According to a January 2018 survey from orderTalk, an online ordering software provider, at least 45% of U.S. adults believe within the next 12 months, they will increase their use of online ordering, with nearly two-thirds of Americans already in the habit of ordering digitally via an app or website.
Today retail channels are banking that convenient delivery is needed to match consumers’ increasingly mobile lifestyles. The same orderTalk survey indicates that consumers would be happy to pay some kind of premium for a more convenient delivery option that is the result of an online transaction.
Change in convenience retail is led primarily by a growing proportion of the population living in urban areas, the rise of smaller households and aging populations. Furthermore, hyper-connected consumers increasingly are placing their trust in online ordering—especially in retailers who provide seamless convenience solutions.
Moreover, there are new convenience stores committed to bending the old rules, using technology as a cornerstone to compete with bigger chains and prodding convenience business models that aren’t as convenient as they claim to be.
If such stores might be considered up and comers, then Foxtrot Market is a new-age pack leader. Launched four years ago, Foxtrot Market currently operates four stores in Chicago. Its business model blends e-commerce, on-demand delivery and a striking brick-and-mortar experience to meet consumers’ shopping needs for quick, quality items and foodservice.
Foxtrot Market features local ingredients on its menu, artisanal items such as fresh pastries from neighborhood bakeries, a bevy of wines, microbrewed beers, healthy waters and other convenience category merchandise, and locally brewed coffee. The small chain also offers a selection of house-made sandwiches, salads and other foods.
At the heart of its operation, Foxtrot Market boasts enough Chi-town vibe to engage existing patrons and enough technological muscle to pull in new ones.
For the delivery side of the business, the company has both an app and website (foxtrotco.com) where customers can shop its entire selection. Foxtrot Market offers the same products online as it does in-store. Everything is available for on-demand delivery within an hour. Inventory is held at its retail locations so once an order is placed, it’s packed by store employees and then sent off with a member of the company’s courier team.
Foxtrot Market co-founders, CEO Michael LaVitola and Taylor Bloom, the company’s chief technology officer, originally crafted their business plan to function—and thrive—in an urban setting.
The burgeoning retailer now is ready to expand to more locations this year after raising $6 million in fresh financing. Foxtrot Market plans on opening at least four more locations in 2018, including a store outside of Illinois.
Still, the c-store and the city where it operates remain closely linked.
“I started the company while I was in business school here in Chicago. Our market thrives on being urban, with a lot of density, with a lot of walk-by traffic,” said LaVitola. “Chicago is great because of all the neighborhoods the concept works in. The denser the parts of town, the better for our delivery business.”
Though Foxtrot Market began as a corner online enterprise, the retail side of the business came on about two years later. That’s when the entrepreneurs began targeting brick-and-mortar space for expanding retail offerings. Now, company sales are split 50-50, both in-person and online, across all of its locations. LaVitola said the c-store chain is honing its capabilities to deliver more on customer expectations.
“From the perspective of leveraging the square footage we have, the brand we have and the inventory we have, online orders have been crucial for us,” said LaVitola.
“What we have done is try to figure out the items people want delivered on demand.”
To that end, the store focuses on stocking local versions of c-store staples: beer, ice cream, chips coffee and other items. The items can be purchased in person or online—then delivered to the customer’s location.
Increasingly, it’s the concept of delivery that retailers as small as Foxtrot Market or as large as Amazon are trying to implement successfully.
John Matthews, president and CEO of Gray Cat Enterprises, a planning and marketing services firm, was once vice president of marketing for White Hen Pantry during its heyday before it was sold to 7-Eleven in 2006. A Chicago-based operation that eventually expanded to 300 stores, it gained many loyal customers more for its fresh food and deli operations than typical convenience store offerings.
This focus on foodservice operations and bulk deli propelled its gross profit percentage significantly higher than industry averages.
Delivery was also part of its operation, albeit with limited success.
“While I was at White Hen—nearly 15 years ago—we had a number of delivery companies reach out to us and ask if they could deliver our food,” Matthews said. “Because of logistical challenges and cost, none of them could pull it off.”
Regarding Foxtrot Market’s model, Matthews said “a niche marketer may be able to manage Lincoln Park, Ill., but hard to expand.”
While the retail landscape has changed a great deal since White Hen ruled the roost, Bloom is confident what is working in Chicago can succeed in many metropolitan areas such as Austin, Denver or Pittsburgh. One advantage Bloom said is Foxtrot Market handles all deliveries in-house with a courier segment the company controls. There are no third-party delivery partners.
“What we really hit on with Foxtrot, the same people who want their groceries delivered or their meals delivered, want their convenience items delivered. They want that convenience factor,” said Bloom, who was 23 when he met LaVitola at the University of Texas in Austin when he was studying for his Master’s in computer science.
In the early days, customers were forgiving of mistakes, Bloom said. They were just happy to use an app and have a bottle of wine arrive at their door. Today, customer expectations have grown, so Foxtrot Market has had to become faster and more efficient. The result is the c-store is more advanced in its online ordering solutions than many of its competitors.
The goal is still to become even better in both service and customer-centric strategies that have been developed in-house.
“We have a ton of tools around the order-fulfillment and delivery side,” Bloom said. “So, we have an inventory management system that we’ve written internally. When an order comes in, it’s routed to one of four stores, based on geography. Within 30 seconds of the order coming in, they have already started working on it.”
Bloom has developed technological tools to ensure that orders are correct and get out on time.
To handle mobile payments, Foxtrot Market relies on Braintree, a division of PayPal, a company based in Chicago that specializes in mobile and web payment systems for e-commerce companies.
