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OUTMANEUVER UNCERTAINTY NOW NEXT
May 2020
RESPONDINGTO
ACRISIS
COVID-19 and the collapse of oil
prices offer the fuel and convenience
retail industry a defining moment
2
OUTMANEUVER
UNCERTAINTY
As the health and humanitarian impacts of the COVID-19
pandemic evolve, so do the business and economic
challenges. Organizations looking to balance their
immediate needs with longer-term opportunities will
see the trade-offs play out across three waves of
impact: the Now, the Next and the Never Normal.
The Now includes an emphasis on supporting people,
customers and suppliers. The Next will feature
refocusing the business to withstand new threats and
seize new opportunities. And the Never Normal will
require navigating rapid shifts in cultural norms, values
and behaviors.
This is the moment to reinvent business models and
reintegrate the value organizations provide into a new
societal landscape. The time to shape a mindset of bold
business transformation powered by new approaches to
technology and responsible leadership is underway.
Covid-19isaglobalcrisisthatiscontinuing
toevolve.Thetimelineandfullimplications
ofthiscrisisarenotknown.
Whatisknownisthatshort-termsolutions
wouldbeabletolastforlongerthan
expected,andlong-termconsumer
behaviorswillforeverbechangedwhenwe
reachtheend.
Sowhatstrategiesdofuelandconvenience
retailersshouldimplementnexttolimit
operationalissues,keepemployeesand
consumerssafe,andpositiontheir
businessesfor thenextwaveofchange?
3
The fuel and convenience retail industry has been no stranger to disruption.
Consumer habits are shifting from in-store to virtual purchases. New competitors are
emerging. Store consolidation is squeezing margins. With improved fuel efficiency,
the advent of electric vehicles, and an increase in ride-sharing, demand for motor fuel
has been on the decline.
Today, the fuel and convenience retail industry faces a critical inflection point. Two
main factors are accelerating industry disruption: the onset of COVID-19 driving a
substantial decrease in demand, and an increase in oil supply, triggering a significant
drop in oil prices.
While no industry group is fully insulated from the affect COVID-19 is having on all
markets, fuel-only providers can temporarily take advantage of high retail fuel
margins and low spot prices. As consumer demand decreases, higher margins may
minimize the immediate impact, but fuel-only providers will still experience long-term
effects. Fuel and convenience retailers, on the other hand, should commit to the
additional overhead that comes with owning or operating a c-store in both the near-
term and long-term.
So, what can fuel and convenience retailers do now—and next—to address critical,
immediate people-needs of their business? At the same time, how do they transition
through these challenging times to ensure their company thrives into the future?
Creative team: Replace image with
either color block or icons – Given
unique state of oil and gas industry,
it is not appropriate to include
image of people
Covid-19hasprofoundlydisrupted
fuelandconvenienceretail
4
5
Disruptorsimpactingbusinessoutcomes
Industry and consumer behavior disruptors COVID-19 is accelerating
Oil prices have shown
significant decline
An increase in oil supply led to a
significant drop in prices beginning
in mid-March 2020. Futures prices
have fallen to the lowest levels
since 2002, translating to gasoline
prices below $2/gallon. US fuel
rack-to-retail margins are at all-time
highs, with the average as high as
¢85/gallon.3
Operational costs are increasing faster
Labor costs have increased 8-10% year over year4
and continue to increase under the COVID-19
crisis. In 2019, direct store operating expenses
increased for the fourth consecutive year, wage
expenses increased 7.2%, and associate turnover
hit 121% year over year.5 The labor market is tight,
and the industry desperately requires investment
to attract and retain employees.
Fuel demand is declining faster
Global fuel demand was already declining, but
with COVID-19, fuel and convenience retailers are
reporting fuel volume declines of 40-60%.1 We
expect demand will continue to fall as consumer
travel has come to a near-halt around the world,
with effects lasting well into 2021.2
More consumers are
going inside the store
65-75% of consumers bought gas but
did not enter the convenience store
before COVID-19. Now stores are
seeing an increase in shoppers who
would normally go to supermarkets
for groceries. Consumers want quick
access to products, and stores have
experienced sales increases of 5%
during this outbreak.6
Demand for modern technology
is increasing
87% of consumers prefer to shop in
stores with touchless or convenient
self-checkout options, and COVID-19
is accelerating the consumer-
centric, quick, contact-limited
buying experience.7 We also expect
to see an increase in online and
mobile payments.
Demand for new, different
products is increasing
Consumers want convenience stores
to provide familiar products from
lower-cost brands and new products
not typically kept in stock. Product
types growing the most due to
COVID-19 include essentials,
packaged beverages, beer and
cigarettes. Hot beverage sales have
declined. 17
Interest in vehicle ownership
2020 car sales were estimated to fall 15.3% in the
U.S. and 12% globally. However, vehicle sales may
benefit from the lack of trust in public transit
brought on by COVID-19. Intent to purchase a new
car grew by 72% in China for those who did not
already own a car.8 An increase in vehicle
ownership will result in more trips to the pump and
c-stores. However, the industry impact is expected
to linger long after this crisis is over.
How will this
impact us?
6
7
AccentureanalysisshowsthattheUSfueland
convenienceretailindustrystandstoloseupto$10billion
thisyearduetoCOVID-19
In early March 2020, the COVID-19 pandemic caused a major shift in daily life across the US.
This led to a rapid decline in demand as a shock ran through the fuel and convenience retail
industry. An escalating series of events has led to a faster-than-anticipated demand
decline of 40-60% (Figure 1). At the same time, crude oil prices dropped significantly,
which has led to retail margins as high as 85 cpg for some operators.9, 10
While fuel demand is down, anecdotes point to merchandise revenue remaining flat over
this period. Looking ahead, we expect a shift in demand as consumers adapt to an
extended stay-at-home lifestyle and purchase fewer high-margin items inside stores.
Retailers should commit to getting ahead of this challenge by rethinking product mix,
marketing campaigns and purchasing channels as behaviors evolve.
As the next few months unfold, fuel and merchandise demand impacts are unknown, but
recovery scenarios can model the potential margin impacts (Figure 2). In an accelerated
recovery scenario (a V-shaped model), the pandemic is contained quickly, and demand
returns alongside summer travel increases. In an extended recovery scenario (a U-shaped
model), a slower return to normal periods will extend the potential impacts until late 3Q
2020.11
Impacts of these recovery scenarios will differ. But the most dramatic blows will be dealt to
businesses that do not have the benefit of full rack-to-retail margins. The potential impact
on these businesses could be up to 75% loss in margin throughout 2020. Optimizing
convenience store margin during times of volatile demand may buffer the impacts of shifts
in fuel sales patterns.
