Pivoting A Path Back To Prosperity

Dec. 10, 2020
COVID-19’s challenges inspire new avenues for convenience services operators to broaden their offerings, rebuild and grow in 2021

Convenience service operators kicked into survival mode for much of 2020, focused on getting though the COVID-19 pandemic and economic downturn while adapting to best serve their clients and help them reopen.  

Automatic Merchandiser spoke with industry experts about the lessons learned, trends and competition operators should expect and prepare for in 2021, and opportunities on the horizon.  

Differentiate to capture new business 

Jim Carbone, a recently retired 30-year convenience services veteran who cofounded Chicago’s Tradecraft Outfitters in 2008, redefined office coffee service (OCS) with the introduction of craft coffee and the concept of pantry service to attract and retain top talent by providing complementary break room refreshments beyond the basics. Canteen purchased Tradecraft in January 2018 and Carbone and his team stayed on board.

“We had double-digit growth every year,” he commented. “When I look back, the economy was in the toilet when we began and we created our own path through differentiation. The key for operators is use this downtime to think about the new normal and look what to do differently in 2021.” 

Tradecraft saw coffee and pantry service as the future and it’s the segment that’s been hit the hardest by the pandemic, with far fewer employees on-site, distancing protocols and the high-touch nature of brewing and serving coffee. Carbone credited the many manufacturers who have responded with touchless bean-to-cup solutions and dispensers and urged operators to use them. “You have to be ready to use these solutions and make clients comfortable when they do come back,” he emphasized. 

Bridge the work-home gap 

The micro market business has been less impacted by the pandemic because it offers a safe and contactless self-checkout experience while accommodating a wider array of products, Carbone said. “Operators should take advantage of having this breakthrough technology at their fingertips, look into it, embrace it and get on board if they haven’t,” he advised.  

He also recommended that operators bring new products in their micro markets to tap into new buying habits since so much of the workforce has shifted to working from home.  

“Craft coffee sales online and in grocery have skyrocketed. Employees are going to come back with different buying habits,” he predicted. “Bring in new products to help employers make them feel better when they come back. Ask your local roaster partner about syrups and milk alternatives, and better hot tea and chai that they’re buying online and in grocery stores.” 

The vending segment has been dealt a harder blow than micro markets, according to Carbone, citing the lack of ease to enable an entirely touchless process. “This is something operators must address,” Carbone stated. “Have new products in your machines based on their new needs and desires, add PPE [personal protective equipment], and make people feel comfortable using vending machines. Put sanitizing stations next to them like you see at health clubs.”  

Pivot and diversify 

Carbone spoke on a panel at a National Automatic Merchandising Association (NAMA) conference a few years ago that focused on pivoting to meet the needs of a new generation in the workforce. “It’s the word ‘pivot.’ Companies that listened a few years ago are doing better than those who were not quick to change,” he summed up. “The ones who have looked outside the box along the way will bounce back quicker than the ones that fought change.” 

Jeff Deitchler of Prairie Fire Coffee Roasters — and incoming chair of NAMA’s OCS committee — said the OCS and roasting company’s eight warehouses in the Midwest were all impacted differently by COVID-19 because of the diversity of segments it services. Its main facility in Wichita, Kan., which concentrated on OCS and restaurants, was hit harder than its operations in Nebraska, Missouri, and Oklahoma, which serve a large base of convenience stores. 

Prairie Fire’s sales fell dramatically across its 24 OCS routes in March and April, but then rebounded steadily and Deitchler reported that its September 2020 revenue was flat with 2019. He credits this relative success to challenging his team to pay close attention to identify opportunities and operate more efficiently by reducing route frequencies without compromising customer service. 

“We found serious service issues with competitors in the c-store segment. Many threw customer service out the window and we stepped up and gained a lot of business,” Deitchler said. “Competitors weren’t delivering on time; equipment breakdowns were not being addressed.” 

Target c-stores 

Prairie Fire is on track to install 50 to 75 new c-stores by the end of November. “We didn’t think pulling back on customer service was the plan and it was exactly what we saw in the market,” he commented. “We stayed aggressive developing new business and servicing all of the locations we had because if they were open, we felt it was our duty to keep equipment clean and up to snuff. “ 

Deitchler recommended that his fellow OCS operators pursue c-stores. “People now especially don’t want to go into a big store with crowds and stand in line, and they’re working from home [and] getting their coffee local,” he noted. “All of our c-stores have continued to do well, but restaurants and offices are far from where they were pre-pandemic. We don’t have the answer other than that I’m firm believer that you never win by price. Customer service and relationships are way more important than they ever were.”  

Chuck Reed, vice president and general manager for vending at Crane Payment Innovations (CPI) projected that the Malvern, Pa.-based unattended payment provider’s business in the first half of 2021 will be similar to the third and fourth quarters of 2020. “Until a vaccine is widely available, not much will change,” he predicted. “We expect the second half of next year to be better than the first with roughly a 10% recovery, assuming there’s a vaccine and kids go back to school and various reopening attempts continue.” 

Proceed with caution 

Reed advised that operators be intentional and do their homework about which reopening opportunities will most likely stick. “Pursue new business leads with logic and don’t throw caution to the wind,” he said. “People are impatient. Be careful what you pursue.” 

