What a bizarre time in which we find ourselves.
Elon Musk is now the world’s wealthiest individual, Bitcoin quadrupled in value over the past 12 months, and politics, public health and the economy are rife with uncertainty. It’s easy to look around and wonder what exactly is going on.
The past year forced individuals and businesses to react to an unexpected challenge without the benefit of precedent. It was a time for knee-jerk reactions, pivots and responses to immediate needs.
I suspect a sense of normalcy will return in 2021 — even if it’s a new normal. From masks and travel restrictions to changes in daily habits, we’ve lived with these changes long enough to grow accustomed to them. Even my grandmother has become proficient at FaceTime.
A lot of things got a free pass last year because of COVID-19, but this will be a year for businesses to press forward and demand results. It’s a time to look critically at the past year and decide what worked and what didn’t. For better or worse, the effects of this pandemic are likely to linger long after vaccines are available to everyone.
Predicting the future is a risky business even in more stable times, but I do think we can be certain about a few trends. I’d like to share my thoughts on eight of them.
1. Divergence in industry business models will continue.
As I previously explained in an article co-authored with fuels consultant Brandon Lawrence, recent years have witnessed a divergence in convenience store business models.
The Consolidators are scaling the “traditional” convenience store, the QSRs operate a food-forward model and invest in a higher-quality customer experience, and the Merchant Supported canopies utilize fuel as a loss-leader and compete on price. Companies caught in the middle need to pick a side. For single-store operators and small chains, there’s an opportunity to play a different game and create boutique, differentiated retail experiences.
This model held up during 2020 and should continue to be valid in the new year. Murphy USA’s recent acquisition of QuickChek is a prime example. Murphy USA has resisted the consolidation route, but this move gave them the know-how to make a foodservice play. This will be a very exciting development to watch over the next year.
2. More attention will be paid to the digital customer experience.
The past year reinforced the fact that retailers need to think beyond physical stores. Expect retailers to now take a critical look at their strategies and be more thoughtful about managing the digital side of their customer experience.
Loyalty apps will be a prime target for review. Recent years witnessed a large rollout of loyalty programs, but it takes more than discounts on soda and snacks to foster loyalty and win the app retention game. Expect retailers to explore new functionality.
Social media and digital listings platforms will also receive attention. The success of social media accounts from brands like Sheetz, Kum & Go and Kwik Trip is difficult to ignore. Moreover, I suspect many marketing teams will realize their mistake in neglecting Google Maps. Expect to see renewed interest in Google My Business listings and online reviews.
3. Retailers will press forward with delivery, but many will look beyond the third-party platforms.
The pandemic was a kick in the pants on delivery. The ‘wait and see’ approach of recent years proved to be a problem in March and April, and many retailers rushed to partner with third-party delivery platforms. Now that the dust has settled, expect to see some retailers pursue a higher level of sophistication than “we’re on DoorDash.”
Moreover, expect to see continued competition in delivery from outside the industry. As I previously wrote, job postings for DoorDash’s DashMart reveal that at least 10% of the U.S. population will have access to this dark store brand — and that’s a conservative estimate. Other platforms are likely to pursue disintermediation, and there will certainly be regional startups seeking to emulate the success of goPuff. Amazon’s grocery stores should also be on retailers’ radars.
4. The ability to market safety and cleanliness will be a competitive advantage.
Americans still enjoy shopping in physical stores. The catch is that it’s easier than ever to avoid lazy retailers who neglect their product offer and especially their customer experience. Just ask Macy’s or Bed Bath & Beyond.
Expect consumers to exit the COVID-19 pandemic with lingering concerns around health and safety. Convenience retailers who continue to breathe life into the “dirty gas station” stigma will find it even more difficult to compete against those who invest in a high-quality customer experience. I may be biased given my involvement with the Safe Shop Assured certification program, but data already shows that this was a trend before the pandemic.
5. Foodservice will see continued investment, but there’s a catch.
What used to be a differentiator has now become commonplace in many markets. Bean-to-cup machines continue replacing traditional coffee equipment, and similar menu items exist from one retailer to the next. It’s no longer unique to see a turkey wrap or sausage, egg and cheese croissant at a gas station. Expect more retailers to recognize this problem and look to answer the question of what’s next.
6. Branding will be paramount in separating outlier brands from the rest.
Any question about the importance of branding should have been removed when a YouTuber launched 300 ghost kitchen restaurants overnight. Similarly, I found it interesting that when I hiked to the top of South Dakota’s Black Elk Peak in May, I saw a fellow hiker wandering around the old lookout tower in Buc-ee’s t-shirt. The closest store is more than 1,000 miles away. Then again, I’ve seen Buc-ee’s clothing in dozens of airports around the country.
Consumers are not purely rational beings that reward cheap gas prices and discounts on soda with loyalty. The ability to execute well, delight customers and foster the creation of a powerful brand identity that creates a team mentality and sense of belonging is a retail superpower that can’t be ignored. Expect to see a growing gulf between retailers that succeed and fail at this.
7. The fuel canopy will continue to be a less effective lever for generating visits.
As I previously wrote in the second part of a series co-authored with fuels consultant Brandon Lawrence, fuel demand is likely to face challenges in the coming years. Remote work is particularly concerning with many reluctant to return to the office, but there are other issues including rising fuel economy and the right-sizing of America’s over-retailed landscape.
With fuel being less important to customers, retailers will be known for the other things they do — or don’t do. Expect to see more retailers acting on this.
8. More retailers will add charging stations, but not everyone has a business case.
Most electric vehicles do and will charge at home. For consumers who require occasional access to a public charger, retailers will find competition from movie theaters, hotels, malls, big-box stores, grocers and any other businesses that decide to install charging stations. Any growth in this category will, by definition, fragment the fuel customer base, and not all retailers will see a business case for charging.
Expect to see more charging stations installed in 2021. Privately, expect to hear skepticism and concern about the outlook for electric vehicles.