While the effects will be different for companies across the industry, it is critical for each
company to assess its own forecasted recovery scenarios and associated response.
Figure 1
Expected fuel volume demand destruction in 2020
US Fuel Gallon Comparison (Pre- and Post-COVID-19)*
Billion gallons
1Q2020 2Q2020 3Q2020 4Q2020
Baseline Fuel Gallons
V-Model Fuel Gallons
U-Model Fuel Gallons
40
30
20
10
0
Figure 2
Fuel and convenience store impact will be lessened by high fuel margins
and relatively sustained retail demand
US Total Margin Comparison (Pre- and Post-COVID)*
$Billion
1Q2020 2Q2020 3Q2020 4Q2020
Total U-Model Margin Total V-Model Margin Total Baseline Margin
$40
$30
$20
$10
$-
*See References section for data sources used in the Accenture analysis.
8
Demandgrowsforhealthandwellnessasneed-to-have
categoriesincrease
Segments CAGR (2019 v 2021)
Food & Grocery 2.5%
Health & Beauty 5.7%
Home 5.6%
Others -3.5%
COVID-19 impact: Significant growth for health and beauty as
consumers increase spending on OTC healthcare and personal care
products. Food and grocery segment (overall) grows as consumers
increase their spending on need-to-have categories—leading to a dip
in demand for tobacco products long-term (some have experienced
a short-term boost) and slower growth for prepared meals (For
prepared meals, 1.7% is the post-COVID-19 forecast, v/s 4% prior b/w
2019 v/s 2021) 13
The food and grocery segment would continue to dominate the product mix at c-stores. Post-COVID-19,
health and beauty will likely be the fastest-growing segment at a CAGR of 5.7% between 2019 and 2021.12
151 156 160 163 168
4.7
4.8
5.0 5.3
5.6
1.1
1.2
1.2
1.2
1.3
30
30
29 28
27
2017 2018 2019 2020 2021
Other
Home
CAGR (F) = 1.7%
Segment Market Size for C-Stores in US (US$ Bn)
187 192 196 198 202
Segments CAGR (2019 v 2021)
Tobacco -1%
Prepared meals 1.7%
Some key categories for c-stores will be negatively impacted
(degrowth or slower growth post-COVID-19)
Sources: Global data’s COVID-19 Impact Market Model – Consumer Goods. Global data’s Retail: Insights - Market Size By Product and Channel 2019. Accenture analysis.
Fourkeyareasforfuelsandconvenienceretailers
tofocusonnowandnext…
Fear of COVID-19 transmission has
increased consumers’ expectations
in availability of products, safety,
proximity of shopping locations and
their need for a sense of community.
Now is the time to provide a tailored
shopping experience that helps
consumers feel connected while
limiting risks by providing safe
interaction consistent with state and
local safety guidance.
SAFE,
CONTACT-LESS
EXPERIENCES
Enhance consumers’
in-store experiences
One of the best decisions you can
make is to invest in engaging your
consumers to build relationships that
drive loyalty. Plan to operationalize
your digital investments and foster
innovative partnerships so you can
enhance consumer engagement
through information sharing and a
two-way dialogue that can maximize
your efficiency and understanding of
their needs. The shopping experience
should no longer be limited to inside
the store.
IMPROVE
CONSUMER
ENGAGEMENT
Accelerate technology
investments to enhance digital
experiences
It has never been more important to
care for your employees, so they feel
safe at work and are inspired and
equipped to provide care and service
for your consumers. Invest in your
employees to build trust and loyalty—
key enablers to attract top employees
and keep the people who are the
backbone your consumers come to
rely on.
INVESTIN
EMPLOYEES
Build employee loyalty
The products and services
consumers want you to provide have
changed. We’re seeing increased
demand for essential items and a
shift away from traditional retail
stores toward online and
convenience stores. This provides an
opportunity for fuel and convenience
retailers to meet consumers’
evolving needs and provide a wide
array of products and services.
Meeting this need by rethinking
products and services will help build
consumer loyalty.
RETHINK
PRODUCTSAND
SERVICES
Meet evolving
consumer needs
9
…to address critical, immediate people needs and to prepare to thrive into the future
What do
we do?
10
Be aware of crisis Navigate the crisis Restore confidence
Expectations
• Enhance cleanliness to enable safe
shopping
• Reduce contact throughout the
shopping experience
• Communicate with consumers how
you will keep them safe
Enable growth
Expectations
• Stage 3+
• Launch enhanced products and
services based on conversations
with consumers for long-term
opportunities
C-store response
• Enforce heavy sanitization and
personal hygiene practices
C-store response
• Enforce heavy sanitization and
personal hygiene practices
• Modify store hours
• Instill delivery/curbside and store
window pickup
• Enhance mobile offerings to limit
contact
• Generate community support
C-store response
• Test new operations of business
and ongoing safety/sanitation
measures
• Analyze consumer behavior and
demand shifts
• Localize product portfolio
• Pilot new and enhanced services
C-store response
• Interim engagement stage—
reintroduce opportunity for
consumers to shop freely in new
service models with ongoing
monitoring of new baseline
• Continue reinforcing personal
hygiene and sanitization protocols
Expectations
• Stage 2+
• Begin shift in products and services
based on conversations with
consumers for quick-win
opportunities
Expectations
• Stage 1+
• Empathy and community caring as
part of global community
navigating a crisis together
NOW NEXT
Stage 1 Stage 2 Stage 3 Stage 4
WE ARE
HERE
Take immediate actions to focus
on safety while addressing
government guidelines.
Reimagine new ways of working
and how to serve consumers
while sustaining operations
during the crisis.
Establish new normal standards,
focusing on quick-win opportunities
that boost confidence
Transform the future of convenience
and grow consumer loyalty through
new and innovative offerings.
4stagesoftransition:
Navigatingwithsolutionsforconsumersandemployees
11
KEY AREAS
1. Mobilize an operational SWAT
team to oversee response,
monitor trends, communicate and
plan for upcoming situations.
