Moving C-Stores From A Fuel-Plus To A Plus-Fuel Model

Convenience stores (C-stores), overall, are in an innovation rut. While there are some larger chains that have made great leaps and bounds into the digital age of commerce and mobile omnichannel experiences, the encounter one has at the average corner C-store today bears an uncanny resemblance to what one might have experienced two decades ago.

“It’s almost as if pay at the pump has become a pit stop for innovating and using IT to their advantage. You can pay for gas outside, but that’s about it — there is no support for ordering anything else. We are starting to see things like loyalty program[s], but, by and large, it is so far behind the rest of the retail industry,” said Diebold Nixdorf’s Director of Service Station and C-Stores Ulrich Seemann to Karen Webster in a recent conversation about the progress of innovation in the segment.

Given that profit margins on fuel are notoriously thin (and the cost of labor behind the counter is going up), consumers who only ever pause for gas, and never even set foot inside the store, are a major lost opportunity for additional sales. Moreover, failing to keep up with the innovation curve being set by the rest of retail means forgoing the opportunity to build ongoing, more valuable, repeat transactions with customers.

According to the PYMNTS Paying At The Pump Report from late 2018, by offering a mobile app experience that delivers the convenience consumers have come to expect, C-store owners could boost revenues by roughly $22 billion from additional sales. Among consumers who use apps to pay for gas, 73 percent said they are likely to shop at a nearby C-store when they buy gas.

The opportunities for revenue to literally drive by are the bad news, Seemann told Webster. The good news is that progress is possible, and even beginning. It’s just that getting out of first gear can be tricky, especially for smaller stores.

When It Comes To C-Store Innovation, Size Matters

There are plenty of chains with easily recognized names — like Wawa, Sheetz or Cumberland Farms — that serve as great examples of advanced offerings, he noted, handing consumers a qualitatively different in-store experience than the one to which they are accustomed. That includes order-ahead options, fresh specialty foods, self-service kiosks that can offer much customization, private-label brand offerings — the list goes on.

“In many cases, these brands are all large enough to have the IT capabilities to implement these new kinds of services. They are using solutions that often come more out of the retail world than the convenience stores world, and then building very specific, highly customized, in-house systems,” he said.

Such customizations, Seemann noted, limit customer use to home chains. When they step outside that mass market experience into the 50 percent to 60 percent of U.S. C-stores that are run by individual proprietors, the situation becomes quite different. It gets tricky to talk about advanced technologies, and the best ways to deploy them.

Those owners, he added, need out-of-the-box solutions that allow them to customize and adjust for their specific stores’ layouts, demographics, locations and a host of other factors. This is an area that is starting to see traction, but providers with a focus on convenience stores have been slow to evolve.

As the market continues to move forward, providers are beginning to put those early solutions into the market — mostly because they must.

Moving To A Plus-Fuel World, Instead Of A Fuel-Plus World

In the beginning, Seemann noted, gas stations were about fuel and filling up. The first big evolution was to the fuel-plus model, where stations started to build up their other offerings, like food and grocery items, to give customers reasons to expand those basket sizes. The new, emerging trend — on display at some advanced locations in places like Texas, he noted — involves stations where the model is plus-fuel: Customers come for the food, “fill their carts with the custom or unique merchandise,” then fill up on fuel on their way out.

“It almost becomes an afterthought,” Seemann said.

That is a far cry from where the majority of C-stores are today, but the pressure all around the industry is building. One can see it in the QSR and fast food space, he noted, where players like McDonald’s are rolling out self-service kiosks to great revenue-driving effect. One can see it in grocery retail, where consumers are flocking to things like mobile ordering or curbside pickup, or where retailers are expanding their “order online, pick up in-store” offerings. One can see it in Amazon Go locations popping up across urban areas, where checkout has been technologically streamlined out of the process entirely.

“This is all on the rise today, and all of these other formats are what the owners have to be looking to. They know there is a need, and they want to be more innovative because that is what their customers are looking for,” he said.