Pardon the Interruption

Reprinted from NACS Magazine [September 2017] with permission. For more information about NACS and subscription information for NACS Magazine, please go to or contact NACS at (703) 684-3600.

NACS Magazine interviewed the late USA Today founder Allen “Al” Neuharth in September 2008, a time when headlines screamed that print was dead. It was an alleged demise brought on by a digital revolution that many predicted would make print newspapers and magazines (like this one!) obsolete. When we asked Neuharth if he believed newspapers were dead, here’s what he said: “I remember very well when television came in and nearly everyone predicted that newspapers were dead. I wasn’t around when radio came in, but I read about the reaction and it was the same thing: Newspapers were dead. And they survived both. Now that the Internet is heavily used, it’s the same cry.”
Neuharth believed that newspapers would adapt to the disruption brought on by digital’s growth. And in its own right, USA Today, when it was launched, disrupted how newspapers delivered news. “People in Boise, Idaho, for example, weren’t really going to read The New York Times or Wall Street Journal … we worked to design something that might appeal to the whole country.”
Did consumers even know they wanted what USA Today could offer until it was available on newspaper racks? Maybe not, but they certainly responded. It’s a great example of a disruptor coming into an already-established industry and reshaping it—much like Amazon, Netflix and Uber are doing today to change consumer behavior.
“Disruptors have succeeded in training vast swaths of consumers to view them as a reflexive default setting,” writes PricewaterhouseCoopers (PwC) in its report “The New Retail Ecosystem: From Disrupted to Disruptor.”
“Be it Amazon, Netflix or Uber, they’ve done so by finding the ideal combination of convenience, price, speed and variety that best appeals to consumers. With tiered options that allow room for tradeoffs and flexibility. And continually expanding service offerings well beyond their original value propositions. Rather than responding to consumer preferences, they actually shape consumer behavior,” the report reads.


At last year’s NACS Show, Vish Ganapathy, vice president and CTO of IBM Global Consumer Industry, led the Technology Edge keynote on how retailers can shift their mindset to the consumer experience to remain competitive among a sea of marketplace disruptors. He suggested that the biggest threats to retailers are the new competitors “that aren’t classified as competitors,” and he cited three megatrends:
1. Widespread, competitive disruption. “Disruption is going to happen, and we are barely scratching the surface,” he said, noting that smartphones today will look like toys in the future.
2. An explosion of devices will totally change how we shop.
3. Data science will determine how we’ll make better decisions. “Humans are terrible predictors of the future because we’re tarnished by what we see today,” he said.
Although the official news of Amazon’s convenience store format featuring its “Just Walk Out” technology had not been released at the time of Ganapathy’s NACS Show presentation (the official news broke in December 2016), he gave attendees a sneak preview of how Amazon would disrupt current retail technologies. “Things like the [point of sale] will be heavily disrupted because Amazon doesn’t have that legacy system already in place,” he said.
Ganapathy suggested that retailers who are considering investments in their POS systems should also consider mobile. “The POS, I believe, will become mobile POS,” he said.
So, what’s a retailer to do? For one, said Ganapathy, a new way of thinking is required: “The concept of ‘channels’ is a byproduct of silos in people, process and technology … We cannot foresee how many ways our customers will choose to engage with us, so we need to design solutions that can be leveraged way beyond the original context in which it was imagined. … The customer is the only channel.”


