December 2021

Feature

Delivering Convenience

Third-party providers bring new consumers to c-stores but at a cost.
Terri Allan

Over the past year and a half, the c-store chain Casey’s has partnered with third-party food delivery companies, supplementing its own in-house driver program as at-home demand for its pizza and other foodservice items surged during the COVID-19 pandemic. According to Art Sebastian, vice president, digital experience at the Iowa-based company, the partnerships “have been going very well for us as we’re working hard to meet our guests’ needs.” Leveraging third-party delivery providers “is helping to add to our scale, allowing us to move quickly and to meet growing demand,” Sebastian said.

On-demand orders have indeed been on the rise in recent years, with all sorts of retail and restaurant businesses benefiting. According to the NACS “Last Mile Fulfillment in Convenience Retail” report released last year, 46% of North American c-stores offer mobile ordering for delivery to alternate locations, such as homes or offices. Of those that do provide off-premise delivery, half employ more than one platform, including the likes of DoorDash, Uber Eats and Grubhub, as well as own-store delivery, the survey found.

The growth in the marketplace delivery landscape has been stellar in recent years. DoorDash, for example, reported that its second-quarter 2021 revenue increased 83% over the year prior to $1.2 billion. Uber Eats, meanwhile, continues to be buttressed, with its acquisition of Postmates in 2020 and Drizly, an on-demand alcohol delivery service, earlier this fall. DoorDash has expanded its sales opportunity by recently launching the DoubleDash function, which allows app users to add items to their orders from select nearby stores, including c-stores. Among the c-stores reportedly featured on DoubleDash are 7-Eleven, Casey’s, Wawa and QuickChek.

Pandemic Push

“Incorporating DoorDash and other third-party providers is a great opportunity to tap into a segment of customers that convenience stores may not otherwise reach,” said Jim Rastetter, category manager at GPM Investments LLC, parent to chains including E-Z Mart, Scotchman and Apple Market. GPM has partnered with DoorDash since July 2020, and according to Rastetter, “Our relationship allowed us to serve individuals who were nervous to enter stores during the height of the pandemic, as well as those quarantined at home.” At the time of this writing, Rastetter said the company is in talks with other third-party providers “for potential projects.”

Incorporating third-party providers is a great opportunity to tap into a segment of customers that convenience stores may not otherwise reach.

Chicagoland’s PRIDE Stores has partnered with Uber Eats for about three years to deliver food from the company’s Urban Counter and Taco Urbano eateries. Arrangements with Grubhub and DoorDash were added this summer, owner Mario Spina reported. He described overall results of the partnerships as “not bad. The biggest issue has been the high fees.” Spina added that he has seen an improvement in the delivery providers’ models since first teaming up with them, including the ability to track drivers’ routes. The retailer is hoping to put his own mobile ordering and delivery program, including own-store delivery, in place in 2022. Once that’s up and running, he plans to use the third-party platforms as marketing tools.

Casey’s has partnered with DoorDash since 2020 and earlier this year added Uber Eats. According to Sebastian, the DoorDash partnership started with its marketplace platform, and this summer expanded to include the white-label program, DoorDash Drive, whereby orders are placed and processed through Casey’s, with deliveries carried out by DoorDash.

“We’re seeing tremendous traction,” he saidof the white-label program just four months after its inception. At press time, the c-store chain had just added DoubleDash to its on-demand offerings following a successful pilot program. “We’ve seen incremental orders,” Sebastian reported, although average order value has been smaller than that of other on-demand orders.

Challenges Abound

Still, according to the NACS Last Mile report, only 61% of retailers are satisfied with their third-party delivery partners. Concerns include high fees, little access to consumer data, difficulties delivering age-restricted products and service and operational issues.

“In the c-store world, consumers aren’t generally ordering high-cost items,” remarked Patrick Loftus, survey research and data visualization manager at NACS. “When a meal is ordered from
a restaurant for a family of four, there may be more of a willingness to pay high delivery costs, but for the small basket sizes at c-stores, there may be less of a willingness.”

Spina expressed concern about high commission fees as well and believes that as the platforms expand into merchandise ordering and delivery, the charges may negate retailer margins. He pointed to products like beer and wine, with margins of about 25%, and questioned the practicality of paying a 30% fee to the delivery provider. “While I understand that people are looking for convenience today, the price structure is high,” he said. For larger operators like Casey’s, however, the fees aren’t as much of a factor. Sebastian cited the chain’s “economic model and scale” when negotiating with the marketplaces.


Source: NACS Last Mile Fulfillment in Convenience Retail Report, www.convenience.org/lastmile.

Loftus said that little access to customer data for orders placed on the third-party platforms has “big long-term ramifications. As a retailer, you want information about your customer. Little access to that data doesn’t make for a great partnership,” he said. Relatedly, Loftus pointed to concerns over data security. “As customers are paying with credit and debit cards, their information is floating around. Retailers can be concerned about how secure the platform is. They don’t want to be blamed for any breach.”

