Insight Report Convenience Powering the Retail Edge Powering the Retail EdgeStore The challenges, the priorities, the future.....

Powering the Retail Edge Powering the Retail Edge The Demand Powering the Retail Edge Powering the Retail EdgeFueling for Convenient Convenience In-Store Technology expectations for frictionless payment options, including with Next Level scan & go technology, mobile POS and line-busting, that expedites the checkout process have fostered a demand for increasingly sophisticated in-store technology. According to a recent report by NACS and public Technology research firm PSB, 165 million people shop at a c-store every day during Powering the Retail Edge Powering the Retail Edge peak seasons. At the same time, the report underscored the need to provide more convenient payment for this growing Innovation customer base. Checkout C-Store In the world of convenience, c-store retailers cannot afford speed and wait shoppers want executives view inconveniencing their on-the-go with long wait times at the times matter: technology to their physical store as platforms for checkout. What’s more, with the rise of third-party convenience store get them in and out faster: technology innovation, but concerns delivery services such as GoPuff, UberEats, DoorDash and GrubHub 45% over aging hardware, cost and consumers now also expect to be able to buy meals, snacks and of shoppers said security limit innovation capabilities, additional items from their nearest convenience store online and have they entered and 44% according to new research them delivered to their doorsteps. left convenience of convenience commissioned by Zynstra. stores with a store shoppers As the need for convenience continues to increase for today’s time- purchase in hand said they would in under three be interested in The c-store has long been a staple in strapped consumers, c-store retailers recognize that their stores need minutes. ¹ technologies that consumers’ world, providing the ultimate new ways to delight and engage consumers. However, constraints allow them to pitstop for road trips, last-minute items, a including costs and aging IT infrastructure are current pain points instantly pay and quick coffee break or meal. But unprecedented limiting the ability to innovate. Top that with the increasing competition skip checkout lines. 2 consumer expectations and shopping behaviors from the Amazon Go convenience store concept, and c-store retailers in the retail and grocery industries are putting face a number of challenges. pressure on c-stores to create new levels of Kim James, Circle K’s Senior Director of Excellence, Merchandising and Marketing, challenged c-store executives to consumer engagement and convenience. face these issues during her NACS panel discussion. She said now is the time to ask three pivotal questions: Increasingly, technology is seen as the answer. “How can we act; how can we take charge; how can we embrace our customers in a different way?”³

¹ https://csnews.com/consumer-survey-finds-c-stores-still-reign-supreme-convenient-locations-fast-service ² https://www.businesswire.com/news/home/20181128005464/en ³ https://csnews.com/evolution-convenience-centers-customer-experience 3 v

The Challenges Results The survey found c-store retailers of Creating know they need to implement Convenience enhanced IT features to continue offering their consumers higher levels As c-store retailers look to engage their consumers in of convenience, whether that be at new and different ways through technology, a majority of them face common pain points in elevating the in-store the pump, in the store or home experience. delivery.

Zynstra commissioned a survey by Censuswide to identify the priorities and obstacles c-store retailers face as they look to innovate within their stores.

However, obstacles to doing so include: Methodology • The research focused on Aging hardware infrastructure c-store directors and IT managers from that’s expensive to maintain U.S. convenience store chains with a • physical footprint of 20 to more than Difficulty in adapting their existing 500 locations and average revenue IT to answer consumer demand between $10M to more than during peak shopping hours $999M. • Concern over cost of implementing new technology

4 5 Looking to

Furthermore, c-stores’ current IT infrastructure also the future Aging IT Infrastructure 96% prohibits success during peak trading hours, as only C-Stores responded that upgrading customer 37% of survey respondents answered that their current loyalty initiatives and improving staff is a Barrier to Innovation According to the survey IT system is very prepared to cope with consumer productivity through technology are the top results, 96% of c-store directors demand during these busy periods, leaving nearly 2/3 of two key IT priorities, followed by: Most c-stores can offer only the most basic functions given the and IT managers agreed that if respondents only somewhat or not very prepared • Reducing cost and improving operational limitations of current IT infrastructure and bringing new technology it was easier to implement new to answer consumer demand in high-traffic and rush innovations into the stores is difficult. The majority of survey efficiencies applications and services, hour times. respondents said they are constrained by a lack of resources. they would do it more • Enhancing the security of their IT in stores As c-stores map out their plans for in-store technology innovation, often. • Utilizing technology to improve the identifying how to overcome IT cost challenges, solving aging shopping experience hardware pain points and delivering upon consumer demands during 55% Additionally, when asked about peak shopping hours are high on the agenda. rolling out seasonal promotions, 55% of respondents answered that Not surprisingly, 49% of c-store survey respondents said that the 49% their IT infrastructure is somewhat or What are your key IT priorities? And, when asked to main IT challenge they face in-store is the high cost and risk of not very prepared. This is a key area as describe the impact of their the range of products being demanded Upgrade customer loyalty programs 39% downtime associated with a potential rip and replace of entire store current store IT infrastructure by modern c-store shoppers are 45% Improve staff productivity through infrastructure to bring it up to date. In a world where consumers on their business, only 49% of changing fast and it is essential that Similarly, only 45% of 39% respondents said it was an technology demand convenience and speed, c-stores cannot afford downtime. c-stores have the capabilities respondents said their IT engine for innovation and the to react quickly. infrastructure is very prepared Reduce costs and improve operational delivery of new in-store to cope with increased need 38% Those with 250+ stores were found to have a higher percentage in efficiencies customer experiences. for uptime, leaving 55% Enhance the security and compliance of these IT challenges, indicating low levels of IT agility for larger c-store somewhat or not very 37% estates based on the complexity of their incumbent IT infrastructure. prepared. in-store IT Use technology to improve the shopping 36% experience While the drive to deliver innovation within the c-store The next top 5 IT challenges identified by survey respondents included: Manage your in-store IT to reduce the impact of impending end of life challenges being exists, cost constraints and aging hardware make 29% the goal hard to reach, as they present barriers to posed by operating system and application vendors innovation. Support new store openings (organic or 26% 47% 35% 35% 33% 32% through acquisition) Inability to cope Inability to drive Aging hardware Inability to bring High costs Refresh POS infrastructure 20% associated with with lines during upsell promotions infrastructure new features, compliance and peak trading from multiple that’s expensive to apps and digital security protocols hours and high touchpoints in the maintain engagement season store and at the inside the store pump due to POS “With one in seven stores getting remodeled every year at a cost of $400,000, that can limitations with existing systems put pressure on some stores whether to modernize operations or exit the business,” said NACS Vice Chairman of Research Andy Jones, and president and CEO of Sprint Food Stores Inc., Wrens, Ga.⁴

