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05/10/2021

The future of convenience stores

The co-directors of McGill University’s Retail Innovation Lab explore how new technologies and shifting consumer behaviours are converging to revolutionize the retail experience.
McGill Retail Innovation Lab frictionless check out

Over the last few years, retail has been in a state of profound transformation. The COVID-19 pandemic has strongly accelerated this transformation. Consumers are significantly changing what they buy and how they shop. They are better informed, price sensitive, and they are looking for convenience, personalization, and a seamless omni-channel experience. Consumers are also more focused on safety, health and well-being, protecting their privacy, promoting their local community, and environmentally conscious.

At the same time, we are witnessing unparalleled technological innovations through AI, robotics, and big data, just to name a few. These new technologies are allowing customers to experience frictionless retail and enhanced services, while allowing retailers to digitize and put in place effective omni-channel operations. 

This has led retail to become one of the most innovative sectors. This is not only due to the rise of Amazon, Alibaba and other digitally native players, but also to more traditional retailers such as Walmart, Nike, Lululemon and retail tech players like Shopify and Lightspeed.

As a result, convenience stores are being forced to adapt to these changes faster than ever before. This shift is also being accelerated by the fact that big convenience players, such as 7-Eleven and Alimentation Couche-Tard, are seeing fewer opportunities to grow through acquisitions and thus must find new ways to grow organically within their existing networks of stores. This involves not only the use of new technologies, but also shifting the culture, mindset, and processes to allow innovation to thrive. 

Greater convenience and the role of technology

We are witnessing a strong move to offer more convenience, ease of shopping and safety to consumers and employees. 

The first big trend is towards frictionless retail. In North America, Amazon Go has led the way. As for convenience stores, 7-Eleven started piloting mobile checkouts in 2018 in Dallas and is now available in Utah and New York. In February 2021, the company announced that it was testing its first cashierless store concept with an in-house custom-built technology.

Couche-Tard has also moved aggressively. They announced in 2020 that they were piloting touchless, autonomous checkouts in partnership with Standard Cognition. They currently have several pilot stores in Arizona. The technology leverages ceiling-mounted cameras with proprietary AI and computer vision software to associate each customer to the items they pick up. Couche-Tard has also partnered with McGill University to launch the first frictionless store in Canada in January 2021.

The key to these innovations is to identify key pain points along the customer journey. Beyond introducing innovations like curbside pick-up, other examples are

·     Simplifying the fuelling experience though license plate recognition of loyal customers. This allows customers to have the fuelling station identify them as they arrive, immediately prepare the fuelling station and debit automatically their payment.

·     Bringing the store out to customers. As customers are refuelling, they can buy products from a grab and go frictionless vending machine next to the fuelling station.

The front of the Retail Innovation Lab store

Product offering: Innovating with the times

Convenience stores are also experimenting and upgrading their product offering to align with consumer trends and new generations of consumers. 

As the pool of electric vehicles increases, convenience store operators are experimenting with the introduction of electric charging stations. We are also witnessing a number of different product innovations, such as:

·     Upgrading the standard product offering. For example, Couche-Tard has introduced higher-quality coffee with their new self-service coffee machines,

·     Building off the trend of local shopping by offering, for instance, locally craft beers and local specialties.

The Retail Innovation Lab (RIL) at McGill University

One setting that combines all the above elements is the RIL at McGill University, which opened in the heart of Downtown Montreal in January. The lab is a live, open and transactional convenience store environment. This allows Couche-Tard to work with leading edge academic researchers on areas such as, frictionless operations, artificial intelligence, sustainability innovations, and the trade-off between personalization and privacy. 

All these initiatives are showing that we are living in an exciting time for the future of convenience stores to take advantage of the new realities brought by shifting consumer demands and rapid technology advances. COVID-19 has substantially accelerated the need for change. Several players are testing and innovating to make customers’ lives easier and the shopping experience more personalized and frictionless.

head shots of Charles de Brabant and Prof. Maxime Cohen

Charles de Brabant is executive director, Bensadoun School of Retail Management, at McGill University. Prof. Maxime Cohen is associate professor of Retail Management and Operations Management and co-director, Retail Innovation Lab, at McGill University.

This article originally appeared in the May/June issue of Convenience Store News Canada.