In 2005, Amazon began revolutionizing the frictionless customer shopping experience with the launch of its Prime membership. Today, Prime members are accustomed to a one-click checkout, and depending on who you ask (and don’t bother asking Amazon; you won’t get an answer), there could be somewhere between 65 million to 80 million Amazon Prime members globally.
Now, among the myriad ponds Amazon is fishing in, the retailer is gearing up to open its first Amazon Go physical store and showcase its Just Walk Out technology, which “automatically detects when products are taken from or returned to the shelves and keeps track of them in a virtual cart. When you’re done shopping, you can just leave the store. Shortly after, we’ll charge your Amazon account and send you a receipt,” explains Amazon’s website.
While the world waits for Amazon to officially open the doors to Amazon Go, the technology is not new. In a 2003 NACS “Ideas 2 Go” video segment, German retailer Future Metro Store field-tested RFID technology for a similar self-contained shopper experience: recording a purchase by removing an item from a store shelf.
But what is new—and creating disruption—is how consumers pay for the merchandise. Frictionless payment is becoming an expectation at retail. “The move toward frictionless payments in e-commerce (e.g. PayPal) is creating a demand for that same experience in brick and mortar,” agreed Hubert Williams, vice president of technology and development at Utah-based Maverik, Inc. “It’s essential that the convenience industry remains convenient relative to other channels, and that need is driving POS and payments innovation.”
Barclays writes in its 2016 “Frictionless Payments” report that a great consumer payment experience “is the one which makes the least impression on the user,” and so frictionless payments should not get in the way of the purchase experience. Barclays cites PayPal, as Williams also mentioned, Apple Pay and Android Pay as examples of frictionless solutions.
Although the mobile solutions industry is still a fragmented industry with many players in the market, and the rate of mobile payments adoption in the United States has been slow, retailers should think twice before putting these types of investments on the back burner.


The pace at which technology develops is like a freight train, and while the speed of change is hard enough to keep up with, retailers may sideline investments in new technologies because they often become obsolete in six months’ time. However, technology is at the core of retail disruption.
A 2000 Harvard Business Review report, “Disruptive Technologies,” describes how radically technology can change the game: “When a technology that has the potential for revolutionizing an industry emerges, established companies typically see it as unattractive: it’s not something their mainstream customers want, and its projected profit margins aren’t sufficient to cover big company cost structures. As a result, the new technology tends to get ignored in favor of what’s currently popular with the best customers. But then another company steps in to bring the innovation to a new market. Once the disruptive technology becomes established there, smaller scale innovations rapidly raise the technology’s performance on attributes that mainstream customers value. “What happens next is akin to the rapid, final moves leading to checkmate. The new technology invades the established market.”
One of the keys to keeping up with technology is establishing awareness. Convenience retailers may not, and financially cannot, go after every shiny object, but they can rely on the expertise of their IT teams for insights on new and emerging technologies.
“While it may be difficult to stay at the forefront of relevant technology, we must stay connected and find opportunities for meaningful innovations that can drive customer engagement—and act on them,” said QuickChek veteran John Schaninger of The Schaninger Group. He suggests considering how technology is used not just to sell more merchandise, but how technology will make customers’ lives easier— everything from “mobile applications, delivery possibilities, fueling scenarios, and even customer shopping information, to corporate support center functionality.”
Customer experience-focused technologies, like self-ordering kiosks and self-checkout inside the store, will continue to evolve with an emphasis on extending convenience opportunities, suggests Ed Collupy, executive consultant at W. Capra Consulting Group. Disruption will also come from the Internet of Things (IoT), “with its endless opportunities to increase customer traffic, services and basket size,” as well as the IoT’s ability to optimize supply chain operations with greater wholesaler and DSD supplier automation.
“Anyone who focuses on technologies that make the experience quicker, easier and more relevant will certainly have an upper hand,” said Joe Bona, president of Bona Design Lab. “Amazon Go is an example of how technology will only make convenience that much more convenient. However, as fuel efficiency, electronic hybrids, ride sharing and Uber will result in fewer trips to convenience stores, I believe that staying focused on other daily missions, beyond fueling our vehicles, will be fundamental to long-term viability and success.”