2. Develop a mechanism to
evaluate current consumer
behavior and monitor shifts.
Understand which changes are
here to stay.
3. Establish a short-term
operational plan to address
government guidelines, customer
and employee safety, and your
plan to make products available to
consumers in need.
4. Develop a communications
strategy to demonstrate empathy
for consumers and employees. Be
transparent, and keep
stakeholders informed.
Stages1and2: Whattodoimmediately
ACTIONS TO CONSIDER
Safe and contact-less experiences
• Set up safety mechanisms and transition to curbside pickup, delivery, etc.
• Increase cleaning quality and quantity; reduce store hours to allow for more cleaning
• Enable mobile checkout and enhance apps with features that limit in-store contact
• Optimize placement to enable consumers to find and purchase high-demand products
• Reinstate attended fueling to reduce the number of people who touch the pump
Improve consumer engagement
• Announce operational changes and safety precautions on website and social media
• Use on-premise and social media to support COVID-19 public service announcements
• Show gratitude to first responders and healthcare workers with free drinks and snacks
• Shift your marketing narrative to focus on core values, community support, and an
emphasis on cleanliness and safety; ask consumers how you can support them
Invest in employees
• Increase hourly wages and/or provide incentive compensation to frontline workers
• Reduce in-person interaction through mobile technology and physical barriers
• Regularly monitor employee temperatures and well-being, and provide PPE
• Amend PTO policies to allow employees to support their families
• Release training in a digital format to prepare employees for changing responsibilities
Rethink products and services
• Cease food and beverage self-service and disallow reusable containers
• Expend essential product offerings (bread, milk, cleaning supplies, paper goods, etc.)
focusing on local sourcing where feasible; place in visible, quick-grab locations
• Shift to more private label and cost-conscious brands to help consumers financially
• Consider quick pick-up packages for truck drivers and fuel service for high-risk groups
Stage 1: Be aware of crisis
1. Consolidate operations and
support owners. Determine the
need for stores to go dark, share
resources and/or staff.
2. Develop localized community
support plans to help store
managers demonstrate empathy
and commitment to the community.
3. Enhance mobile offerings
to limit contact and ease consumer
fear. Enable new apps and
technologies to enhance employee
operations.
4. Reimagine how the
work gets done. Hire local
businesses to help with cleaning,
food service, marketing, etc.
Repurpose and retrain employees to
satisfy regulations and consumer
expectations.
Stage 2: Navigate the crisis
12
• Test new operations and ongoing
safety/sanitation measures
• Analyze consumer behavior and
demand as the market changes
• Assess localized efforts to determine
which should scale
• Pilot new and enhanced services that
provide quick-win benefits
Stage3:Restoreconfidence
INNOVATIONS TO CONSIDER
Safe and contact-less experiences
• Create new and innovative mobile app features to
enhance onsite experience (i.e. prepayment and
contactless fueling, purchase c-store products while at
the pump for curbside delivery, etc.)
• Install CCTVs and emergency buttons for safety
• Provide WiFi access, rapid device chargers, electricity to
power devices
• Scale out pickup and delivery services
• Provide lockers as a delivery option
• Install advanced barriers, such as a drive-thru window
• Consider a removable pump attachment that can be
cleaned and recycled
Invest in employees
• Continue to enhance their compensation and benefits
packages (e.g., permanent increases to hourly wages to
match market demands, providing health
insurance/medical benefits and paid time off to
employees)
• Develop an incremental increase package based on
performance and loyalty
• Provide tools and development options to build skills for
different divisions and management positions aligned to
specific career paths
• Build a company culture in which employees live the
company’s purpose and values—with leaders setting an
example for frontline employees
• Conduct engagement surveys, and put the results into
action
QUICK-WIN
CONSIDERATIONS
As you identify which opportunities could
have a significant effect on consumer
confidence, quickly—and with minimal
effort—consider:
• The potential shakeout across key
consumer groups
• Which infrastructure or tech building
blocks are in place to reduce time and
effort
• The return on investment now and in
the future (once expectations are set
with consumers)
Improve consumer engagement
• Develop marketing packages for franchise owners
• Create more targeted messaging based on consumer
segmentation and data to personalize the experience
and optimize demand generation
• Enhance marketing campaigns that provide transparency
into product sustainability and responsible supply chains
• Connect your loyalty program with the mobile app to send
targeted offer notifications
• Enhance your loyalty program with more ways to redeem
points and by encouraging behaviors you want to drive
• Partner with local businesses to enable reward sharing
• Partner with local businesses to enhance curbside pickup
and delivery as an alternative to local grocery stores
Rethink products and services
• Focus more on healthy, sustainable offerings, including
fresh produce and healthy snacks based on local consumer
preferences
• Introduce advanced soda/coffee dispensing that diversifies
product offerings
• Provide convenience hub services to create a one-stop
experience (e.g., dry cleaning, car wash, basic car services)
• Turn toward a more hyper-localized product assortment to
reduce risk in the supply chain
• Set up interactive digital displays for personalized
consumer interfaces
KEY AREAS
13
• Scale the quick wins you introduced in stage 3
• Identify new growth levers using simulation analytics to forecast
• Reintroduce consumers to shopping in a post-COVID-19 world
• With new service models in place, you can run structure experiments
and monitor to establish a new experience baseline
• Assess your largest opportunities to transform the business to drive
value—continually iterate to balance complexities and cost
• Develop an incremental release plan to implement the long-term
opportunities you identified and begin to execute
Stage4:Enablegrowth
Build for the future of convenience
Consumers
• Use look-alike modelling to identify the characteristics of your best
consumers
• Make incremental enhancements to your loyalty program to reward and
delight consumers by continually giving them new benefits to build a
sense of anticipation
Employees
• Build and test an employee loyalty program to boost productivity and
efficiency, help in reducing turnover costs and build a stable,
personalized consumer experience
Invest to drive loyalty
EMERGING INDUSTRY APPROACHES
On-demand fuel delivery
Across the industry, on-demand fuel delivery is becoming an option at home or
work
Contact-less payment
Applications have emerged that allow consumers to pay for fuel without leaving
their cars. Using geolocation, by scanning a QR code, or by inputting a code,
consumers can select their pump, fill up, and pay via their mobile wallets
LEADING EMPLOYEE PRACTICES
H-E-BTM
H-E-B offers tailored development plans to support employees who want to
grow within the company.14
Kwik TripTM
Kwik Trip has an ethical work culture with competitive compensation and
benefits. The company strives to inspire employees to live the company
mission—treating consumers how they want to be treated and making a
difference in their customers’ lives.15
QuikTripTM
QuikTrip offers competitive compensation, two weeks paid time off and an
option to purchase additional time off. It also pays 81% of health coverage and
has partnerships with doctors who provide services to employees.16
KEY AREAS
14
KEY TAKEAWAYS
• Prioritize which initiatives will create
a delightful consumer experience
and become part of daily life (rather
than a behavior that was out of
necessity due to guidelines during
the crisis)
• Determining which consumer
behaviors will stick is a combination
of the industry disruptors that
accelerated new behaviors, like
focusing on sanitation/safety, and
how positive the experience was for
the consumer during the crisis
• Convenience stores should consider
how they can improve the consumer
experience for those behaviors that
did have a high impact (like delivery
services and frictionless / contactless
fueling) to increase the likelihood that
they’ll becoming a permanent
behavior and drive consumer loyalty
INNOVATIONS TO CONSIDER
Safe and contact-less experiences
• Change the definition of convenience by providing
additional purchase channels such as smart home-
integrated ordering and automatic tank gauges/ordering
for both the consumer and store
• Use automation to enhance the convenience store
experience (self-checkout, walk-out technology, etc.)
