How Convenient, Episode 15: Small Operators, Big Transformation

Today's consumers have a healthy appetite for e-commerce and seamless digital experiences, but small retailers often lag behind with their technological and e-commerce capabilities.
 
This week on How Convenient, Greg Crow welcomes VP of Innovation at National Retailer Solutions Jacob Jonas to discuss solutions to the unique challenges faced by independent retailers today.
 
Listen and subscribe to the full episodes at one of the following links. Below is the episode’s transcript which has been edited for readability. If you have any comments, questions or would like to learn more, contact us below.
 
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Transcript:

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Greg Crow: In this episode, we discuss the category where independency stores are growing faster than C-store chains. Welcome to How Convenient, a new podcast about the essential role convenience stores play in the busy lives of consumers. Our hope is to equip innovative C-store leaders as they seek to earn lasting shopper loyalty. In each weekly episode, we'll briefly share an update on C-store store sales trends and what we're learning from billions spent for purchase transactions. Today's episode is recorded on March 18th. I'm Greg Crow with Koupon, I'm thrilled that with me today is Jacob Jonas with NRS.

Jacob Jonas: How's it going, Greg? So, I'm with NRS for a couple of years now, and we're a very fast-growing point of sale provider. We focus on independently owned convenience stores, so a lot of single store operators and a lot of mom-and-pop shops. We are already in 13,000 stores nationwide, and we had all this growth in just about five years. So, we're really one of the fastest growing players in the market. And my particular role with National Retail Solutions is I'm the Vice President of innovation.

Greg Crow: Fantastic. Thanks for joining us today Jacob. Before we get started, as always, we'd love your feedback so we'll let you know how you can share that with us in a few minutes. Our flash for this week or the week ending March the seventh, in store sales were flats versus 2020. Alcohol sales up 10%, candy 2%, tobacco up 1%, beverages and snacks were flat and food minus 7%. Total trips down 15%, basket dollars up 16%.

So, Jacob, thanks again for joining us. So, you live in the world of independent retailers, as you said, so the majority of the 150,000 community stores in the US are independently owned and local retailers have a rich history of community engagement. All C-stores have had a challenging 12 months. What are some of the unique challenges that independent retailers face?

Jacob Jonas: Nowadays, as you know, there's a lot of consolidation. So, the constant fear for an independently owned store, that's always there is, the competition with big box retailers and larger chain stores. And more recently e-commerce has been a source of a lot of competition. You see in the news every day that another delivery provider is now working with convenience stores. So, for example, whether it's Door Dash or Uber, they're delivering now from convenience stores. Amazon and many other e-commerce providers are delivering groceries and other items that traditionally would have been purchased in convenience store.

And all of that has really been accelerated by COVID. We've seen a tremendous amount of adoption from independent retailers of e-commerce during COVID. But if you look in the news again at the chain stores, they have really dived in headfirst into the world of e-commerce to the point where you're not a serious chain, big box or anything like that, unless you do have an e-commerce offering at this point so you kind of have to have one now. Another real issue sometimes for convenience stores is they lack technology and data. Independently owned stores don't have the same budgets as big chain stores and so a lot of them, we found still had old cash registers, and there's not much data you can look at with an old cash register.

Lastly, sometimes the staff and the customer shopping at these stores are not the most tech savvy. So, to bring technology into these stores, it's a bit of a lift, it takes training of the employees and of the customers. Those are a few of the issues that independently owned stores are having, but I'll also talk about later about how we're helping them overcome those challenges at NRS.

Greg Crow: That's awesome. It's interesting, several of the things that you mentioned, I would say are common to virtually any retailer today. And I mentioned earlier, I think one of the big advantages’ independents have is retail started out as a face-to-face relationship. And many of these smaller operators have very close relationships with their consumers and that can be an advantage. The disadvantage, I think you also highlighted is when you're a small operator, you don't necessarily have the technology and the budget and the resources. So, I guess to get into that point, talk a little bit about if you would, how did NRS get started and really what value do you bring to independent retailers in that context?

Jacob Jonas: Sure. It's an interesting story and actually really jives with what you guys are doing over at Koupon. Originally, the Chairman of IDT, which is a publicly traded company and IDT actually owns National Retail Solutions. So, the Chairman's name is Howard Jonas and yes, I am related. He came up with the idea that we should bring coupons to all these independently owned stores because they're being left out of the deals that big CPG providers are offering and why should they be left out? There's plenty of these stores out there. They do plenty of business and their customers, a lot of times are looking for the most cost-efficient way to buy something.

