Predicting the Future of Convenience Retailing

From healthy foods to a radical shift in goods and services, retail futurists offer a glimpse of the changing consumer needs that could shape the convenience store industry over the next 10-20 years.

By Howard Riell, Associate Editor.

Customers seeking today’s newest phone apps. Electric fueling stations rather than gas islands. Stores that change format frequently, and on a dime. More healthy rather than snack foods. Plasma screens that greet customers by name and offer targeted promotions when they walk in the door. Marijuana and other mood-altering substances for sale.
Welcome to the future of convenience retailing.

According to futurists, visionaries and industry watchers, the next couple of decades will see changes that are both surprising and extraordinary in retailing.
What do the next 10—or even 20—years hold in store for the convenience store industry?

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“First of all these are two very, very different questions,” said Ryan Mathews, founder and CEO of Detroit-based Black Monk Consulting and a globally-recognized futurist and consultant. “The future, defined as 2022, is likely to be quite different from the future defined as 2032.”

One thing is clear in either future, however. The primary value proposition of the convenience store industry—as with all retailing segments—will have to be radically redefined or the industry will become obsolete.

“Today’s consumers are increasingly living in a world of 24/7 real-time access to a broad range of goods and services delivered through an ever-broadening platform of devices and interfaces,” Mathews said. “Old concepts like viewing retailers by channels—and making allowances for channel idiosyncrasies like higher price points and margins—are rapidly become a thing of the past, and it’s therefore unlikely to survive into either future.”

One could make the argument that there will always be a need for emergency or last minute purchases, “but this is hardly a formula for a robust future,” Mathews said.

Shift in Consumer Demands
Dallas-based futurist Jim Carroll sees healthier foods becoming a more fundamental offering at more convenience store down the road. “You wouldn’t think it, but there is a very seismic change going on in terms of what the stores are selling,” he said. “I think they’re realizing that what people are consuming—fried foods and fatty snacks—is changing. People are much more conscious of their food consumption.”

This is a trend that Carroll has been hearing about personally—directly from c-store operators. “Wellness—focusing on nutrition and an active lifestyle—is certainly a trend,” he said. “You think about the number of convenience stores that have undertaken a shift to fresh food. The focus is not on Doritos and Twinkies. Sure, some operators do focus on these items, but your industry leaders and top quartile chains are embracing change.”

Retailers, Carroll said, are trying to get away from the traditional popping chips paradigm. “If you play into the sort of ‘life to go’ issue and recognize that people want to get in and get a healthy meal quickly, why not have those items at the ready in convenience and gas stations? Even 7-Elevens now are selling sushi.”

Promotions, too, will gain impact, Carroll predicted. “It won’t be too long before I am able to fill up my car while my iPhone is communicating with the c-store,” he said. “By the time I walk into the store an LCD TV panel up on the wall is going to recognize me and greet me with a customized commercial.”

Once the store recognizes a particular customer there are endless possibilities to upsell merchandise via text messages and electronic coupons. The constant in the equation is change.

“I see c-stores undergoing relentless change in terms of what they do,” said Carroll, “because I think consumers change so quickly. That’s a major part of what’s going on—a very fast format shift. There is a South African chain that is converting its entire c-store strategy over to fresh food—a complete format shift, because even over there they are seeing that same kind of demand for fresh food served fast.”

Convenience is Key
Even as futurists and industry experts peer into the future, the one edge that the industry always maintains is convenience.

“Inside the store, we know that 20 years from now we will sell the same thing that we sell today: convenience,” said Jeff Lenard, vice president, industry advocacy for NACS. “What that looks like is difficult to predict.”

Knowing exactly what products will line store shelves two decades from now is difficult, Lenard conceded.

“Who thought 20 years ago that categories like bottled water or electronic cigarettes would exist, or could have forecasted the flood of energy/relaxation products coming?”
Lenard, like many others, does believe that foodservice will be an increasing part of convenience stores’ future. “But it’s also an increasing part of just about every other channel, from drug stores to dollar stores to even furniture stores. And, you also have emerging trends like food trucks,” he said.

Cohort Effect
“One of the good things about thinking in a 20-year increment is that you get to at least start thinking about cohort effects,” said renowned futurist, lecturer and social critic Watts Wacker, founder and director of FirstMatter LLC.

Cohorts, he noted, are groups of people—Baby Boomers, Generation X, Millennials—who travel through time together.