• Create a subscription to allow consumers to opt-in to
products delivered on a regular basis, including fuel and
full-service fill-up to increase speed and reduce contact
• Drive efficient operations by implementing cloud-based
POS and back-office tech, smart energy management,
remote site management, real-time performance
technology and predictive asset management
• Create new experiences like entertainment, pop-up
events, and in-store bars to drive loyalty
Invest in employees
• Enable a digital employee experience and leverage
smart staffing methods
• Expand health and wellness benefits for employees
• Train employees on the skills they’ll need to provide
consumer experiences with new technologies
• Invest in technology to augment employee
responsibilities and make their jobs easier, more efficient
and safer
• Introduce a robust employee loyalty program based on
the lessons learned in Stage 3
Improve consumer engagement
• Incorporate augmented reality, extended shelves and self-
ordering kiosks to engage consumers in-store and remotely
• Enable omnichannel integration for a seamless experience
• Use recognition technology (biometric scanning, facial and
license plate recognition, connected car) to meet consumer
needs while providing more security and less contact
• Implement light-enabled beacon technology to share
information (when a fueling station is close, when products
are in stock or during promotions) and enable informed
decision making
• Demonstrate you know your consumers with personalized
digital menu boards and Bluetooth LE beacons/near-field
communications to connect with them
Rethink products and services
• Create no-contact gas stations to increase consumer
convenience and sustain cleanliness and safety
• Move toward sustainable packaging and healthy food
offerings that engage consumers in the experience
• Build on-demand fueling services where consumers need
them, enabled through the mobile app
• Consider providing alternative energy options, including
more EV charging stations, to increase c-store browsing
• Create automated fueling for connected, self-driving cars
• Enable robotic inventory management and floor tracking
sensors to understand consumer behavior
15
Stage4:Enablegrowthandprioritizewhatwillstick
Fuel and convenience retailers
must act now to address the far-
reaching implications of COVID-19
and the oil market impacts to
preserve the business and
ultimately enable growth.
16
FurtherCOVID-19rapidresponsearticlesavailableonAccenture.com
Channel Shift:
Prioritizing Digital
Commerce
5 new human truths
that experiences
need to address
Retailers serving
consumers on the
frontline
17
A one-two punch for
oil markets
Robert Raidt
Managing Director
Accenture Interactive
robert.raidt@accenture.com
Brian Gray
Managing Director
Energy
brian.d.gray@accenture.com
Questions?Let’schat
Jen Pritchard
Managing Director
Retail
j.pritchard@accenture.com
Matthew Strawn
Managing Director
Accenture Interactive
matthew.strawn@accenture.com
Jay Amburkar
Senior Manager
Consumer Goods and Services
jayasree.amburkar@accenture.com
18
References
1. “Annual Energy Outlook 2020 with projections to 2050”, January 2020, U.S. Energy Information Administration © 2020 U.S.
Energy Information Administration
2. “The One-Two Punch for Oil Markets”, April 1, 2020, Accenture, © 2020 Accenture https://www.accenture.com/us-
en/insights/energy/oil-markets-responding
3. OPIS, “Emergency Fuel Market Update”, March 30, 2020, IHS Markit © 2020 OPIS, IHS Markit
4. “Convenience Store Retail Trends: Year in Review & 2019 Outlook”, January 7, 2019, Convenience Store News © © 2020
EnsembleIQ, via Factiva
5. “Another Record year for Convenience Stores”, April 2, 2019 CPS Daily News © Winsight, LLC. 2020 via Factiva
6. Ibid1
7. Ibid 3
8. Ibid 3
9. OPIS, “Emergency Fuel Market Update”, March 30, 2020, IHS Markit © 2020 OPIS, IHS Markit
10. Ibid2
11. “It could take three years for the US economy to recover from COVID-19”, March 30, 2020, World Economic Forum © 2020
World Economic Forum
12. Global Data Consumer Intelligence Service 2020 © GlobalData Plc 2020, Accenture Analysis
13. Ibid12
14. https://www.heb.com/static-page/article-template/Learning-and-Development
15. https://jobs.kwiktrip.com/content/culture/
16. https://www.quiktrip.com/Jobs/Benefits
17. Steve Holtz, CSP Daily News, “First Look at COVID-19’s Effect on C-Store Sales”. March 24, 2020
18. NACS, “Convenience Retail Industry Pivots for Long-Term COVID-19 Impact”, April 14, 2020.
19
To help our clients navigate both the
human and business impact of COVID-19,
we’ve created a hub of all of our latest
thinking on a variety of topics.
Each topic highlights specific actions which
can be taken now, and what to consider next
as industries move towards a new normal.
From leadership essentials to ensuring
productivity for your employees and
customer service groups to building supply
chain resilience and much more, our hub
will be constantly updated. Check
back regularly for more insights.
VISIT OUR HUB HERE
20
DISCLAIMER: This document is intended for general informational
purposes only and does not take into account the reader’s specific
circumstances, and may not reflect the most current developments.
