Closing store locations has been a near-daily occurrence during the pandemic. But when a high-flying QSR like Dunkin is in the news, it’s a bit of a surprise. The chain announced on Tuesday (July 7) that it was following through on its decision announced earlier in the year to close down 450 Speedway gas station locations as it continues to reinvent its brand.
Although Dunkin’ says it is ending the relationship due to restricted space and limited menus, the move brings several issues into the spotlight, the most important being customers’ willingness (or lack thereof) to enter the store after they’ve had contactless options at the pump. It also comes at a time when the gas station business is suffering from rock-bottom pricing and margins, as well as a downturn in travel caused by the pandemic. In fact, Speedway parent Marathon Petroleum has been trying to sell the Speedway chain, which is centered on the East Coast.
Back in February, Dunkin' President Scott Murphy told financial analysts says it is ending the Speedway relationship, which has been in place for the past several years, as it works to update its image. "By exiting these sites, we're confident we'll be better positioned to serve many of these trade areas with future Dunkin' restaurants that reflect the full expression of our next-generation restaurant design," he said at the time.
Speedway told Convenience Store Products that the breakup with Dunkin' was mutual, as its own brand of coffee and doughnuts will replace the Dunkin' products. Dunkin’ committed to the gas station convenience store business earlier in the year as it expanded its partnership with Shell Oil Company. Running until the end of 2020, the “Sip Dunkin’, Save at Shell” promotion will grant savings of $.10 per gallon every time five Dunkin’ beverages are purchased by Fuel Rewards members who have Shell Gold Status and members of the DD Perks Rewards program.
Apparently the loyalty play and strong mobile app game from Dunkin’ wasn’t enough to save the Speedway partnership. A PYMNTS report in late 2018 found that convenience stores at gas stations could also benefit from a user-friendly mobile experience. Mobile apps are proving to be effective at encouraging consumers to visit a station’s C-store to buy items like soda, snacks, magazines and cigarettes. For a significant share of app-friendly consumers, this is already second nature. Of consumers who use mobile apps to pay for gas, 73 percent say they are likely to shop at the facility’s convenience store, and 82 percent want a mobile app experience that will let them pay for C-store items.
PYMNTS’ research has also found that contactless payments, which have witnessed slow adoption in the U.S., appear to be growing in popularity. Just 0.3 percent of U.S. consumers’ POS transactions were contactless in 2016, and only 3.5 percent of cards in circulation at that time were capable of making such payments. The COVID-19 pandemic could be prompting consumers and merchants to reconsider the technology. One credit card network reported that U.S. consumers’ use of its contactless cards and digital wallets rose 150 percent between March 2019 and March 2020.
A study conducted in late March illustrated a similar shift, finding that 30 percent of consumers reported using contactless methods like cards and smartphones for the first time after the pandemic hit. Safety concerns appear to have driven much of this development, as 29 percent of those surveyed said they were “very” or “extremely” worried about contracting the virus when handling cash, and 22 percent cited the same concern regarding payment cards.