Executive Summary
- The Convenience RPI ranks 41 U.S. c-store banners on their ability to deliver loyalty and growth beyond fuel. The retailers ranking in the top 13 (i.e. the 1st Tercile) include a mix of evolving national and regional operators, as well as chains that are extensions of core grocery chains, or traditional gas brands, proving there are multiple pathways to success. Ultimately, the 1st Tercile wins on clarity of strategy, disciplined execution, and a superior ability to evolve beyond the core, traditional c-store offering.
- Top-tier retailers are growing nearly 2x – 3x faster than laggards, and when the c-store industry as a whole contracts, the Top Tier still manages positive growth. Five-year compound annual growth rate in foot traffic, based on Placer.ai data, has been 7.2% for the Top Tier of retailers and only 2.5% for the bottom tier. In the past year, the Top Tier has grown foot traffic by 0.8%, while the Bottom Tier contracted by -2.7%.
- Buc-ee’s, Sheetz, Wawa, Kwik Trip, and Walmart C-Stores hold the top 5 spots in our overall Convenience RPI rank, each with distinct strategies focused on either: Quality Experience/Products, Frictionless Transactions, or Affordability.
- There are 6 dimensions of the C-Store customer value proposition. In order of importance in driving chain growth and emotional connection with customers, they are: Quality, Affordability, Frictionless Transactions, Visibility, Product Variety, and Traditional Convenience/Speed.
- The Top Tier of retailers employs a few different strategies to achieve their superior rankings: 1) Converting over half of their customers to viewing them as a meal destination, through a wide variety of food, drink and meal occasion options, backed by capabilities that make it easier to customize orders and place them through a variety of channels. 2) Standing head and shoulders above 90% of C-Stores on overall Quality of products, food taste and store experience. 3)Dependably and consistently delivering clean, well-organized stores as well as the core c-store need states of gas savings while driving further Affordability in c-store products.
- The Bottom Tier of retailers are large, national franchise or independent models, who have competitive advantages in Traditional Convenience/Speed through strong location convenience and ability to get customers quickly in and out of the store, and who over index relative to the market in traditional c-store trip missions of lottery, candy/snacks, tobacco, and gas only visits. While many of these players can trumpet leading c-store market share, these leads are shrinking lately, and they all have weaker emotional connection scores with customers. They get dinged by customers for inconsistency of experience between their locations and a lack of innovation in their offering.
- A tale of two divergent paths emerges between the Top Tier and Bottom Tier. The Top Tier is full of c-store chains that are increasingly blurring the lines between traditional C-Store offerings, QSR offerings, and Grocery offerings. Meanwhile, the Bottom Tier is slow to adapt what has worked for them in the past. The cost to retailers who do this is clear in our study.
- Within these Bottom Tier national franchise or independent models, however, are bright spots. Their decentralized operating models mean more variation in customer experiences across their brands, with a lower bottom end than corporate-run stores. However, this same decentralized approach has led to their top-end of customer experiences to be even better received than the top-end of Buc-ee’s customer experiences. This means that these Bottom Tier chains have extremely passionate, talented licensees or franchisees in their system they can learn from. The key will be operationalizing those learnings and making them accessible to their broader base of operators and licensees.
- The Pillar of Frictionless Transactions is especially important for c-store customers who view c-stores as meal destinations. ~30% of c-store customers say they usually visit a QSR within 30 minutes of leaving a c-store, and the QSR channel has been growing foot traffic the past 3 years, while the c-store channel has been flat. C-Stores that are meal destinations today have superior meal item variety to QSRs, a strength they can continue to lean into. But to stop the bleeding of meal missions to QSRs, they need to close a significant performance gap in Frictionless Transactions. Frictionless Transactions is the retailer’s ability to make it easy to customize meals, pull variety together into a meal, and place and pick-up orders whenever they want, however they want.
- Top Tier C-Store Retailers have superior personalization engines to Bottom Tier retailers. They are driving greater app adoption (33% of their customers use their app v 19% for bottom-tier), greater loyalty program adoptions (51% v 30%). These are two critical sources of data for delivering a personalized and, therefore, frictionless experience. Additionally, 1 in 5 of their customers made purchases by ordering ahead, versus only 1 in 10 Bottom Tier retailers. However, compared to QSRs, even the leading C-Stores lag on these measures.
- Grocery store operators not in the c-store business today have assets that pure c-store players don’t. The prospect of their entry should be motivation enough to keep c-stores innovating. Walmart, Safeway, Hy-Vee and, GetGo – until only very recently owned and operated by Giant Eagle – all are in the Top Tier of the Convenience Store RPI. They have leveraged their unique grocery assets in different ways: driving quality, fresh food, and meal option differentiation from traditional c-stores; or, driving superior savings, especially in fuel, through their scale or through rewards programs benefits that can accumulate through broader grocery shopping behaviors. Their diversified businesses could also make it possible for them to subsidize their c-store chain growth and operations with other profit streams that traditional c-store operators can’t.