This year two European countries announced bold moves to combat air pollution. Their solutions? Remove the vehicles from the road, as in gas-powered and diesel-powered vehicles, and bolster demand for electric vehicles (EVs).
Williams of Maverik said that the commitments by France and Britain to ban the sale of gas and diesel vehicles by 2040 signals a huge disruption in the fuels market, especially if similar bans spread to other countries and increase innovation in the EV industry. “This will all disturb the basic economics of the convenience fueling business much sooner than 2040,” he said.
Kevin Smartt, CEO of Kwik Chek based out of Austin, Texas, sees three similar movements occurring at the same time: mass consumer acceptance of e-commerce, less dependence on gas-powered vehicles and the growth of ride-sharing services. “As all three of these disruptors transpire in the market,” he said, “our industry needs to be prepared for a future that could mean less foot traffic in our stores, both at the pump and inside the store, and a dramatic shift in how we will be selling fuel.”
Foodservice industry veteran Jerry Weiner, who retired in 2015 from Pennsylvania-based Rutter’s, sees not-too-distant-future retail disruption coming from a combination of increased demand in EVs, and drug and dollar stores becoming more agile at selling foodservice and convenience items.
“I have been watching these retail giants slowly, but deliberately, add more items that would normally be classed as typical c-store fare. I have also seen a push toward more foodservice-related items like coffee, fountain, some prepared sandwiches, etc. These companies have deep pockets and, with time and investment, will ultimately figure [foodservice] out,” Weiner said, adding that “these retailers already have good corner real estate, where all they have to do is add quick charging stations to existing parking spots—you can do the math.”
Norman Turiano of Turiano Strategic Consulting LLC sees a future where a shift in transportation could disrupt the current c-store mindset. “The lack of transportation business will no longer drive inside sales, which will need to increase to offset the lack of fuel profitability,” he said. “We’re already seeing chains like Sheetz and Wawa opening new formats where there is pedestrian traffic, as opposed to street traffic, with an emphasis on foodservice.”


Consumers today want what they want when they want it, which is now. In the convenience retail space, Bona of Bona Design Lab says that since most food and beverages purchased at convenience stores are consumed within minutes of purchase, he’s more concerned that any potential disruption would come from a place not yet identified. “I could argue that if Panera or Pret-a-Manger decided to open up c-stores, they might easily be disruptive to our channel by targeting the same daily missions that already make c-stores somewhat unique and protected from online delivery,” he said.
When consumers are thirsty or hungry, Bona said, the impulse is to find the closest place that’s on their way. “That is why I would be not be as worried about drone deliveries, autonomous vehicles or delivery services … And, with more and more of the population moving closer to urban centers, new free-standing convenience formats will begin to pop up on the retail landscape, bringing food-on-the-go closer to where people live, work and play.”
Rahim Budhwani, current NACS chairman and CEO of 6040 LLC, agrees that consumer demand for immediate consumption doesn’t bode well for a two-hour delivery window. However, the industry should be prepared to compete in the delivery space. “People don’t really want to wait two hours for beer, soda or even pizza. So, I don’t see that as a disruptor, but people will be asking us to deliver too, which may change the current retail landscape,” he said.
Collupy of W. Capra cited delivery disruption from startups like—“truly a convenience store on the Web”—and the more established delivery models by Postmates, DoorDash and UberEATS.
Likewise, Lisa Dell’Alba, president and CEO of Square One Markets in Pennsylvania, sees disruption coming from industry competitors that are meeting c-store customers where they are. “Customer demand is changing, from the desire for a destination to a desire for items to come to them by utilizing apps like Instacart, Amazon, or Grub Hub. We have worked so diligently to create spaces for people to come to us and now we are challenged with competitors who come to our customers. While it may be easy to utilize the same tools, it becomes a different challenge and a potentially different offering to be unique when you can no longer depend on a brand concept that is built upon clean bathrooms and trendy colors. The impulse game has essentially changed forever,” she said.


Let’s wrap up with a tale about Borders. Remember the now-defunct bookstore chain? During its heyday, the multi-billion-dollar brick-and-mortar retailer had more than 500 locations around the world. Then it filed for bankruptcy and went out of business.
What happened? Was Amazon to blame? Well, eventually yes, but not at all once. Deloitte says in its “Disrupt Retail” report that there’s no single defining issue that led to Borders’ downfall; rather, it was attributed to a combination of strategic risks that, for too long, went unidentified or unaddressed.
“In the end, technical disruption and underlying consumer behavior changes attacked the basis of Borders’ strategy and their inherently biased belief that consumers wanted to browse and purchase books in large mall-based stores. Not recognizing and fully appreciating the impact of disruptive trends, driven by the transformative power of e-commerce and the rise of the Internet, Borders was left shooting in the dark.”
Diagnostics on the health of your business and where threats are coming from are one thing, but the prescription for success is simple: If you’re not working on the business that will put your current business out of business, someone else will. With 80% of c-stores SKUs essentially the same across all stores, what are you doing to stand out? You can either be the disruptor, or be disrupted.

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