s because they have a salad, but I’m still getting an order of fries, which probably isn’t the healthiest thing for me to eat. But, but knowing that I have the opportunity to make a healthy choice, I think is something that operators in our channel need to ensure that we’re doing at every level. And it doesn’t require a full service, fresh prep, kitchen. That’s very costly for a lot of operators, but they certainly can think about, “Hey, do I have a fresh basket of bananas and apples and oranges that I can sell to a shopper when they’re in the store?” Or can I have the latest in a plant-based yogurt or something that I know is super on trend, don’t have to lean in and have a whole 12 foot set of, of health and organic product, but a couple of really great attractive trip motivators that are basket builders that are fresh and can inspire people to perhaps pick something up that they otherwise might not do. And we have to teach our people to be suggestive and selling, right? When somebody is in buying a pack bev, knowing that that is a leading indicator, 35%, 36% of those shoppers, tell us they’re going somewhere else for food service. How do we capture them at that moment to say, Hey, have you tried our great new salad or bacon cheeseburger or whatever it is that we’re pushing and make sure that we’re selling suggestive selling to shoppers when they’re in the store. I think that’s an opportunity that too often is untapped in the rush to get the customer checked out and onto the next.

Chris Blasinsky:
I thought there were some interesting insights during the State of Industry Summit, particularly by the folks at Parker’s where the hot dispensed beverage and fountain area has been decimated from the pandemic, right. Self-serve was taken offline. Uh, they they spoke to using, or being able to lift sales in those categories with prepared food and bundling those offers as you’re suggesting.

Lori Stillman:
Yeah, I think there’s the idea of cross-promotion. And as we look at the numbers from what happened last year in the height of the pandemic there were a couple of really telling indicators for opportunities that we have. We saw single cans of pack bev or beer convert to larger pack sizes. We saw shoppers looking for instead of an immediate consumption size of a salty snack or a cookie. They were looking for something that they could reseal and use later, or take home and share with others. And, and we need to think about when those moments occur, if someone is in buying a 12 pack of beer what might they be looking to go with that? And are there things that we can do in terms of with this 12 pack of beer, you get $3 off of food service purchase, or what can we do to, to do cross category promotions that really push the right categories to stimulate purchases in foodservice over the course of the day on the right day part. And I think it’s just, we’re going to have to do some tests and learns as an industry and get better at that but you know, if there’s a great offer and I’m hungry, why not take action on it rather than get back in my car and drive somewhere else to pick something up?

Chris Blasinsky:
Yeah. You know, Lori, between you, me and Jeff, we’ve been in hundreds of convenience stores over the years. And the thing that I find is really impressive, even through a pandemic is that did not stop innovation in our channel. Companies that were building, continued to build continued to offer new flagship models. One recently that I think you went into well, I know you went into it with the new 7-Eleven in Manassas {Virginia}, and we saw some of that innovation with Dave Carpenter out in Denver a couple of years ago when we visited his store for Ideas to Go. And now we’re starting to see those really just cool ideas transpire across the 7-Eleven portfolio with their innovation sites. I think what you’re talking about with driving trips and excitement, some of those things that you, that, that they’re doing can absolutely do that. Even things like you and I were joking about the Franke machine, where it’s like, if I could get that in my home, I would, but it’s, it’s just, it’s not so much the product, but when you, when you walk into the store and you see these high end the design and the equipment and the path to purchase and the flow of the store, and it’s really just thoughtful. And to me, it would make the trip a lot easier for someone to walk in and given the time that we know people want to be in and out in our stores under four minutes. I mean, they, they really have that in mind with these stores.