Accenture disclaims, to the fullest extent permitted by applicable
law, any and all liability for the accuracy and completeness of the
information in this presentation and for any acts or omissions made
based on such information. Accenture does not provide legal,
regulatory, audit, or tax advice. Readers are responsible for obtaining
such advice from their own legal counsel or other licensed
professionals.
Copyright © 2020 Accenture All rights reserved.
Accenture, its logo, and New Applied Now are trademarks of Accenture.
Accenture is a leading global professional services company,
providing a broad range of services and solutions in strategy,
consulting, digital, technology and operations. Combining
unmatched experience and specialized skills across more than 40
industries and all business functions—underpinned by the world’s
largest delivery network—Accenture works at the intersection of
business and technology to help clients improve their performance
and create sustainable value for their stakeholders. With 509,000
people serving clients in more than 120 countries, Accenture drives
innovation to improve the way the world works and lives.
Visit us at www.accenture.com
AboutAccenture
21

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Outmaneuver Uncertainty with COVID-19 Strategies

  • 1. OUTMANEUVER UNCERTAINTY NOW NEXT May 2020 RESPONDINGTO ACRISIS COVID-19 and the collapse of oil prices offer the fuel and convenience retail industry a defining moment
  • 2. 2 OUTMANEUVER UNCERTAINTY As the health and humanitarian impacts of the COVID-19 pandemic evolve, so do the business and economic challenges. Organizations looking to balance their immediate needs with longer-term opportunities will see the trade-offs play out across three waves of impact: the Now, the Next and the Never Normal. The Now includes an emphasis on supporting people, customers and suppliers. The Next will feature refocusing the business to withstand new threats and seize new opportunities. And the Never Normal will require navigating rapid shifts in cultural norms, values and behaviors. This is the moment to reinvent business models and reintegrate the value organizations provide into a new societal landscape. The time to shape a mindset of bold business transformation powered by new approaches to technology and responsible leadership is underway.
  • 4. The fuel and convenience retail industry has been no stranger to disruption. Consumer habits are shifting from in-store to virtual purchases. New competitors are emerging. Store consolidation is squeezing margins. With improved fuel efficiency, the advent of electric vehicles, and an increase in ride-sharing, demand for motor fuel has been on the decline. Today, the fuel and convenience retail industry faces a critical inflection point. Two main factors are accelerating industry disruption: the onset of COVID-19 driving a substantial decrease in demand, and an increase in oil supply, triggering a significant drop in oil prices. While no industry group is fully insulated from the affect COVID-19 is having on all markets, fuel-only providers can temporarily take advantage of high retail fuel margins and low spot prices. As consumer demand decreases, higher margins may minimize the immediate impact, but fuel-only providers will still experience long-term effects. Fuel and convenience retailers, on the other hand, should commit to the additional overhead that comes with owning or operating a c-store in both the near- term and long-term. So, what can fuel and convenience retailers do now—and next—to address critical, immediate people-needs of their business? At the same time, how do they transition through these challenging times to ensure their company thrives into the future? Creative team: Replace image with either color block or icons – Given unique state of oil and gas industry, it is not appropriate to include image of people Covid-19hasprofoundlydisrupted fuelandconvenienceretail 4
  • 5. 5 Disruptorsimpactingbusinessoutcomes Industry and consumer behavior disruptors COVID-19 is accelerating Oil prices have shown significant decline An increase in oil supply led to a significant drop in prices beginning in mid-March 2020. Futures prices have fallen to the lowest levels since 2002, translating to gasoline prices below $2/gallon. US fuel rack-to-retail margins are at all-time highs, with the average as high as ¢85/gallon.3 Operational costs are increasing faster Labor costs have increased 8-10% year over year4 and continue to increase under the COVID-19 crisis. In 2019, direct store operating expenses increased for the fourth consecutive year, wage expenses increased 7.2%, and associate turnover hit 121% year over year.5 The labor market is tight, and the industry desperately requires investment to attract and retain employees. Fuel demand is declining faster Global fuel demand was already declining, but with COVID-19, fuel and convenience retailers are reporting fuel volume declines of 40-60%.1 We expect demand will continue to fall as consumer travel has come to a near-halt around the world, with effects lasting well into 2021.2 More consumers are going inside the store 65-75% of consumers bought gas but did not enter the convenience store before COVID-19. Now stores are seeing an increase in shoppers who would normally go to supermarkets for groceries. Consumers want quick access to products, and stores have experienced sales increases of 5% during this outbreak.6 Demand for modern technology is increasing 87% of consumers prefer to shop in stores with touchless or convenient self-checkout options, and COVID-19 is accelerating the consumer- centric, quick, contact-limited buying experience.7 We also expect to see an increase in online and mobile payments. Demand for new, different products is increasing Consumers want convenience stores to provide familiar products from lower-cost brands and new products not typically kept in stock. Product types growing the most due to COVID-19 include essentials, packaged beverages, beer and cigarettes. Hot beverage sales have declined. 17 Interest in vehicle ownership 2020 car sales were estimated to fall 15.3% in the U.S. and 12% globally. However, vehicle sales may benefit from the lack of trust in public transit brought on by COVID-19. Intent to purchase a new car grew by 72% in China for those who did not already own a car.8 An increase in vehicle ownership will result in more trips to the pump and c-stores. However, the industry impact is expected to linger long after this crisis is over.
