Credit cards that were once seen as an evolution in transaction management are now chip-based, proximity-based, app-based, even wearable.

Take a look out your window. It’s clear the weather is changing, signaling one thing: 2019 is coming to an end. As we tie up loose ends for the year, let’s take a look at some of the key trends that impacted international convenience retail over the past year and how they inform our future.

Consolidation

Recent merger and acquisition activity has been unprecedented both domestically and internationally. Global consolidation since 2000 has resulted in a 55% decline in US wholesalers. To put this in perspective, wholesalers are closing shop at a rate of one a day.

Retailers are also far from immune to the effects of consolidation. This year, for the first time since 2009, retailers saw a decline in total sites. This decline largely impacts single-store operations and smaller chains, as large corporations continue to grow. Looking at the same situation globally, 3 of the 5 largest convenience retailers in the US are owned by companies headquartered outside of the US.

Consolidation is not without its unique challenges. Integrating human resources, aligning inventory, expanding back-office accounting. Working each challenge piecemeal is inefficient. Instead, unify your operation with a capable, scalable ERP solution.

Revenue Growth

While M&A activity has proven to be somewhat volatile, revenue growth remained consistently positive. Fuel led the charge in revenue growth in 2018, increasing 13.6% and adding a penny and a half per gallon to margins. Diesel recovered in 2018, up 7 cents per gallon after a decline of a couple of pennies in 2017. Important to note is that revenue growth came not as a result of demand, but as a result of street prices and increased margins.

Inside the store, transactions were down 5.8%, but aggregate sales per customer went up. This is great news, as consumers are purchasing more per visit. Consumer confidence is also increasing: 32% of customers feel that c-stores are now offering more prepared food, and 19% feel they are selling healthy food. Retailers who want to take advantage of customer expectations and their preparedness to spend more need to offer more and better food choices. It may also be time to invest in loyalty programs. According to the 2019 C-Store Shopper Report, Loyalty program members spend 29% more per visit than nonmembers. Fifty-seven percent are likely to make a store visit each time they gas up, 42% more likely to do than nonmembers.

Complexity in Labor

Onsite labor makes up a resource in convenience retail that is becoming increasingly complex. This complexity in labor makes it more expensive to distribute fuel. In retail, wages went up 4%. While that number does impact margins, the impact is less than it was in previous years. More good news: Costly turnover is down 3 points to 118% marking the second year in a row of declining turnover. This is still almost twice the turnover rate of the rest of the retail industry, but an encouraging change nonetheless.

While many of these workforce trends are unavoidable, c-store retailers should focus on what they can control. Investing in data-driven labor management software can inform the company’s hiring strategy, reduce overtime, optimize staffing levels based on transaction data, identify time-of-year turnover spikes and more.

Regulatory Uncertainty

No wholesaler or retailer on the globe is exempt from regulatory pressures. While some factors such as traditional tobacco products and alcohol remain somewhat constant, other regulated entities evolve as the technological landscape continues to change. Alternative fuels like hydrogen and biofuel as well as fuel alternatives such as electric vehicles (EV) and plug-in hybrid electric vehicles (PHEV) result in brand new legislation even as they make some legislation related to fossil fuel and pollution irrelevant.

Payment Space

Payment solutions at retail stores were at one time a simple dichotomy: paper money or plastic credit that could be transferred by hand. Retailers now manage these forms of payment in a variety of electronic formats. The very credit cards that were once seen as an evolution in transaction management are now chip-based, proximity-based, app-based, even wearable. Similarly, customers present electronic coupons and “e-wallets” with uncompromising expectation. Looking ahead, retailers can be proactive by implementing frictionless technology. This evolution provides a superior customer experience, and it positions c-store retailers to compete head-to-head with otherwise very powerful disruptors.

New Retail

Changes in payment space make up just one aspect of what is being termed “new retail.” This omnichannel method of interaction with customers combines virtual store visits with real visits. To remain relevant, retailers must be savvy in both the digital space as well as in their brick and mortar establishments, marrying the two channels in a seamless customer experience. Key interactions now take place virtually rather than face-to-face. Consumers may now walk into a store and complete a transaction without any human interaction whatsoever.

Growth in Foodservice

Foodservice is an area of convenience retail that continues to see growth year over year. No longer is c-store foodservice relegated only to candy and beverages. Fresh and prepared food preparation in convenience retail has exploded in recent years. International retail is leading the way when it comes to uncompromisingly healthy choices and choices that are not only acceptable, but desirable, even to the vegan/vegetarian shopper. Retailers around the world are now starting to be perceived as advocates of good health.

What’s Ahead?

We cannot observe trends without giving a nod to what’s ahead. Artificial intelligence, already a very real presence in retail in general, will continue to permeate convenience retail and wholesale. Also on the horizon: “cloud kitchens” that will simply consist of cold storage and food preparation tools of a scale to serve thousands of nearby households within 10 minutes.

Regardless of your outfit’s size and wherever you may be on the trend wave, PDI is there to help.

Did You Know: Your Source for PDI News provided by PDI, the leader in enterprise management software for the convenience retail and petroleum wholesale markets.