Industry Insights & Trends

Innovations Currently Disrupting the Convenience Store and/or Quick-Service Restaurant Industries

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Automated checkout, delivery-only venues and contactless customer experiences are three innovations that are currently disrupting the convenience store and/or quick-service restaurant industries.

1. Automated Checkout: Amazon Go

Automated Checkout

  • Specifically within the convenience store sector, 7-Eleven’s test of “cashierless stores” and Circle K’s pilot of an “autonomous checkout experience” are two of the most recent demonstrations of this automated checkout trend.
  • However, Amazon and its Amazon Go concept is perhaps the most visible and disruptive example of this industry innovation in practice, with Amazon announcing plans to open roughly 3,000 of these cashier-less stores by 2021.
  • Notably, Amazon Go stores fall into the “tracked-as-you-go” category of automation with their Just Walk Out Shopping concept, which uses “computer vision, sensor fusion, and deep learning” to automatically detect when consumers take/return products and subsequently bill consumers after they leave the store.
  • Unlike other automated checkout concepts, Amazon Go enables customers to shop with “no lines and no checkout” at all.
  • Despite some early indications that Amazon Go was less successful and/or was too costly at a price of $224 million for 56 Amazon Go locations, customers, industry analysts and Amazon have subsequently reported that the concept is a tremendous success.
  • Amid customer reports that Amazon Go is an “amazing experience” and analyst assertions that Amazon Go is an industry “game changer,” Amazon is reporting that shoppers are spending an average of 50% more at Amazon Go locations versus typical convenience stores.

2. Delivery-Only: Ghost Kitchens

  • The concept of delivery-only was similarly identified as a significant innovation in the retail industry, particularly within the quick-service restaurant (QSR) sector, based on reporting of delivery-only as a “key innovation reshaping the future of QSRs” and retail overall by industry experts (e.g., The New York Times, The Washington Post, QSR Web, QSR Magazine, PYMNTS, Medium).
  • Delivery-only refers to the establishment of a food or other operation without providing a space for on-site consumer interaction, based on the assumption that all procured goods will be directly delivered to the customer rather than picked-up or enjoyed on-site.
  • Within the quick-service restaurant sector, delivery-only can take the form of “ghost kitchens, dark kitchens, virtual restaurants and cloud kitchens,” however The New York Times asserts that the two most popular formats for delivery-only QSRs are virtual restaurants (which are connected to full-service restaurants but produce delivery-specific products) and ghost kitchens (which are essentially a meal preparation hub with no retail presence).
  • Notably, these delivery-only models enable existing as well as new restaurant concepts to build their businesses without the “hassle and expense” of new waiters, furniture or retail space.
  • In particular, ghost kitchens are becoming increasingly popular among a wide variety of established QSRs (e.g., Quiznos, Aloha Poke and Wetzel’s Pretzels) as well as new market entrants.
  • Although the current coronavirus pandemic has helped catalyze the popularity of this delivery-only format, Technomic predicts that sales via ghost restaurants in the US will continue to rise by a 25% CAGR through 2025, while Euromonitor predicts that ghost kitchens will exceed $1 trillion in revenue by 2030.
  • In parallel, Reforming Retail asserts that these delivery-only concepts have the potential to substantially improve QSR margins, including by eliminating cash shrinkage (3-8% revenue/margin increase), facilitating better demand forecasting (5% margin efficiency) and improving customer pricing/promotions (5-10% revenue increase).

3. Contactless Experience: Papa John’s

  • Finally, contactless customer experiences were selected as another major innovation in the retail space, per discussion across retail trades (e.g., Total Retail, Convenience Store News, QSR Web) and among other industry experts (e.g., Gladly, Experian, Medium).
  • Notably, the contactless customer experience in retail is currently developing along a variety of pathways, including:
    • Ecommerce, and exclusively online retailers, which eliminate all physical contact between the retailer and customer through online purchase and home delivery.
    • Buy online, pick up in store (BOPIS), which enables customers to shop and pay for goods without entering a store.
    • Curbside pickup, which allows customers to select, purchase and even pick up goods by visiting but not entering a retail location.
    • Contactless payment, in the form of tap-to-pay or mobile payment, which reduces contact in high-contact checkout areas.
  • These offerings are appreciated by customers not only as a safety measure amid the pandemic, but as a key innovation in convenience and service.
  • As such, contactless experiences are emerging as a significant innovation and differentiator among retailers, including both convenience stores (e.g., 7-Eleven) and quick-service restaurants (e.g., McDonald’s).
  • Moreover, brands such as Papa John’s are leading this industry innovation by deploying end-to-end contactless experiences for their customers.
  • Specifically, Papa John’s “No Contact Delivery” program eliminates all physical contact between customers and the QSR by incorporating online ordering (through the website or mobile app), the application of Quality Seals to all products (which are not handled/touched by a person after they are put into an oven), the delivery of the product outside of the customer’s location and the resolution of all billing/tips through contactless payment formats.
  • Meanwhile, Papa John’s has reported five straight quarters of double-digit same-sales growth, and CEO Rob Lynch has accredited the pizza chain’s recent success in part to its implementation of such a robust and all-inclusive contactless experience for customers.
GLENN TREVOR
Glenn is the Lead Operations Research Analyst at Simple Manifestation with experience in research, statistical data analysis and interview techniques. A holder of degree in Economics. A true specialist in quantitative and qualitative research.

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