  • 7. 7 AccentureanalysisshowsthattheUSfueland convenienceretailindustrystandstoloseupto$10billion thisyearduetoCOVID-19 In early March 2020, the COVID-19 pandemic caused a major shift in daily life across the US. This led to a rapid decline in demand as a shock ran through the fuel and convenience retail industry. An escalating series of events has led to a faster-than-anticipated demand decline of 40-60% (Figure 1). At the same time, crude oil prices dropped significantly, which has led to retail margins as high as 85 cpg for some operators.9, 10 While fuel demand is down, anecdotes point to merchandise revenue remaining flat over this period. Looking ahead, we expect a shift in demand as consumers adapt to an extended stay-at-home lifestyle and purchase fewer high-margin items inside stores. Retailers should commit to getting ahead of this challenge by rethinking product mix, marketing campaigns and purchasing channels as behaviors evolve. As the next few months unfold, fuel and merchandise demand impacts are unknown, but recovery scenarios can model the potential margin impacts (Figure 2). In an accelerated recovery scenario (a V-shaped model), the pandemic is contained quickly, and demand returns alongside summer travel increases. In an extended recovery scenario (a U-shaped model), a slower return to normal periods will extend the potential impacts until late 3Q 2020.11 Impacts of these recovery scenarios will differ. But the most dramatic blows will be dealt to businesses that do not have the benefit of full rack-to-retail margins. The potential impact on these businesses could be up to 75% loss in margin throughout 2020. Optimizing convenience store margin during times of volatile demand may buffer the impacts of shifts in fuel sales patterns. While the effects will be different for companies across the industry, it is critical for each company to assess its own forecasted recovery scenarios and associated response. Figure 1 Expected fuel volume demand destruction in 2020 US Fuel Gallon Comparison (Pre- and Post-COVID-19)* Billion gallons 1Q2020 2Q2020 3Q2020 4Q2020 Baseline Fuel Gallons V-Model Fuel Gallons U-Model Fuel Gallons 40 30 20 10 0 Figure 2 Fuel and convenience store impact will be lessened by high fuel margins and relatively sustained retail demand US Total Margin Comparison (Pre- and Post-COVID)* $Billion 1Q2020 2Q2020 3Q2020 4Q2020 Total U-Model Margin Total V-Model Margin Total Baseline Margin $40 $30 $20 $10 $- *See References section for data sources used in the Accenture analysis.
  • 8. 8 Demandgrowsforhealthandwellnessasneed-to-have categoriesincrease Segments CAGR (2019 v 2021) Food & Grocery 2.5% Health & Beauty 5.7% Home 5.6% Others -3.5% COVID-19 impact: Significant growth for health and beauty as consumers increase spending on OTC healthcare and personal care products. Food and grocery segment (overall) grows as consumers increase their spending on need-to-have categories—leading to a dip in demand for tobacco products long-term (some have experienced a short-term boost) and slower growth for prepared meals (For prepared meals, 1.7% is the post-COVID-19 forecast, v/s 4% prior b/w 2019 v/s 2021) 13 The food and grocery segment would continue to dominate the product mix at c-stores. Post-COVID-19, health and beauty will likely be the fastest-growing segment at a CAGR of 5.7% between 2019 and 2021.12 151 156 160 163 168 4.7 4.8 5.0 5.3 5.6 1.1 1.2 1.2 1.2 1.3 30 30 29 28 27 2017 2018 2019 2020 2021 Other Home CAGR (F) = 1.7% Segment Market Size for C-Stores in US (US$ Bn) 187 192 196 198 202 Segments CAGR (2019 v 2021) Tobacco -1% Prepared meals 1.7% Some key categories for c-stores will be negatively impacted (degrowth or slower growth post-COVID-19) Sources: Global data’s COVID-19 Impact Market Model – Consumer Goods. Global data’s Retail: Insights - Market Size By Product and Channel 2019. Accenture analysis.
  • 9. Fourkeyareasforfuelsandconvenienceretailers tofocusonnowandnext… Fear of COVID-19 transmission has increased consumers’ expectations in availability of products, safety, proximity of shopping locations and their need for a sense of community. Now is the time to provide a tailored shopping experience that helps consumers feel connected while limiting risks by providing safe interaction consistent with state and local safety guidance. SAFE, CONTACT-LESS EXPERIENCES Enhance consumers’ in-store experiences One of the best decisions you can make is to invest in engaging your consumers to build relationships that drive loyalty. Plan to operationalize your digital investments and foster innovative partnerships so you can enhance consumer engagement through information sharing and a two-way dialogue that can maximize your efficiency and understanding of their needs. The shopping experience should no longer be limited to inside the store. IMPROVE CONSUMER ENGAGEMENT Accelerate technology investments to enhance digital experiences It has never been more important to care for your employees, so they feel safe at work and are inspired and equipped to provide care and service for your consumers. Invest in your employees to build trust and loyalty— key enablers to attract top employees and keep the people who are the backbone your consumers come to rely on. INVESTIN EMPLOYEES Build employee loyalty The products and services consumers want you to provide have changed. We’re seeing increased demand for essential items and a shift away from traditional retail stores toward online and convenience stores. This provides an opportunity for fuel and convenience retailers to meet consumers’ evolving needs and provide a wide array of products and services. Meeting this need by rethinking products and services will help build consumer loyalty. RETHINK PRODUCTSAND SERVICES Meet evolving consumer needs 9 …to address critical, immediate people needs and to prepare to thrive into the future
  • 11. Be aware of crisis Navigate the crisis Restore confidence Expectations • Enhance cleanliness to enable safe shopping • Reduce contact throughout the shopping experience • Communicate with consumers how you will keep them safe Enable growth Expectations • Stage 3+ • Launch enhanced products and services based on conversations with consumers for long-term opportunities C-store response • Enforce heavy sanitization and personal hygiene practices C-store response • Enforce heavy sanitization and personal hygiene practices • Modify store hours • Instill delivery/curbside and store window pickup • Enhance mobile offerings to limit contact • Generate community support C-store response • Test new operations of business and ongoing safety/sanitation measures • Analyze consumer behavior and demand shifts • Localize product portfolio • Pilot new and enhanced services C-store response • Interim engagement stage— reintroduce opportunity for consumers to shop freely in new service models with ongoing monitoring of new baseline • Continue reinforcing personal hygiene and sanitization protocols Expectations • Stage 2+ • Begin shift in products and services based on conversations with consumers for quick-win opportunities Expectations • Stage 1+ • Empathy and community caring as part of global community navigating a crisis together NOW NEXT Stage 1 Stage 2 Stage 3 Stage 4 WE ARE HERE Take immediate actions to focus on safety while addressing government guidelines. Reimagine new ways of working and how to serve consumers while sustaining operations during the crisis. Establish new normal standards, focusing on quick-win opportunities that boost confidence Transform the future of convenience and grow consumer loyalty through new and innovative offerings. 4stagesoftransition: Navigatingwithsolutionsforconsumersandemployees 11