A silver lining to the COVID cloud is that it has accelerated implementation of technology and operators’ push for efficiency at servicing accounts, Reed added. 

“Look at your staffing levels. See who’s been spun out of other businesses and leverage good talent and have the right people on your team,” Reed advised. “Confront today’s current harsh reality and don’t wish on a star that it will get better. Size your business for what is going on, and plan for the worst and hope for the best.” 

Reed also sounded the alarm that deadlines for all credit card readers to accept EMV chip cards and the transition from 3G to 4G connectivity both hit early next year.  

“Operators who have 3G telemetry need to know what they have to do before carriers turn down the towers,” he emphasized. “And if their card readers are not EMV compliant, they will face a penalty from the card brands for declining EMV transactions after certain due dates. Most operators will find some readers in their base that need to be updated over the air or switched out. Talk to your tech partners and don’t get caught off guard.” 

He agreed with Tradecraft’s Carbone that it’s time to pivot away from batch-brew pour-over to single cup systems. “It’s something operators are addressing and should be thinking about if they’re not,” he stated. “Vending also needs a more ubiquitous solution to enable a touchless experience when making a selection, paying, and retrieving the product. Crane is working to make all three touchless, which likely will accelerate in the next couple of years and become more permanent.” 

Not only is the number of employees on location drastically reduced in most locations, but it’s also completely unpredictable from week to week. This makes telemetry more essential than ever, Reed stressed. 

“Operators can’t count on any pattern of attendance in locations,” he said. “Telemetry lets you query the machine remotely and see what’s sold and what hasn’t, which is more important than ever to merchandise machines and maximize service efficiency.” 

Expand into home delivery  

Port Huron, Mich.-based All Star Services has become the first operator in the U.S. to go live with LightSpeed Automation’s new feature that allows operators to provide their clients’ employees the same snacks they had at the office in the comfort of their home, exemplifying one of the many ways operators can pivot heading into 2021. 

“Like many of our fellow operators, a ‘new normal’ was in place with our business being heavy in pantry service, where employers gave perks to their employees. And now, all are working from home and we needed to find a way to service it,” said Duncan Smith, All Star Services’ president and chief operating officer. “People have grown comfortable with having food delivered to their door and that is not going away even after the pandemic is long gone. This provides us with a chance to build a new revenue stream and a direct customer base no matter where they work.” 

LightSpeed completed the integration with Shopify over a year ago and when the pandemic hit, it supplied a way for the company to help its customers quickly pivot. The orders flow directly into LightSpeed to be picked just like a vending or market order. 

“Once picked, the order is shipped using Shopify’s shipping module and you get the benefit of using their extremely low shipping rates,” explained David Marler, LightSpeed’s vice president of sales and marketing. “You can literally get into the home delivery business in just a couple of days.”  

Elyssa Steiner, vice president of marketing at Malvern, Pa.-based USA Technologies said a bright side to the pandemic is that it has forced operators to get more creative and diverse in their offerings and to leverage technology to gain insight about their customers to better compete against brick-and-mortar retail and online and delivery services. 

“Operators who have invested in telemetry and a VMS [vending management system] are positioned well to really leverage technology to expand and pivot their services for unattended retail,” Steiner stated. “They have the warehouse, inventory, locations and know how to manage and adjust based on consumer demand.” 

Some manufacturing plants, for example, are operating at higher levels than they were pre-COVID, some with mandatory temperatures checks and rules that employees cannot leave the building during the workday. “There’s an opportunity there to expand SKUs, drop boxed lunches, palettes of water and supply PPE,” she said. “What else do your customers need? Can you vend it or sell in your micro market what they would normally get from Amazon?” 

Operators also stand to benefit from the pandemic pushing unattended retail further into the mainstream. Walmart, for example, is testing a self-checkout-only approach to processing purchases, and Burger King announced plans for new restaurants that feature a completely touchless experience — both inspired by pandemic precautions. 

“Self-checkout is blurring the lines of unattended retail as many retailers have pivoted quickly to provide a faster, safer, more convenient, socially distanced transaction,” Steiner pointed out. “Vending was long seen as a choice of last resort but with micro markets added to the mix especially, that’s no longer the case as consumers favor self-checkout in the world of COVID.” 

Enable cashless and touchless transactions  

Steiner agreed with CPI’s Chuck Reed that COVID has accelerated cashless. She cited a USAT study that showed 53% of transactions in 120,000 vending machines were cashless last December and jumped to 65% by the end of July.  

“Cashless was growing steadily, but we haven’t seen that much of a jump in such a short time and much can be attributed to people wanting touchless,” Steiner observed. “In 2021, every time an operator deploys a machine, it should have a card reader or they’re missing more than 50% of sales.” 

With retailers struggling to reach consumers with less traffic in their stores, Steiner recommended that operators pursue forging alliances with them. 

“Vending machines in airports sell clothes and beauty products and electronics,” she instanced. “You already have access to the customers and locations. Partner with local retailers and sell their products in your machines. Pivot a little to deliver what the consumer wants. The sky’s the limit. If you can vend it, you can offer it. There’s an opportunity to come out of COVID stronger than we went in.”