Updated: Jun 21, 2020
I've just finished watching the latest series of The Crown. Something that cost over $130 million to produce but a key product in Netflix's ability to keep growing their audience base to nearly 160 million subscribers world-wide. That number is 31% up on what they had achieved in 2018. The Golden Globes last weekend had 34 nominations for Netflix produced shows and movies. They remain the goliath of the streaming world and at a time when those cutting the cord in the US increased by 33% in 2018. So is this because Netflix provide the best shows and movies today? Is it because they help you avoid the increasingly annoying repetitive commercials about products you'll never buy? Or is it because it satisfies the growing demand for curated convenience by today's highest spending consumer category?
Probably all three but it is the latter which I'd like to explore in this article in particular.
Back when I was a senior leader running the ampm franchise, I saw how the disruption in retail and mobility over the recent decade had affected one of the more stable and growth oriented sub-segments of the wider retail industry. The 'convenience store' industry, as it is commonly called, was a regular stop in every automobile owning family's life at least once a week and, for many others, many more times. The purpose of the visit would be driven primarily by the rather 'undesired' and 'expensive' need to fill up one's vehicle. In the UK where I cut my teeth in that industry and in many other states across the USA, was then followed by the opportunity to differentiate the experience beyond the price of the gasoline. The true customer experience began.
For decades, convenience stores provided customers the chance to buy their pack of cigarettes or a drink for their local trip ahead. This then morphed into many other categories of snacks, candy and a variety of different beverage types. I would often be included in conversations determining what and how to range the latest innovative product and where and how to do it. Today's convenience stores are differentiating themselves by satisfying the customer's demand for 'fresh' food and 'variety' - something that I was able to successfully launch at ampm. And yet despite new products and innovation occurring, transactional decline continues to be an area of concern for many convenience retailers across the world.
The world of convenience was quietly being disrupted by other sub-segments that were providing more 'convenience' in a more 'curated' way. Of course - Amazon's name comes to mind straight away. A clear data driven picture of every consumer's viewing habits, buying preferences and demographic status helped Amazon ensure the right type of products appeared in front of each consumer's eyes every time they happened to visit their site. Their Prime service ensured the cost of delivery was taken away as a decision making factor in each transaction and had the same effect as a 'commercial' driver using the company fuel card without care or concern of the price of gasoline. Amazon's adoption of 'mobile' shopping helped people shop whenever and wherever they wanted. And the 'Subscribe & Save' service offers items that were bought regularly in the grocery and wholesale stores would now be delivered straight to their customer's door - often at a competitive price point. A term used across industries today seems appropriate to introduce here - frictionless convenience. Where you can get what you want, when you want it, how you want it and with as little effort on your behalf as possible. Bricks & Mortar retailers have quaked in their boots, some have already died from the volume decline that has occured as a result of such innovation and others are not responding to it fast enough.
Amazon's impact to the wider retail market left convenience retail initially unscathed but as delivery speeds improved and the advent of PrimeNow occurred, convenience customers started to realize they could get what they wanted at a cheaper price within just a few hours without having to leave their home. Convenience Retailers have long known that categories which need to be relied upon are those which address the 'impulsive behavior' of a consumer. Given consumers would be visiting gas stations less regularly today due to more efficient fuel usage of the modern car and the wider 'work from home' movement reducing the amount of commuter travel, every opportunity to get a sale when a consumer visited a convenience store mattered.
Merchandising teams would be faced with how to draw the consumer into the store from the forecourt with compelling 'Two for $x' offers on drinks or a tasty new snack to satisfy their cravings ahead of the next meal-part. It is why today you'll see products like canned vegetables and tissue boxes in the far corners of a store (if there at all) and food to go more dominant in store design. The credibility of the products that address that impulsive urge is what differentiates the best convenience retailers from the rest today. What is also becoming increasingly important is that need to be able to customize the consumer's dietary preferences in their food choice. It is why Wawa's and Sheetz often are called out for their strides in product innovation in the USA and why in the UK, BP's Marks & Spencer alliance brings two strong brands together to breed confidence to the consumer's decision on how to eat well and safely. The latter has achieved remarkable results with more transactions oriented towards a store purchase than a gas purchase - more people going to a gas station to buy food products rather than gas - who would have thought that?
So what does any of this have to do with the Netflix effect? Well, it means bricks and mortar retail, traditional channels that value their consumer face to face relationship need to innovate and offer more options curated to each consumer than ever before. They need to utilize their loyalty data, formalize digital relationships with their customers and value them to the point where they can support their needs in a fully customizable manner.
The average person is staying home more than ever before for their rest and their social 'activity'. The department stores in malls are as quiet and as ghostly as they have ever been. The transactional behavior pattern is clear. Come to us they quietly think. Don't expect us to come to you because we won't unless you make us feel special.
Whether it's game nights with friends or binge-watching the Crown with delivered pizza, today's consumer is not venturing far to get their social fix. When they leave their home it is for a specific purpose or a special event. The convenience oriented customer is having more delivered to their home than ever before and they are becoming increasingly expectant in how 'frictionless' the process is for them because they know that there's someone else innovating to improve it if their current provider doesn't quite get it quite right. It is why so many are now flooding the meal kit market and why my current industry in Ghost Kitchens is supporting a similar level of disruption of the restaurant industry that has affected retail over these last twenty years. The lessons learned for retailers in the last twenty years need to be learned by those just facing the ambiguity and opportunity that comes from disruption. Leadership needs to think through new spectacles on this world and not lose sight of what has affected retail in front of us all in these last few decades. It is what Kitchen United excels at in helping restaurants manage the disruption as seamlessly as possible and how our member success team is on hand to help restaurant members thrive amidst the change affecting their industry.
Convenience has always been part of each of our lives through convenience stores to online shopping and from sit down restaurants to delivered food from dark kitchens but our demands for improvements amidst our increasingly busy lives are growing stronger. The wise ones among us know that consumers are willing to pay for it if it meets their needs in exactly the way they demand it. But we also know that the disruption and the innovation at the heart of that disruption has not finished and more is yet to come. The agile and those with the consumer at the front of their thinking will likely win and the slow and resistant will surely fail.