  • 12. KEY AREAS 1. Mobilize an operational SWAT team to oversee response, monitor trends, communicate and plan for upcoming situations. 2. Develop a mechanism to evaluate current consumer behavior and monitor shifts. Understand which changes are here to stay. 3. Establish a short-term operational plan to address government guidelines, customer and employee safety, and your plan to make products available to consumers in need. 4. Develop a communications strategy to demonstrate empathy for consumers and employees. Be transparent, and keep stakeholders informed. Stages1and2: Whattodoimmediately ACTIONS TO CONSIDER Safe and contact-less experiences • Set up safety mechanisms and transition to curbside pickup, delivery, etc. • Increase cleaning quality and quantity; reduce store hours to allow for more cleaning • Enable mobile checkout and enhance apps with features that limit in-store contact • Optimize placement to enable consumers to find and purchase high-demand products • Reinstate attended fueling to reduce the number of people who touch the pump Improve consumer engagement • Announce operational changes and safety precautions on website and social media • Use on-premise and social media to support COVID-19 public service announcements • Show gratitude to first responders and healthcare workers with free drinks and snacks • Shift your marketing narrative to focus on core values, community support, and an emphasis on cleanliness and safety; ask consumers how you can support them Invest in employees • Increase hourly wages and/or provide incentive compensation to frontline workers • Reduce in-person interaction through mobile technology and physical barriers • Regularly monitor employee temperatures and well-being, and provide PPE • Amend PTO policies to allow employees to support their families • Release training in a digital format to prepare employees for changing responsibilities Rethink products and services • Cease food and beverage self-service and disallow reusable containers • Expend essential product offerings (bread, milk, cleaning supplies, paper goods, etc.) focusing on local sourcing where feasible; place in visible, quick-grab locations • Shift to more private label and cost-conscious brands to help consumers financially • Consider quick pick-up packages for truck drivers and fuel service for high-risk groups Stage 1: Be aware of crisis 1. Consolidate operations and support owners. Determine the need for stores to go dark, share resources and/or staff. 2. Develop localized community support plans to help store managers demonstrate empathy and commitment to the community. 3. Enhance mobile offerings to limit contact and ease consumer fear. Enable new apps and technologies to enhance employee operations. 4. Reimagine how the work gets done. Hire local businesses to help with cleaning, food service, marketing, etc. Repurpose and retrain employees to satisfy regulations and consumer expectations. Stage 2: Navigate the crisis 12
  • 13. • Test new operations and ongoing safety/sanitation measures • Analyze consumer behavior and demand as the market changes • Assess localized efforts to determine which should scale • Pilot new and enhanced services that provide quick-win benefits Stage3:Restoreconfidence INNOVATIONS TO CONSIDER Safe and contact-less experiences • Create new and innovative mobile app features to enhance onsite experience (i.e. prepayment and contactless fueling, purchase c-store products while at the pump for curbside delivery, etc.) • Install CCTVs and emergency buttons for safety • Provide WiFi access, rapid device chargers, electricity to power devices • Scale out pickup and delivery services • Provide lockers as a delivery option • Install advanced barriers, such as a drive-thru window • Consider a removable pump attachment that can be cleaned and recycled Invest in employees • Continue to enhance their compensation and benefits packages (e.g., permanent increases to hourly wages to match market demands, providing health insurance/medical benefits and paid time off to employees) • Develop an incremental increase package based on performance and loyalty • Provide tools and development options to build skills for different divisions and management positions aligned to specific career paths • Build a company culture in which employees live the company’s purpose and values—with leaders setting an example for frontline employees • Conduct engagement surveys, and put the results into action QUICK-WIN CONSIDERATIONS As you identify which opportunities could have a significant effect on consumer confidence, quickly—and with minimal effort—consider: • The potential shakeout across key consumer groups • Which infrastructure or tech building blocks are in place to reduce time and effort • The return on investment now and in the future (once expectations are set with consumers) Improve consumer engagement • Develop marketing packages for franchise owners • Create more targeted messaging based on consumer segmentation and data to personalize the experience and optimize demand generation • Enhance marketing campaigns that provide transparency into product sustainability and responsible supply chains • Connect your loyalty program with the mobile app to send targeted offer notifications • Enhance your loyalty program with more ways to redeem points and by encouraging behaviors you want to drive • Partner with local businesses to enable reward sharing • Partner with local businesses to enhance curbside pickup and delivery as an alternative to local grocery stores Rethink products and services • Focus more on healthy, sustainable offerings, including fresh produce and healthy snacks based on local consumer preferences • Introduce advanced soda/coffee dispensing that diversifies product offerings • Provide convenience hub services to create a one-stop experience (e.g., dry cleaning, car wash, basic car services) • Turn toward a more hyper-localized product assortment to reduce risk in the supply chain • Set up interactive digital displays for personalized consumer interfaces KEY AREAS 13
  • 14. • Scale the quick wins you introduced in stage 3 • Identify new growth levers using simulation analytics to forecast • Reintroduce consumers to shopping in a post-COVID-19 world • With new service models in place, you can run structure experiments and monitor to establish a new experience baseline • Assess your largest opportunities to transform the business to drive value—continually iterate to balance complexities and cost • Develop an incremental release plan to implement the long-term opportunities you identified and begin to execute Stage4:Enablegrowth Build for the future of convenience Consumers • Use look-alike modelling to identify the characteristics of your best consumers • Make incremental enhancements to your loyalty program to reward and delight consumers by continually giving them new benefits to build a sense of anticipation Employees • Build and test an employee loyalty program to boost productivity and efficiency, help in reducing turnover costs and build a stable, personalized consumer experience Invest to drive loyalty EMERGING INDUSTRY APPROACHES On-demand fuel delivery Across the industry, on-demand fuel delivery is becoming an option at home or work Contact-less payment Applications have emerged that allow consumers to pay for fuel without leaving their cars. Using geolocation, by scanning a QR code, or by inputting a code, consumers can select their pump, fill up, and pay via their mobile wallets LEADING EMPLOYEE PRACTICES H-E-BTM H-E-B offers tailored development plans to support employees who want to grow within the company.14 Kwik TripTM Kwik Trip has an ethical work culture with competitive compensation and benefits. The company strives to inspire employees to live the company mission—treating consumers how they want to be treated and making a difference in their customers’ lives.15 QuikTripTM QuikTrip offers competitive compensation, two weeks paid time off and an option to purchase additional time off. It also pays 81% of health coverage and has partnerships with doctors who provide services to employees.16 KEY AREAS 14
