Micro marts are appearing in office buildings, fitness centers and as small, stand-alone, self-service convenience stores offering a limited SKU mix to customers in an autonomous checkout environment. C-store operators are watching and determining how they can integrate this model to their advantage.
NanoStore and lunchbox are two recent examples.
In November, Ahold Delhaize USA’s services company Retail Business Services began piloting ‘lunchbox,’ a small-format frictionless store, in its Quincy, Mass.-based office. Customers must register and scan a proprietary app to enter. Then they select their items and walk out. The micro mart offers fresh, healthy food and snacks and is open 24/7. Customers can select from a range of payment methods in the app. Inside the store, artificial intelligence (AI) systems detect which products are removed from shelves and ‘anonymous body skeletal tracking’ connects the products with the correct shopper.
AiFi, which launched NanoStore — a small-footprint, all-in-one, automated plug-and-play store that includes AiFi’s sensor fusion and AI to enable auto-checkout — recently provided the template for Albert Heijn’s micro mart at Amsterdam’s Schiphol Airport that opened in September. Customers gain access by tapping a contactless debit card — or other contactless payment method like Apple Pay or Samsung Pay — to open the door. Then customers select products and walk out.
Defining Micro Marts
But what makes a micro mart a micro mart?
“We see (micro marts) clearly as attempts to compete with Amazon Go and Pret A Manger,”said Richard Crone, CEO of Crone Consulting. “Micro markets or micro marts or nano marts are really quick-service restaurants (QSRs), if you analyze the SKUs. That’s the defining point in distinguishing them from traditional vending machines or banks of vending machines.”
Micro marts are cashier-less, include autonomous check-in, offer a limited SKU mix compared to traditional c-stores and feature open-air shelving, which provides flexibility for accommodating various packaging that holds prepared foods.
“In the case of Amazon Go, again it’s a QSR, but it’s created a new category — premium prepared foods with groceries (PPFG). These other concepts are trying to do the same,” Crone said.
Micro marts aren’t always stand-alone locations. Crone pointed to Byte Technology, which offers small-footprint, unattended “stores” that are around the size of a small refrigerator and fit beside the gas pump. Customers can use a credit card or app to check in and open the case to select their products. C-stores can stock it themselves or partner with a local company.
It’s not a coincidence that micro marts’ SKU mix focuses on food.
“They have to eliminate the exceptions that autonomous checkout can’t handle,” Crone noted. “The reason the SKUs are limited and principally focused around food is that merchandising concept works. You don’t have any tickets switching or partial scans, or scan and switch, or skip and slip the line, or check on theft profiling,” he said.
“The convenience operators today have to be watching this, but they must know that it’s a whole new merchandising concept. It’s radically different than the product mix and customer experience they have today,” Crone added.
The best way c-stores can prepare is to create a check-in strategy at their stores. “You can’t do these other things without a check-in strategy,” he said.
Russell’s Convenience is not only watching micro marts but diving into the concept.
Raymond Huff, president of HJB Convenience Corp., operates 19 Russell’s Convenience locations across Denver, Los Angeles, San Francisco, Honolulu and Detroit, including two Russell’s Express micro mart locations in office buildings. The two Russell’s Express locations are cashier-less, open 24/7 and feature cameras.
“The nearest manned store is always watching that store,” Huff said.
Customers enter their telephone number into a touchscreen to open the door. “So you have to be a member,” Huff said.
Once inside, customers select their products, scan the UPCs and pay using credit, debit or with the SKIP app. Russell’s Express eliminated any products that require an employee to be present such as coffee, alcohol or cigarettes. The SKU mix includes prepackaged foods customers can heat up in a provided microwave.
Huff had the idea for cashier-less locations when a couple of locations didn’t have enough sales volume to warrant having an employee present. But at the time, he couldn’t convince the landlords of the buildings to allow him to implement the idea. That is, until he visited China in 2013 and saw tried-and-true examples of these automated stores at work.
Russell’s had been scanning since the ‘90s, so Huff began the transition by analyzing the store’s top-selling items to determine which SKUs to keep. The health and beauty aid section, for example, dropped from 500 items to less than 50.
Today, one Russell’s Express measures 700 square feet, and the other, 300 square feet. The larger location features 150 items, while the smaller store offers between 30 and 50 items.
One of the biggest challenges for micro marts today, Huff said, is legislation from cities and states requiring that stores accept cash. Huff pointed out that if he needed to add a machine to handle cash payments, that would up the cost of his micro mart by $35,000. “And that’s just for the machine.”
While some retailers worry about tailgating — where one person enters their code, but several people enter with them — Huff welcomes the practice because it converts new customers. When it’s time to check out, customers only get the discount if they enter their number, which inspires spectators to become members.
“In my opinion, every c-store operator should have a micro market option,” Huff said. He suggested looking at opportunities to open such locations in office buildings.
Huff noted, based on his experience, micro marts do about 25-50% of the sales volume of a standard c-store. “What I would say to other operators is, ‘Get out of your box … and look for growth opportunities because they’re out there.’”
Micro markets allow The Army & Air Force Exchange Service to serve military communities in small or remote locations, as well as outside normal operating hours. It introduced its first Exchange micro market in 2014 at the Raven Rock Mountain Complex in Blue Ridge Summit, Pa. The Exchange currently has 47 operating micro markets that are unmanned and open 24/7. It has approximately 60 more under consideration.
Exchange micro markets carry snacks, cold beverages and small meals, with a focus on healthy — such as fresh fruit and salads — and sundries, said Trini Saucedo, senior vice president for services and food for the Army & Air Force Exchange Service.
“A single Exchange micro market can easily stock between 500 and 700 SKUs. …,” Saucedo said. Exchange micro markets do not stock any age-restricted products.
Shoppers select items from open-air shelving or coolers and scan their purchases at the point of sale, where they can pay in a variety of ways depending on location — some even allow payment with a fingerprint and a PIN.
“On military installations that are geographically expansive, the Exchange food court or nearest Exchange store might be quite a distance away from a particular building. Micro markets give shoppers at these locations grab-and-go options that are convenient and nutritious,” Saucedo said. “They are complementary to areas where we may not be able to provide or support full Express stores.”
Crone suggested two entry points for c-stores to micro markets that play to their strength — “which is their location.”
The solution is not to retrofit an entire existing store. “That’s boiling the ocean,” he said.
Given the demand for pick-up, order-ahead and returns, c-stores could create a partitioned area inside their existing c-store for order-ahead or buy-online/pick-up in-store, or for product returns on behalf of Amazon, FedEx, etc.
“Equip that area with autonomous check-in/checkout,” he said. “Then use that data to curate a set of personalized product add-ons that are sitting right next to the FedEx package.” Customers can put those add-ons in their bag and walk out.
Another option is installing something similar to aforementioned Byte Technology at the gas pump.
The consumer is already checked in to the fueling app to pay for their gas, and “can easily use that to open this refrigerator,” he said.
As c-stores venture into micro marts, protecting their data rights is crucial. “That data is yours. That’s your lifeblood and competitive advantage. Autonomous checkout suppliers don’t have a business model unless they can get inside the store and start recording all that data,” Crone said.
Developing a check-in strategy that allows retailers to capture and own their own data is an important step in the process.