On the delivery side, the company found that third-party vendors couldn’t grab products and deliver them in a timely manner. Also, there was less control over quality and how the delivery person interacted with customers. It was two years ago that Foxtrot Market developed its own delivery platform. Since then, customer satisfaction levels have spiked.
Gary Stibel, founder & CEO of the New England Consulting Group, is familiar with Foxtrot Market’s operation and said the small retailer is doing many things right in terms of “new convenience.” He said online ordering and delivery should be a critical consideration of the entire c-store channel, especially since few convenience retailers today have the capability to do it effectively.
“All the smart money is testing something,” said Stibel. “They should have been testing something five or 10 years ago. What Foxtrot is doing that we think is smart is using their own delivery. Most of the c-stores in their tests are using third-party delivery. Third-party delivery is yesterday because it’s expensive, it takes more time. That’s the reason Domino’s works better than Pizza Hut.”
TESTING ONE, TWO, THREE
A small fraction of large c-store chains are testing delivery—and all are using third-party delivery companies.
Wawa in January 2018 expanded its delivery service partnership with Grubhub to select locations in New Jersey. The service is available in parts of Pennsylvania. Wawa, which this past April became the first convenience store to be voted the best sandwich shop in the U.S. in Market Force Information’s annual survey, has yet to announce a major rollout of the delivery program.
Another convenience retailer that is joining with Grubhub is Pittsburgh-based GetGo. Giant Eagle’s convenience store chain has started a pilot program with Grubhub to offer delivery of its meal options in a handful of Pittsburgh locations, the Pittsburgh Post-Gazette reported. GetGo will also trial UberEats at a Columbus, Ohio, location. For either service, a $3 fee is tacked on for delivery.
Earlier this year QuikTrip Corp. began testing delivery through Uber Eats at a few of its Oklahoma locations.
Late last year, 7-Eleven Inc. began testing on-demand ordering for delivery or in-store pickup at select Dallas stores with its new 7-ElevenNow smartphone app. The company chose to partner with on-demand delivery provider DoorDash to allow consumers in a few major markets including Chicago, New York City and Los Angeles to order goods directly from their smartphones. As the industry’s largest c-store retailer beefs up its online ordering presence, 7-Eleven seemingly is searching for different avenues to stay ahead of the convenience curve.
In the March 2018 edition of Convenience Store Decisions, Gurmeet Singh, 7-Eleven’s chief digital officer and chief information officer, explained how the Irving, Texas-based company is preparing to roll out the delivery platform to other U.S. locations this year.
“That’s why at 7-Eleven, we want to redefine convenience through software,” Singh said at that time. “We strive to be in the ecosystem of our customers in order to serve their needs in an effortless way. With the 7-ElevenNOW app, customers in the Dallas area can expect a real-time view into available inventory, deliver beer to their door or have wine prepped for pick-up, and even earn 7-Eleven reward points. The new app allows us to reach our customers in a seamless, effortless and delightful way.”
MEANS TO AN END
Mobile app usage and online ordering for meals jumped 18% in 2017, and now grabs 1.9 billion foodservice visits, according to the NPD Group.
To prepare for such as trend, Panera Bread Co., which in the last few years has spent about $150 million on technology that underpins delivery and other services, has built its own U.S. delivery service. It hired 10,000 drivers in 2017 and announced it’s on track to do the same in 2018.
Panera is just one example of a retailer that is developing different delivery systems.
Walmart announced it is installing 500 additional pick-up towers, giving access to about 40% of all Americans to the retailer’s offerings.
On a smaller scale, at least one company is looking at a new revenue stream as part of what experts term rideshare commerce. Coca-Cola has started sampling its Glaceau Smartwater through Cargo, an in-car commerce platform, according to a recent Market Daily report. The sampling will happen in Lyft and Uber cars in Atlanta. Currently, Cargo is in Boston, Chicago, Minneapolis, New York and Washington, D.C.
Of course pick-up towers and Coke products in the console of an Uber ride are one thing. Retailers that pride themselves as being on the cutting edge of disruption are taking the traditional concept of delivery to a different level.
At a time when foodservice providers will deliver food, drinks and other items to a residence, Domino’s Pizza is ensuring consumers don’t even have to be home. The pizza company this past April announced it is adding online ordering for more than 150,000 new delivery “hotspots,” which include U.S. parks, public beaches and other locations that don’t have traditional addresses. So, if you want a pepperoni pie during a break from jet skiing, it’s just a phone call away.
Amazon hasn’t hit the beach yet, but it’s waging a delivery war on the other retail channels in new and unique ways. Its newest initiative allows Prime patrons in dozens of U.S. cities to get their Amazon orders delivered to a parked vehicle, provided their vehicle has the proper technology. With a few taps on a smartphone screen, the courier can unlock the car and drop the parcel inside the trunk or on the back seat.
While these new delivery systems are grabbing headlines, Matt Sargent, senior vice president of retail at Frank N. Magid Associates Inc., a research-based strategic consulting company based in Minneapolis, said c-stores still deliver convenience, which is proven every time a customer goes into a store to grab a sandwich or tobacco product. It’s the digital age of delivery that c-stores must plan for.
“Digital-(driven) delivery for convenience stores is a challenge. Convenience stores have traditionally filled the gap when immediacy trumped the need for broad assortment and value,” said Sargent. “Amazon Prime Now addresses both immediacy and broad assortment, which calls into question the value of c-store digital offerings. Better for a convenience store to partner with a digital player like Amazon and Walmart and determine how to work in partnership rather than compete against these types of players.”