  • 15. KEY TAKEAWAYS • Prioritize which initiatives will create a delightful consumer experience and become part of daily life (rather than a behavior that was out of necessity due to guidelines during the crisis) • Determining which consumer behaviors will stick is a combination of the industry disruptors that accelerated new behaviors, like focusing on sanitation/safety, and how positive the experience was for the consumer during the crisis • Convenience stores should consider how they can improve the consumer experience for those behaviors that did have a high impact (like delivery services and frictionless / contactless fueling) to increase the likelihood that they’ll becoming a permanent behavior and drive consumer loyalty INNOVATIONS TO CONSIDER Safe and contact-less experiences • Change the definition of convenience by providing additional purchase channels such as smart home- integrated ordering and automatic tank gauges/ordering for both the consumer and store • Use automation to enhance the convenience store experience (self-checkout, walk-out technology, etc.) • Create a subscription to allow consumers to opt-in to products delivered on a regular basis, including fuel and full-service fill-up to increase speed and reduce contact • Drive efficient operations by implementing cloud-based POS and back-office tech, smart energy management, remote site management, real-time performance technology and predictive asset management • Create new experiences like entertainment, pop-up events, and in-store bars to drive loyalty Invest in employees • Enable a digital employee experience and leverage smart staffing methods • Expand health and wellness benefits for employees • Train employees on the skills they’ll need to provide consumer experiences with new technologies • Invest in technology to augment employee responsibilities and make their jobs easier, more efficient and safer • Introduce a robust employee loyalty program based on the lessons learned in Stage 3 Improve consumer engagement • Incorporate augmented reality, extended shelves and self- ordering kiosks to engage consumers in-store and remotely • Enable omnichannel integration for a seamless experience • Use recognition technology (biometric scanning, facial and license plate recognition, connected car) to meet consumer needs while providing more security and less contact • Implement light-enabled beacon technology to share information (when a fueling station is close, when products are in stock or during promotions) and enable informed decision making • Demonstrate you know your consumers with personalized digital menu boards and Bluetooth LE beacons/near-field communications to connect with them Rethink products and services • Create no-contact gas stations to increase consumer convenience and sustain cleanliness and safety • Move toward sustainable packaging and healthy food offerings that engage consumers in the experience • Build on-demand fueling services where consumers need them, enabled through the mobile app • Consider providing alternative energy options, including more EV charging stations, to increase c-store browsing • Create automated fueling for connected, self-driving cars • Enable robotic inventory management and floor tracking sensors to understand consumer behavior 15 Stage4:Enablegrowthandprioritizewhatwillstick
  • 16. Fuel and convenience retailers must act now to address the far- reaching implications of COVID-19 and the oil market impacts to preserve the business and ultimately enable growth. 16
  • 17. FurtherCOVID-19rapidresponsearticlesavailableonAccenture.com Channel Shift: Prioritizing Digital Commerce 5 new human truths that experiences need to address Retailers serving consumers on the frontline 17 A one-two punch for oil markets
  • 18. Robert Raidt Managing Director Accenture Interactive robert.raidt@accenture.com Brian Gray Managing Director Energy brian.d.gray@accenture.com Questions?Let’schat Jen Pritchard Managing Director Retail j.pritchard@accenture.com Matthew Strawn Managing Director Accenture Interactive matthew.strawn@accenture.com Jay Amburkar Senior Manager Consumer Goods and Services jayasree.amburkar@accenture.com 18
  • 19. References 1. “Annual Energy Outlook 2020 with projections to 2050”, January 2020, U.S. Energy Information Administration © 2020 U.S. Energy Information Administration 2. “The One-Two Punch for Oil Markets”, April 1, 2020, Accenture, © 2020 Accenture https://www.accenture.com/us- en/insights/energy/oil-markets-responding 3. OPIS, “Emergency Fuel Market Update”, March 30, 2020, IHS Markit © 2020 OPIS, IHS Markit 4. “Convenience Store Retail Trends: Year in Review & 2019 Outlook”, January 7, 2019, Convenience Store News © © 2020 EnsembleIQ, via Factiva 5. “Another Record year for Convenience Stores”, April 2, 2019 CPS Daily News © Winsight, LLC. 2020 via Factiva 6. Ibid1 7. Ibid 3 8. Ibid 3 9. OPIS, “Emergency Fuel Market Update”, March 30, 2020, IHS Markit © 2020 OPIS, IHS Markit 10. Ibid2 11. “It could take three years for the US economy to recover from COVID-19”, March 30, 2020, World Economic Forum © 2020 World Economic Forum 12. Global Data Consumer Intelligence Service 2020 © GlobalData Plc 2020, Accenture Analysis 13. Ibid12 14. https://www.heb.com/static-page/article-template/Learning-and-Development 15. https://jobs.kwiktrip.com/content/culture/ 16. https://www.quiktrip.com/Jobs/Benefits 17. Steve Holtz, CSP Daily News, “First Look at COVID-19’s Effect on C-Store Sales”. March 24, 2020 18. NACS, “Convenience Retail Industry Pivots for Long-Term COVID-19 Impact”, April 14, 2020. 19
  • 20. To help our clients navigate both the human and business impact of COVID-19, we’ve created a hub of all of our latest thinking on a variety of topics. Each topic highlights specific actions which can be taken now, and what to consider next as industries move towards a new normal. From leadership essentials to ensuring productivity for your employees and customer service groups to building supply chain resilience and much more, our hub will be constantly updated. Check back regularly for more insights. VISIT OUR HUB HERE 20
  • 21. DISCLAIMER: This document is intended for general informational purposes only and does not take into account the reader’s specific circumstances, and may not reflect the most current developments. Accenture disclaims, to the fullest extent permitted by applicable law, any and all liability for the accuracy and completeness of the information in this presentation and for any acts or omissions made based on such information. Accenture does not provide legal, regulatory, audit, or tax advice. Readers are responsible for obtaining such advice from their own legal counsel or other licensed professionals. Copyright © 2020 Accenture All rights reserved. Accenture, its logo, and New Applied Now are trademarks of Accenture. Accenture is a leading global professional services company, providing a broad range of services and solutions in strategy, consulting, digital, technology and operations. Combining unmatched experience and specialized skills across more than 40 industries and all business functions—underpinned by the world’s largest delivery network—Accenture works at the intersection of business and technology to help clients improve their performance and create sustainable value for their stakeholders. With 509,000 people serving clients in more than 120 countries, Accenture drives innovation to improve the way the world works and lives. Visit us at www.accenture.com AboutAccenture 21