Lori Stillman:
Yeah, absolutely. So that one Manassas store, which happens to be just a couple of miles from my home. And I watched the old location get torn down and the new side go up and when I saw some social media buzz that the store hadn’t stopped opening, I went to check it out. And there were a couple of things that really stood out to me in terms of what they’re doing in that store that I think other retailers can, can take a lesson from first was the ceiling is higher. The gondolas are lower. So you have this amazing feeling of space inside the store with a ton of light. They have to send service, offers that sit in the back of the store with open kitchens, and no matter where you are in the store, you have a hundred percent view into what’s happening behind the plexiglass, which was pretty impressive. Uh, and the food offer looked good, but there were a couple of little subtle things that they did that really caught my eye. First, everywhere you looked in the store, they had opportunities for subtle but accessible sanitation, whether it was gloves that you could put on hanging next to the foodservice or the dispensed beverage aisle, whether it was hand sanitizers and a couple of strategic locations, they really were in the height of the pandemic being super sensitive to the importance of safety in the eyes of the shopper, but the assortment that they had not only were they really expanding on food for later you know, cases of water, gallon, sizes of water and juice and beverage, but they had with that the immediate consumption available as well in a different section, right? So you saw the full box of Oreos over here, and you saw the Oreo sleeve over there, but it was really enabling shoppers to kind of work the store. Their dispensed beverage aisle is the only way I can describe it multiple Franke machines that allow you to go in and do a bean to cup custom coffee order, as well as an espresso machine and all of their other cold and frozen dispensed beverage machines were super digital and engaging, which allows the shopper to experience the store, not just shop, but actually create their own food offer customize the flavors that they want. One of the other things that I thought was really great that they have all throughout store, a little hang tags on products, letting you know, what’s organic, what’s new, what’s a local favorite and again, I think as shoppers are looking for more healthier opportunities in the store, knowing that somebody is paying attention to ensuring that we’ve got an organic packaged beverage juice, we’ve got a paleo or a keto friendly snack that just helps somebody make that decision at the point of purchase and not have to stand there and turn packages around and try to figure out which one fits their lifestyle or their diet. And so the other thing that was really evident in the store is because they had leaned so forward on I think some of the, uh digital and experiential machines for beverages, if the staff were in the aisle and they were excited about the new store, they were talking about why things were the way they were. And I hope that that lasts long past the grand opening because one of the opportunities we have as an industry right now is to connect with people. And as everybody has been living in a digital world when they get into a store, yeah, it’s difficult. It’s hard to see the smile behind the mask, but boy, hearing a voice that welcomes you and talks to you and shows you where something is in the store and retailers have to plan for that. mean we talk about building labor with slack. Well, you’ve gotta be able to have a little bit of slack so that somebody can be in the aisle interacting with shoppers, but that’s going to get me to go back. Right. I mean, besides the fact that I realize I’m probably overspending on coffee every day, because I got a great cup of coffee for about a third of the price of what I normally pay, and that’s going to get me to come back. It might even get me to sit outside and you outside dining area that has wifi, and I can just have a moment. And I think we’re going to have to figure out ways that we get shoppers to see us as not just a place to get in and get out quick, but a place where we can go and linger and meet multiple shopping needs at the same time and get on with our day. So I think there’s lots of good lessons to be learned from that store and others who are really paying attention to how the shopping behaviors are changing and they’re adapting their store design and their offering to really feed some of those needs for experience and interaction.

Chris Blasinsky:
Yeah. And I think you know, talking about dwell time, cause we know that the crux of convenience as you get in and out fast, but as things come along like electric vehicle charging the dwell time is going to be longer for somebody to be hanging out for 10, 20 minutes, whatever it takes to fill up the vehicle with their charge. So I feel like a lot of these retailers are poised for that, whether with exactly what you just described.

Lori Stillman:
I mean, there’s a lot of retailers who had to stack up tables and chairs, where they had dedicated food service areas. And in some cases we’ve seen some great examples where retailers have pivoted that space in the short term to offer larger package sizes, to give people reasons to come into the store, to fulfill some of those other trips that typically convenience may not be at the top of list for, but when things returned to normal and we start looking at maybe categories where the tails a little bit long, and we can shorten some space in some areas to offer a larger, larger package size offerings and we get back to having dedicated space for people to be in store making sure it’s a place where people want to be where they have access to WiFi where maybe noise is minimized. So they can do that midday call, not everybody’s going back to the office. And even when you’re sitting in your home office all day, you’re looking for an opportunity to get out, make a trip and if you can see your local convenience store as the destination, where you can go get that pick-me-up a cup of coffee, grab a great salad or sandwich for lunch, and maybe even pick up dinner that you can take home for later for your family. What we’re going to start to really see the loyalty and the trips come back the way we need them to. And, Oh, by the way, larger package sizes, which lead to larger purchases is what I meant to say.

Jeff Lenard:
I love that, that Chris had mentioned, we go to hundreds of stores is probably actually thousands hundreds with cameras. Uh, sometimes it’s the Ideas to Go where we spend half a day talking to retailers, filming the store, like it’s a newborn baby. One of the ones that you, you touched upon an idea of a store that we visited a couple of years ago called Twice Daily, which is based in Tennessee. And their concept was like what you were talking about, where if you come back a second time during the day, you get a discount. And that’s why they came up with that name Twice Daily, coming in the morning and come on back during the day, you’ll get a deal. And, might’ve been they’re still doing quite well. But the concept is now really right per picking with new technology and apps and things like that to move that along but if you ever see somebody in stores like me, Chris and Lori, when we’re just kind of like taking pictures and we’re trying not to bother anybody – we’re not spies. And then we just share them with everybody at staff. And we just want to get everybody else on staff to see all these cool ideas that we get to see whether on our travels or just because we happen to.

Lori Stillman:
It was predicted the convenience stores and {indiscernible} junkies that like to drive and go, there’s a brand I haven’t seen before from the car around, pull it and check it out. But even my family thinks I’m nuts, but we’ve had some great experiences as a result of discovering what’s out there.