So definitely there's an appetite for coupons from their customers, it's a matter of how. How can we ensure that there's trust between the CPGs and the independently owned stores? So, we searched around in a few options and we realized we're going to have to have a point-of-sale system because we need to be maintaining a database of UPCs, and we need to be able to scan barcodes and report data back to the CPG companies. So really actually out of the idea for coupons came the idea for the POS. Now, interestingly enough, IDT had always been doing a lot of business with independently owned stores because IDT offer them calling services via Boss Revolution and that's one of our brands.

Boss Revolution does money transfer and international calling. So, the point is IDT through its Boss Revolution brand was already in 50,000 locations that were independently owned convenience stores in most cases. And so, we already had a sales network, distributors that were out there and we were seeing that these stores were lacking technology and we thought, wouldn't it be great if we can bring them their first serious piece of technology, let's upgrade them from a cash register to a point of sale. So that's really how we got started. Nowadays, we have a full suite point of sale hardware and software, and we also offer credit card processing through NRS pay, which offers really great flat rates that are hard to beat.

So, we're a one-stop shop. We service everything, whether it's the hardware software or the payment processing, we make it extremely easy for store owners who don't have a history of using technology to embrace the new technology. And we're actually the best value on the market. As I mentioned earlier, a lot of times budget is an issue. We come in with really competitive prices on the hardware, software and our flat rate credit card processing. And our customers love us, whether it's the POS or really the payment processing as well.

The space is very competitive in credit card processing in particular, but between the amazing software and hardware and the flat rate we offer with the payment processing, we don't see a lot of churn. Our customers stay with us long time, they're getting great value and we offer them really that great bridge where they're coming from a place where they didn't have technology to now, they have a lot of technology at their fingertips. So, our mission, I'll just finish off with this. We want to establish NRS as the technology partner for independently owned retailers by helping them digitize their stores. And that's what we've been doing these past few years.

Greg Crow: It's fascinating. I think we talked about the relationships that your customers have and that high touch relationship is important, but as you pointed out with COVID and just consumer expectations in general, consumers are looking for a high-tech as well. And so, I think you hit on point of sale and e-commerce and data. So we're going to dig into that in a few minutes, but we've spent a lot of time on the podcast talking over the last few months about what the last year has meant for mid and large size retailers around engagement and purchase behavior, despite the pandemic and economic downturn and civil unrest across the country, retailers and the channel have proven remarkably resilience and delivering on the core value of convenience to consumers while innovating in a number of ways given the local context. For larger chains, we've seen a drop in trips offset by larger baskets and a different mix in products. As we just said earlier, retailers are focusing on engaging consumers in loyalty programs, focused on the consumer experience more generally, and elevating the brand experience through last mile technology. So, Jacob, can you talk a little bit about what the last 12 months has meant for your customer base, the world of independent retailers and are there some common themes like that you've seen amongst your clients?

Jacob Jonas: Sure. I mentioned this a little earlier, but we really have seen mass adoption of technology and e-commerce. And if you look at the stock market, the companies that have done well, technology, e-commerce, financial technology and NRS is very much at the center of all that. We've really seen independently owned stores as well, now, dabble for the first time in e-commerce. You can imagine if you put yourself in the shoes of a bodega owner, they were just running a brick-and-mortar operation, and it was on cruise control for a long time, but COVID really disrupted that. So, we've seen actually a lot of our stores tell us, hey, we want e-commerce. We want to have a website or even an app that customers can shop from, we can get the order and we can either deliver it or do curbside pickup. And so, we started working on that right away and we actually now have an e-commerce offering.

So, it comes as part of our premium software bundles, but we say premium, it's almost a joke because it's so cheap. Our basic package costs $19.95 a month and our premium package costs just $9.95 a month. So, for $10 more per month, you're getting a suite of advanced data and other features plus e-commerce. And we let you try that for the year, really for just $10 a month, it's unheard of, if you look at what other places they're charging. And then after that, if you want to keep it, you pay another $10 per month and your final fee is going to be $39.95 a month and you have e-commerce perfectly integrated with your POS system. The orders from this website that we can make your store are going to come right into the POS. And we also have a shopping app called the BR Club shopping app, where we put all of our stores so that customers can find them on that app and the orders again, come right into the point-of-sale machine.

So, customers asked for it, we delivered it and we see in the news every day, big chain stores are adopting e-commerce, there's no reason why independence can't do the same. And like I said, because of COVID, we've seen an appetite for that. They were going to need this technology anyways, but they adopted it now much quicker. Another thing is actually during COVID, we went from selling 350 POS’s per month to selling over 500 per month. And yes, that's because our operation is always getting better and better, but a lot of it has to do with stores realizing, hey, I'm not going to be able to operate my store, especially during COVID with just an old cash register. I need a technology; I need the brain of the store in there so that I can really monitor my store whether I'm there or I'm somewhere else. You can actually go on an app and see what's going on at your store from the beach maybe if you want to do that.

