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Having products delivered to our homes has become part of daily life for most Americans. From lunch to energy drinks, power tools and pillowcases, we prefer to order items and have someone bring them to us.
Convenience stores are well-placed to take part in the delivery game, competing directly with grocery stores and quick serve restaurants.
According to the Convenience Retail Delivery Survey from NACS (National Association of Convenience Stores)/Hathway, conducted in September 2021, 43% of people who shop in convenience stores have also used a delivery service to order from there. This indicates shoppers are increasingly making purchases digitally and view delivery services as an extension of convenience stores.
According to Incisiv, an insight firm to help consumer industries navigate digital disruption, 17% of c-stores offered delivery/quick commerce (30 minutes or less) last year, up from 8% in 2022, so this is an area of shopping that’s moving fast and not just a blip we saw during the pandemic.
Because convenience stores operate on very low margins, it doesn’t make sense to offer everything for delivery. However, the area with the best margins — in-store prepared foodservice — is an important area to focus on. It’s also an easy place to upsell, says Art Sebastian, founder and CEO of Nexchapter, a convenience store advisory firm, by promoting incremental items, like adding breadsticks or wings to a pizza order.
Some 79% of Americans say they use food delivery services, with 17% of them taking advantage of these services at least monthly, according to Upgraded Points, an American Express company.
And according to Routific, a cloud-based fleet management solution, revenue for online food delivery is growing at a rapid rate of almost 13% annually between now and 2027. The market volume is projected to total a massive $1.6 trillion in four years. That’s a lot of dollars that convenience stores can capture.
While most age groups participate in online ordering and delivery programs, Gen Z (aged 12 to 27) are most receptive to it. A substantial 49% of them say they’re likely to use a delivery service for convenience store shopping, which is significantly higher than the 25% of all ages of Americans who said they’d use a delivery service.
But the best shoppers for convenience stores to capture are the omni-channel shoppers, who might shop in-store on Monday, order via the app on Wednesday and use its delivery service on Friday evening.
“Omni-channel shoppers spend the most because you make the experience smooth and seamless and it’s easy to shop,” says Sebastian. “When you pull that customer in, and you have loyalty, they’re incentivized to spend more.”
According to a study from the Harvard Business Review, omni-channel shoppers spend around 4% more every time they shop in a store and 10% more when they buy online, when compared to single-channel customers.
And you can capture more of these consumers by doing omni-channel marketing, Sebastian says. “The more you do omni-channel marketing, the results start pouring in.”
The main detractor to delivery is delivery fees — this matters more to consumers than the cost of the goods they’re ordering, but they’ll also spend more to qualify for free delivery — up to $19, says NACS.
The best thing to do with delivery fees, says Sebastian, is to be transparent about them.
Another detractor is the slightly higher prices convenience stores charge when compared to local grocery stores. When this is the case, convenience store operators should focus on what they can do well — speed — which some customers are prepared to pay slightly more for.
Offering delivery isn’t easy and it has a lot of moving parts, but Lula can help. It offers great technology but can also manage delivery services end-to-end for stores, which saves the retailer time and means there’s no learning curve for employees or managers.