Jeff Lenard:
Right. And they know that when you’re on a road trip you’re not stopping at a QSR. It’s going to be a convenience store along the way. Sometimes it’s going to be a convenience store I’ve never been to. And there’s all kinds of opportunities there. But if there were a couple of things that you both also mentioned that I think really tie in to the trips and the baskets conversation, and one was the whole of how do we change behavior with a pandemic, particularly related to coffee and talking about the new coffee machines. Right now we have a segment of the population that really has not been – that over the past year has thought about coffee. I’ll get coffee at home because in some cases it wasn’t even an option to go out and get it. And having these new experiential massage machines where you see the beans being crushed, you see or ground, and then you see the coffee being made and, and it’s, it’s beyond grabbing an air pot or another kind of pot of coffee that you get at home. It’s that kind of thing that’ll differentiate someone post pandemic, when, when you’re trying to attract that commuter, they’ll say, I’ll go out to this store as opposed to hanging out in my house, because this is this, I can’t do this at home. And I think that’s an important thing as we move along trips. But what else, what else? So, what I also wanted to mention is it’s kind of transitioned at some of the basket conversation that you already had where we never, our industry was not known for selling warm beverages. If you put a 16 pack or 18 pack of soda or beer or hard seltzer on, on the floor, it really didn’t move. It was more about putting inventory out there because people want to buy a cold, but we’ve seen this big evolution of people bringing things home now in basket sizes getting bigger and they will buy something warm because it’s not just for the next hour or two it’s I’m out. I may as well pick up this stuff. So the idea of these bigger baskets, I think really has some legs, or it had some legs in 2020. And what I’m thinking is we’ll see more of this in 2021 and beyond.

Lori Stillman:
Well, I think we will, but I think we have to be really mindful of the fact that what people do when they don’t have an opportunity to get what they need somewhere else is not going to necessarily lead to long-term behavior changes. Right? So when, when my favorite brand is the stock, there’s a lot of categories where people will pivot back. I think one of the things that our industry is known for that is not necessarily a positive trait, is we do have a price perception that the offerings that we have are more expensive. And so one of the things that I think as we’re planning for the future, we need to be mindful of how do we overcome that price perception. And in some cases it might be having, having an opening price point that is lower than what we’ve historically carried in some of those categories where people may want to look at us for that quick trip or that fill in trip and not just that last minute items. And so we need to make sure, especially going into what will likely be a period of recession, where the is going to force people to be long-term conscious of their pennies. We need to make sure that we don’t lose the opportunity to win a trip simply because they believe that they will pay more to come into our store than somewhere else. And, there is a value for convenience. And I think we’ve built that into our business model in recent years, but I think there’s a lot of other retailers today who are also trying to sell convenience and a lot of different forms. They too are going to struggle with the pricing. You know, we spent a lot of time last year looking at last mile, and there’s a lot of people who tried last mile solutions that were not willing or interested pre pandemic. And there were two things that I think everybody has to remember in the middle of all this growth of last mile is one, a lot of those third party delivery partners discounted the cost of delivery to get people onto the platform. I doubt they’re going to do that. Long-term just looking at kind of their market caps and how things are trading and how companies get valued. That that’s not a long-term thing they can afford to do. One of the other things that happens is those prices online get marked up higher than if I go to the store. And I know for myself when I’m having that lazy moment and I’m like, I’ll just order three or four things and have it delivered. And then I look at the price and I’m like, wow, that’s like $3 an item, more expensive than what I was paying for it at the same stores that I’m ordering from. And it intends to me is just forget it. I’m going to hop in the car and go get it. It’s not worth spending an extra 20 bucks to get four or five items. So I think we have to make sure that the offer that we have, whether it’s in store or how we serve it up with digital partners doesn’t price us out of the consideration set for the shopper when they’re shopping.

Jeff Lenard:
Yeah. Amen. Uh, I remember growing up my father on the way home from work would get milk at the convenience store because it was, at the time, convenience stores were known as having the best price on milk. It got you in the store. And my dad being a guy, just like all of us, once were in the store and we don’t have a shopping list like women, we go in and it’s like, okay, this is the start of picking up some impulse items. And he’d always come back with a couple more things than just milk. And then I think as we look towards that, where do we grow with the trips on some of these large basket items that may not have the margin, but get them inside the store, not just for that purchase, but the ancillary purchases and the sights and sounds of the cool stores. And so you have all these things going on and if you get them in the store and they see all this theater, it is much more experienced than it was a couple decades ago.