At the 2021 NACS Show, retailers debated the challenges of using delivery services. “With so many orders online, I want people to say, ‘I ordered from The Hub,’” Jared Scheeler, NACS 2021-22 chairman and CEO of The Hub Convenience Stores, said during a general session panel with NACS President and CEO Henry Armour and Kevin Smartt, 2020-21 NACS chairman and CEO and president of TXB Stores (Texas Born). “But today they are saying, ‘I ordered from DoorDash,’ and we need to change that.”

Percentage of stores in North America, Europe and Australia that currently offer last-mile fulfillment services.


Given that some delivery service providers are more regional in nature, the delivery services used vary considerably between North America, Europe and Australia. North American stores are more likely to use their own staff (48%) or DoorDash (33%) for delivery. Retailers in Europe and Australia are more likely to use Uber Eats (74%) and Deliveroo (53%). Other delivery options retailers are partnering with include smaller players such as Glovo, Hugo, Vroom and WAITR.

Source: NACS Last Mile Fulfillment in Convenience Retail Report, www.convenience.org/lastmile.

Smartt said that convenience retailers need to act now to protect their data from third-party delivery providers. “The most important point for the industry is we do not want DoorDash and those third-party companies owning our data,” he said. “And we need to come together as an industry and get it in our contracts that we own the data, not them.”

Third-party delivery platforms also bring other service and operational challenges. “When a delivery provider arrives late to the store for a pickup, who gets blamed?” asked Loftus. “It can often be the retailer.” Rastetter agreed, adding, “Delivery times can always be improved. Long delivery times can lead to a negative customer experience.” To address the issue, GPM is working with DoorDash to adjust available delivery times for stores, expanding or contracting delivery areas around a store and keeping products in stock to reduce cancellations, he said. At Casey’s, the partnerships have given rise to some operational challenges, Sebastian said. “Picking, staging and merging items is new to our team members,” he noted, while managing differing product temperature states—ranging from hot to frozen—also requires training.

Here to Stay

Despite the challenges, c-stores continue to partner with third-party delivery providers. For some, it may be due to “fear of being left behind as others get into it,” Loftus noted. He advised retailers to negotiate access to data when forming a partnership. Also, “don’t run into delivery too quickly,” he said. “There are a lot of options out there. Do your due diligence.”

One solution for some retailers is the white-label model, like Casey’s uses with DoorDash Drive.

“White-label delivery is more accessible for retailers,” said John Nelson, CEO of Vroom Delivery—a platform partnered with DoorDash Drive—and eases some retailer pain points. “It’s cheaper for retailers,” he explained, with an average fee of about $6 on an average basket of $40, most of which is passed along to the consumer. In addition, with white-label platforms, “the provider doesn’t know about the end user. They don’t know basket information,” Nelson continued. “They only act as a fulfillment partner.”

Regardless of the model, retailers and marketplace providers agree that on-demand delivery isn’t going away. According to Sebastian, “the need state of delivery will continue to grow, and c-stores will have to figure out their approach. Delivering convenience and addressing our guests’ needs makes business sense.”

Age-Restricted Products

Alcohol and tobacco provide their own challenges when it comes to the digital marketplace. “State regulations around age-restricted products differ, so it’s important that we have partners who are able to deliver in states where we operate,” said Raghu Mahadevan, senior vice president, digital, at 7-Eleven, which partners with both Instacart and Minibar Delivery for on-demand beer and wine delivery in select markets. The partnership with Minibar—which only offers the platform for alcohol orders, with delivery handled by the stores or outsourced to others—launched over the summer.

“So far, we’ve been very excited about early results,” said Mahadevan. The platform’s “Snacks & More” option allows users to tack on other convenience items. “Salty snacks like chips, popcorn and mixed nuts have been especially popular with our customers thus far,” the 7-Eleven executive noted.

Lindsey Andrews, Drizly CEO and co-founder, added that the platform and its delivery provider partners work to comply with state and local laws. Upon checking out, for example, a user receives a pop-up message that a $20 restocking fee will be rendered if the government identification used when ordering doesn’t match that at delivery. “Hopefully, that’s a monetary disincentive,” she said.

Beyond users, Mahadevan noted that 7-Eleven relies upon the delivery platform “to ensure that the person in store collecting the items are over the age of 21.” (NACS’s new TruAge™ digital identification solution enhances age verification, including for online ordering and home delivery usage. For more info on TruAge visit www.convenience.org/truage.)

GPM Investments LLC expanded its partnership with DoorDash this year to include alcohol delivery in Virginia. “So far, we’ve seen a great response,” remarked Jim Rastetter, category manager at GPM Investments. “We continue to see an increase in popularity week over week.” He also pointed to the challenges that come with on-demand delivery of licensed products. “In the state of Virginia, for example, each delivery sale containing alcohol must include the alcohol permit number for the location making the sale,” Rastetter said. “During the rollout, our team worked closely with DoorDash to research and outline the procedures specifically required.”

Terri Allan

Terri Allan is a New Jersey-based freelance writer, specializing in the beverage industry. She can be reached at terri4beer@aol.com and on Twitter at @terriallan.