A lot of people were just staying home. They didn't want to go to the store as much. So, you can check from your computer or your app what's going on at the store. Lastly, we saw really that independently owned neighborhood retailers, they actually wound-up thriving during COVID because they're viewed as the safe, comfortable, and local place to shop. So, we actually had a study come out recently by our National Retail Solutions data analytics team and they found that actually independently owned stores to use an example, the growth in the alcohol sales far surpassed the growth that was even happening at larger stores, larger format stores. So, we know during COVID that a lot of customers wound up going to C-stores for their liquor, beer, and wine.

And so, Nielsen found for example, that there was a 25% growth in spirit sales at convenience stores during 2020 versus 2019 and with wine about 18%. So phenomenal growth and Nielsen is measuring really larger format stores. We found at our independently owned stores, in the spirits category, they sold 48% more spirits and 45% more wine. So almost even double the growth that Nielsen saw at larger format stores. And I should mention, we do also work with Nielsen and we're very happy with that partnership, but this was just to illustrate that large format C-stores did great business during coven, but the growth was even more phenomenal actually at independently owned stores. And we're proud to partner with these store owners that stayed open and service their local communities throughout COVID.

Greg Crow: Those are stunning numbers. That's fantastic. We've been talking about how strong a category alcohol has been amongst the retailer panel admitted and large size store so it's very interesting to hear that your clients are seeing even stronger growth. That's fantastic. So, Jacob, can you talk about what's next for NRS? What are just some of the trends that you're monitoring and looking at investing in for potential innovation?

Jacob Jonas: Sure. When you boil it down, really our goal is to make these stores more technologically sophisticated. And so, we recently launched, like I mentioned earlier, the pro and advanced software packages, and this is a way of getting our stores to try more technology, get them comfortable with using technology. And so, there's obviously more features bundled together and those pro and advanced packages. You can now get access to advanced data, e-commerce, loyalty so obviously we're seeing that those features in particular are super important in today's day and age. The e-commerce, which I've talked about a lot today is allowing these stores to be more versatile. Service the customer that comes in the store service customers that don't want to come to your store, but live nearby and you can make a quick delivery within a couple minutes like larger companies can't because their warehouses are so far away. Your convenience store is right there, a couple minutes away.

And loyalty also. I didn't touch on that yet, but our e-commerce services come complete with a loyalty offering. So, the store can literally program in, hey, I want to do buy 10, get one free on my sandwiches. And coming soon, they're going to be able to offer points programs, spend a dollar, get one point and then use those points to redeem rewards. So, can you imagine your local bodega doing all that? It seems almost a little farfetched, but they're going to be doing it soon things to these packages. And next up we're actually going to be offering CRM offering. So, the ability to reach out to your customers and keep them coming back, send them email, send them gift cards, or just send them an SMS maybe. Keeping in touch with your customers in today's day and age is super important and now, again, thanks to our partnership with bodegas, which we're very happy about and independently owned convenience stores. And by the way, we work with independently owned liquor stores and tobacco shops as well. All those stores that have been left out of using this type of technology, e-commerce loyalty, advanced data, they're now going to be able to offer all that.

Greg Crow: It's so encouraging to hear what you're doing to help these small retailers reach consumers. That's fantastic. So, Jacob, for those listening that want to learn more, can you tell us how they can learn more about an NRS?

Jacob Jonas: Sure. For customers, anyone interested in general information, you can go to nrsplus.com and any businesses, CPGs, et cetera, interested in our advertising offerings, we actually have, I didn't touch on this, but a nationwide network of digital screens in the stores on the customer facing side of our POS. And so, it's a great place to run an ad it's right at the point of purchase. So, if you're interested in that or in our data, there's never been any data coming out of these stores before, we've really unlocked that black box of data. You can go to nrsdigitalmedia.com.

Greg Crow: Fantastic. Well, thanks again Jacob, for joining us. It's so encouraging to see independent two stores thriving, and I'm sure that's just going to accelerate in 2021. And next week's episode, we'll highlight several brands that are winning with consumers in C-stores today. Thank you for listening to How Convenient we do want to hear from you. You can reach us at koupon.com. Don't forget to subscribe and review us, and you can find more insights at blog.koupon.com. Thanks again, Jacob.

Jacob Jonas: Thank you for having me.
 
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