Lori Stillman:
It is. And I think even in our industry, like I spoke about the 7-Eleven store and this beautiful kitchen that you can look right into, but what they still weren’t doing was maybe offering me to taste to something, right. I’ve never had a 7-Eleven pizza. I don’t know what it looks like. It looked really good in the case. And I’m thinking, gosh, how hard would it be if you’re getting within a couple of minutes of a fresh prepared item, starting to get timed out, or you’ve made an order incorrectly cut it up, have some sort of little sample size, uh cups or paper trays that you can offer to shoppers to get them to try the product. I’m a big believer that if you get product and mouth, you’re probably going to get it in the basket, if it’s a good offer and we need to connect those dots for shoppers and just take them to the finish line to say, if you haven’t tried it, let me give you a quick taste. Right. You know, the grocery store I shop at does that with their cheese and Costco certainly has built a business out of their demo platform. And I think we, as an industry are lagging other channels and giving people opportunities to really experience what’s new in our stores. And that’s a big opportunity.

Jeff Lenard:
And I’m also a sucker for when I go to Trader Joe’s or Costco or something like that. And they do the samples and then you’re just staring at the person there and it’s like, okay, I’ll grab this. I, I don’t want it. It’s good. Yeah, sure. And then maybe some of that translates into more long-term and does create that moment. I think that also what you’re talking about with having all those, those employees down the aisle you, you create that connection. You learn a little bit more about somebody, and then if you go to another store, you’re cheating on these people and you already know them a little bit. So I think there’s a lot of good things going on in our industry. We saw that with the 2020 numbers where we held our own. What about couple things that you saw in 2020, just in wrapping this up, that you really are excited about to see how they play out in the numbers in 2021?

Lori Stillman:
Wow. Great question. So I think the first is I do see us as an industry rapidly embracing drive-throughs and Click and Collect, right? So we are still competing with a lot of other retailers and quick service who are, who are merchandising in time and let’s face it. It’s a hassle to get the kid out of the car in the middle of a snow storm and go inside. And it’s easier to have somebody bring it in handed to you or use a drive-through. And we’ve seen a number of retailers very quickly adapt to how do they give shoppers the ability to access everything inside their store, but through a window or from a designated parking space. So I think watching how that evolves in our industry is going to be super exciting. I think the pivot to larger package sizes, I think this industry has learned a really important lesson that people will buy warm beer at a convenience store and they will buy food for later and so we’ve got to figure out what are the right offers that we need to have and how do we merchandise it in a way that meets the needs of those shoppers who are looking but I think we’re going to see some sticktuitiveness there that is going to last for awhile. And we might see a little bit of a pivot in the store to more items that are food for later, rather than food for now. So I think those are two things that get me really excited. I think the other thing that I am encouraged by is the adoption of all the technology throughout the store and when we’re in an industry where there’s lots of risks of higher mandated minimum wages and food safety concerns and the things that we have to be mindful of as an industry using technology appropriately, using the data from that technology. I mean, come on, I can’t talk about technology and data – I’m a research person and not talk about the importance of that data, but there’s so much to be learned about what shoppers are doing. Even with something as simple as a frozen or hot or cold dispensed beverage, understanding the sizes that are selling in different dayparts, understanding what flavors might be skewing to different times of day and using that to fuel offer personalization or in-store promotions, there’s so much opportunity. And so step one is, we’re leaning into new technology. Step two is starting to really use it to drive decision-making in the organization. And that’s, what’s going to close the gap, right? That’s, what’s allowed the Amazons of the world to really build their businesses by using the data of what was selling on their platform to inform pricing, to inform delivery options, to inform whether or not they wanted to enter into a private label and a category. And so we’ve got to do the same thing. We’ve got to use the data of the experiences that shoppers have in our stores. And there is the secret tool that will help us grow for the future.

Jeff Lenard:
And beyond this podcast, Lori, your team did an amazing job in running our State of the Industry Summit that we had in, in mid-April. Very impressive in terms of the attendance, in terms of the content. It’s one of the many things that your department does. If you go to convenience.org and click on the research tab, you’ll see some of these other things we have coming. We have the State of the Industry Report that will be coming out in another month or so, the June issue of NACS Magazine is the only place, the only media outlet, where you will find all of the data that your team covered during the State of the Industry Summit. [Music] The Last Mile Report is under the Research tab that is free to download. You guys are coming up with all kinds of research and we hopefully are telling all kinds of stories about how people can grow their business through the research, because the numbers are real good indicators on where trends are going, and I encourage you all check them out and see you all in-person at the State of the Industry Summit next April.

Lori Stillman:
Yes, absolutely. We will be back live in Chicago and we are ready.

Jeff Lenard:
So thank you very much for joining us today. And thank you Lori for joining us today and thank you all for listening to this episode of Convenience Matters.

Convenience Matters Closing:
Convenience Matters is brought to you by NACS and produced in partnership with Human Factor. For more information, visit convenience.org.