“We now have a new group of cohorts called Digital Natives,” Wacker said. “Those are people who have spent the entirety of their lives in the Internet, in the ether. Twenty years from now those people are going to be 40. Convenience for them will be defined in a very different way than it will be for people older than they are.”
For instance: c-stores can expect to basically replace telephone stores like AT&T and Verizon in the future, helping consumers keep pace with the frenetic expansion of information.

“Because smartphone apps will be dropped on the market and updates will be available on a regular basis you would go to a convenience store to get your phone upgraded. In fact, you will be upgrading your phone with such regularity that you will be updating it every day. No more schlepping to a Sprint store,” Wacker said. “Convenience stores are based on the concept of convenience, so one of the things that becomes a convenient item is your phone being updated daily.”

Another example, according to Wacker, who served as the futurist at SRI International, the legendary Menlo Park think tank, and spent 10 years as the resident futurist at the social research organization Yankelovich Partners, is that electronic charging stations will have widespread penetration to compete with gasoline fueling stations. Currently, drug store chains like Walgreens have been investing in electronic filing stations in hopes of tapping into the convenience factor in the future.

One of the biggest trends a decade or two from now will involve what Wacker characterizes as East meeting West. The collision of interest to c-stores will be in the area of the life sciences like biology, biochemistry, pharmacology, medicine and nutrition.

“When you start looking at what today is the 5-Hour Energy shots, you’re going to start seeing things for mood shifting,” Wacker predicted. “They’ll take you down, take you sideways, take you up, bring you back down. You’re going to start seeing all sorts of ingredients from the Amazon. Over half of the ingredients in cancer drug
s come from the rain forests. You’re going to see all sorts of instantaneous change, or mood products that are ready to be sold at a cash register. It’s not pharmacology. It’s this whole new thing; potions and lotions.”

Nor will c-stores stop at what Wacker likes to call primal chemistry. “I also think they will get into distributing marijuana,” he boldly suggested. “Marijuana will be legal, and it will be probably the biggest-selling item. We see it happening in Colorado. The Feds have made the decision not to dispute it. What I find funny is you will still have cigarettes under the counter, but you’ll actually be able to market pot.”

Unrooted in the Past
Mathews, of Black Monk Consulting, is advising convenience store operators to stop trying to invent new offerings based on definitions rooted in the past. “Start thinking about what convenience might mean in the future,” he said.

And what might that look like? “There is an old adage to the effect that he who pays for his food by staring into crystal balls had better be capable of living on a diet of shattered glass,” Mathews said. “I’ll avoid the temptation to become too prophetic here other than to say that in a decade, successful and profitable c-stores will be doing a good deal more with customer-specific data processing. Within two decades the channel—as a channel—will likely be either almost entirely automated or will have ceased to exist.”
The real reason to think about the future, Mathews explained is not to find answers, but rather to learn how to ask better questions. “What’s clear is that if it is to survive, the c-store industry must radically restructure itself—starting yesterday.”

The question he suggested convenience store retailers should begin asking themselves is: “What is the industry doing to address the potential of what some call M2M (Machine to Machine) marketing facilitated by the emerging and far-reaching capabilities of the Internet?”

“For example,” Mathews said, “imagine an interface of your car’s internal temperature control mechanisms and the c-store of tomorrow. On a hot day the onboard telemetrics could receive a personalized message from a customer’s favorite c-store, or one where he already has a loyalty card tracking his sales, alerting the driver to special discounts on cold beverages.”

Similarly, a tie-in of weather forecasting, retail intelligence and onboard computers could alert drivers to stock up on appropriate driving aids like windshield wiper fluid and ice scrapers for snow.

While there is no end to questions about the future, Mathews concluded, one thing appears certain. “Unless things change quickly, I’m afraid discussions about the future of the channel may all prove moot,” he said.

Lenard said he also believes that industry watchers will continue to see stores evolve more into problem solvers—foodservice, financial services areas, etc.—than just product sellers. “As part of that, we will continue to see store designs evolve where there are fewer right angles and more open spaces.”

Indeed, Lenard said, part of NACS’ mission is to help predict the future. “Our job is to help tell the industry’s tremendous story to the supplier community so that they continue to see us as a channel of choice and to communicate our industry’s voice to legislators. That way we are always able to compete on a level playing field and provide retailers with as many options and ideas as possible. This will allow retailers and their customers to ultimately determine the future.”