'Destination Versus Desperation': Upscale Convenience Stores Are Coming For Prime Retail Locations

When Paul Nair opened the first location of his upscale neighborhood grocer, Savi Provisions, in Atlanta's Inman Park neighborhood in 2008, he didn't realize he was on the cutting edge of a trend that has begun to reshape retail markets from the suburbs to prime corners of Manhattan.

Savi Provisions, which serves curated wines, high-end cheeses and chef-prepared meals, should open its 25th location next year after expanding to Nashville, Savannah, Durham, Raleigh and Charlotte, Nair said, and his next concept is doubling down on the collision of convenience and craft food and beverage.

This month, Nair expects to open the first UPop, which stands for Urban Provisions Offering Petroleum, an Arco gas-served convenience store on Peachtree Road in the heart of Buckhead, Atlanta's toniest neighborhood. Unlike QuikTrips, Wawas or 7-Elevens, UPop will still be selling Savi's high-end product selection, replete with liquor and a cigar bar, Nair said.

“What I'm trying to do is I'm trying to elevate the convenience store experience to a higher level,” Nair said.

Nair has more competition than ever. Upscale convenience store concepts have expanded across the country, from new entrants like Foxtrot in Chicago and Washington, D.C., and The Goods Market in Los Angeles, to the largest convenience chain in the country, 7-Eleven, launching its Evolution concept in Dallas and other markets.

Consumers were already shopping at convenience stores more often before 2020 as millennials and members of Generation Z demonstrated more willingness to buy prepared meals and craft beer and wine than tobacco products and candy, said Mark Landini, a retail brand consultant out of Sydney who has done work for such retailers as Walgreens, Aldi and 7-Eleven.

Landini said the coronavirus pandemic accelerated the trend, as more affluent consumers bought their merchandise closer to home, especially from convenience stores where operators focus on curating higher-quality food and beverages.

“[Store operators] are now realizing they don't just need to appeal to the lowest common denominator," he said. 

Convenience store sales reached a record high of $243B last year, with beer, wine, liquor, edible and non-edible groceries leading the charge, according to Convenience Store News' 2021 industry report. Merchandise totaled 45.6% of all sales in 2020, jumping from 36% of all sales the year before.

Edible grocery sales from convenience stores grew by nearly $12.5B between 2019 and 2020, or a 9.6% increase, according to the Convenience Store News report. During that same period, sales of beer and malt beverages jumped 14% to $24.6B and sales of liquor and wine skyrocketed 30.9% to nearly $5B.

The growth was helped by services like Grubhub and Uber Eats, which began to pick up goods from some convenience stores and deliver them to customers, typically within an hour. 

“Everyone wants convenience. Everyone wants it faster and everyone wants it easier,” National Association of Convenience Stores Vice President Jeff Lenard said. “That's good when you're a convenience store. That's bad when every other retail store realizes that and now you're competing on convenience.”

Now, convenience store operators are focusing more on luring in affluent shoppers by focusing on prepared meals and healthier food fares, experts say. That has appealed especially to millennials and Gen Z consumers who have demonstrated a willingness to pay more for organic, sustainable and gluten-free foods. 

“We're seeing that [as] more of a focus, that convenience aspect. But the upper scale seems to be really popular right now,” said Aaron Farmer, president of the national retail consulting firm The Retail Coach. “I think that consumers have more disposable income. In a sense, it's like room service, if you will.”

At the same time, convenience stores operations are relying less on fuel sales, a segment that took a huge hit during the pandemic. Fuel sales declined by nearly 20% in 2020, according to the CSN 2021 industry report. 

The trend is prompting operators to experiment with store locations without gas pumps in car-centric cities. In Midtown Atlanta, QT opened its first fuelless store location in 2016, surrounded by high-end apartments and condominiums. That setting helped QT forgo the need for gas, Coro Realty President Robert Fransen said.

Coro owns the property where the QT's convenience-only store is located, as well as a locally owned convenience store in Downtown Atlanta that was recently renovated and upgraded with more of an emphasis on food and beverage.

“It used to be a place you go get a beer and cigarettes. Now it's where you go for fresh, prepared foods,” Fransen said. “I wouldn't do my grocery shopping at a QT. But if I lived in a condo and I wanted to grab a couple of beers and a pizza ... No one is going to confuse it with Whole Foods, but it's certainly nicer than your typical 7-Eleven with the Keno machines.”

Matthew Fernandez, a retail broker at New York City-based Okada & Co., said the overall growth of convenience stores has bigger chains leasing prime retail corners in New York City as they chase the business once dominated by mom-and-pop bodegas.

“The higher-quality, better operator is the one getting the expansion opportunity, for sure,” Fernandez said. "You're seeing more convenience stores taking untouchable corner property."

Amazon began its cashierless Go format in a 1,900 SF storefront in Seattle in 2016. Today it has stores in Chicago, New York and San Francisco, and it is increasingly expanding into grocery beyond its Whole Foods subsidiary. But it isn't the only digital native attempting to stake out a corner in the convenience store space.

DoorDash, the online delivery platform, began rolling out a DashMart convenience store concept in a host of U.S. cities last year. The firm just filed permits to open its first store in Atlanta in Midtown, the epicenter of the city's tech boom.

“The No. 1 e-commerce platform or store, Amazon, is getting into the convenience store game,” Farmer said. “If your No. 1 e-commerce retailer is getting into brick-and-mortar, they see something as well.”

The majority of convenience stores are in rural areas, Lenard said, but convenience store presence in the cities is growing. Of the more than 150,000 convenience stores across the U.S., 15% of those are in urban locations, and another 30% are in suburban areas, according to NACS.

“With the perception that fuel will be less important and food will be more important, you see stores looking to locate where walk-up traffic is as sufficient as drive-up traffic,” Lenard said.

“It's taken 30 years for the perception of convenience store food to change, and it's taken a lot of work by a lot of really good retailers, where convenience stores are considered a destination, versus desperation," he added. "Now the model is, 'Now I really go there because I want something to eat or drink, and, oh by the way, I need gas.'”

Eric Seitz's family has run a chain of Chevron convenience stores for 60 years, but Seitz senses the key change in the market and is responding. He launched a new convenience store concept, Air Guitar, that offers sandwiches, curated wines, high-end coffees, drinks like kombucha and even an ice cream parlor — but not gasoline. 

Air Guitar has been open for more than a month in Gilbert, Arizona, and has been doing well enough that Seitz is looking to expand the concept into 20 locations in the Phoenix metropolitan market and eventually to the West Coast.

“We just wanted to try something different. Fuel is difficult and who knows what the future holds in the next 20 years. It is very commodity-based, and I was trying to get away from that a little bit,” he said. “I'm more destination. We tried to create more destination than commodity-based.”