6 ⁴ https://www.cspdailynews.com/mergers-acquisitions/us-convenience-store-count-dips 7

“Consumers are redefining what convenience means to them, In response to the Amazon threat, survey 91% and as a result, today’s retailers Amazon Go and the respondents identified key technologies There was also a strong appetite among must be extremely tuned in that were important to the future of their survey respondents for putting the right C-Store Omnichannel business. Respondents listed the below technology into the store associates' to the wants and needs of the technologies as VERY important: hands to accelerate checkout and move the individual consumer,” said Jeff Experience transaction away from the fixed register. A Williams, senior vice president combined 91% of respondents identified Amazon Go presents yet another threat to c-stores. With plans mobile POS tablets and kiosk-based POS of retail services for Nielsen. to open 3,000 cashier-less stores in the next three years, they for checkout in aisle by store associates “Convenience players will need will become one of the largest convenience store groups in the and self-checkout capabilities as to continue to seek growth industry. While c-store retailers know they will have to offer 43% 43% VERY important. scan & go opportunities amid a fiercely customers new levels of frictionless checkout and omnichannel mobile payment convenience to compete and continue gaining customer app aggressive environment, whether loyalty, they face pain points in doing so due to cost and lack of that’s through exploration of consistency across their technology infrastructure. Put the Right frictionless payment methods, 42% piloting more efficient retail order online and 41% pickup in-store Technology in Store layouts, expanding private- Top challenges in rolling out new applications and order at the services to the store include: pump Associates' Hands label programs, increasing food service offerings or a move cost of sending IT teams to upgrade and install 43%: the new features was a key challenge toward building an omnichannel presence. That said, as the difficulty in consistency of offline-online 88% value of convenient shopping 42%: components pose challenges This is not surprising, as experiences continues to grow technology-empowered store in importance, convenience as overall budgets hindered their ability to associates can be a differentiating a channel must play into its true 37%: implement new features factor in the customer experience when providing the right information in real time strengths and optimize to be the to the customer. lack of consistency across store sites retail channel that best serves the According to a recent report by Boston created friction in delivering an needs of on-the-go consumers, 32%: Retail Partners, 88% of shoppers are omnichannel experience somewhat or extremely likely to buy on a personal level.” ⁶ if helped by a knowledgeable sales associate.⁵

5 https://brpconsulting.com/download/2018-pos-survey 6 https://www.cspdailynews.com/mergers-acquisitions/us-convenience-store-count-dips 8 9 What C-Store Retailers Want: Simplified, Secure and Scalable Technology To meet the challenges of aging IT and implementing new applications;

of survey respondents answered that simplified 91%:  management of IT is a top priority. Centralized management of the store through a software-defined store strategy can be the key to this, as it allows c-stores to manage all stores from one central system, allowing for faster app deployment and more secure IT updates.

Other important factors in c-store IT include:

89%: reducing IT costs

88%: the ability to run new advanced applications  empowering store associates with the proper 86%: technology to maximize sales per square foot of store space

10 11 Point-of-Sale Flexibility is Critical for Delivering the Right Customer Experience POS Rapid transformation is essential; impacted devices, particularly the majority of c-store retailers POS terminals distributed over systems! know that change needs to a large c-store estate, can result happen immediately, but aging in massive upgrade costs – all POS systems present another to simply ensure continuity of When asked about their POS systems, the barrier. There are multiple support. majority of respondents indicated a number checkout options currently being Security is another key of drivers for change at the POS. This was no trialled by grocers and c-stores concern. Support for legacy with omnichannel integration. surprise as only 18% of respondents said they POS systems is fundamental to In truth, no one yet knows the maintenance of PCI-DSS had the exact POS infrastructure that will which will be the best and most compliance. Without it, POS serve the business now and in the future: preferred option for customers. terminals can’t access the latest What they do know is that all are uncertain of the future of customer checkout updates and patches, exposing transactions gravitate back to behavior, but know they need to make POS c-stores to much higher security 25%:  the POS so they need complete investments now to adjust to evolving behaviors and compliance risks. flexibility to trial and integrate acknowledge that their current POS infrastructure the best new options. On average, retailers are now requires change to meet the demands of the future responding to cyber-attacks 23%:  There are several major problems twice a due to aging in- seek a solution to keep their legacy POS running with with aging POS systems. First, store infrastructure, particularly minimal cost to buy their c-store estates time as they they are subject to the same 21%:  across dispersed geographic analyze how checkout behavior evolves upgrade and support cycles locations. Furthermore, as other computer platforms feel that they have the exact POS infrastructure that upcoming POS end of support and are equally dependent 18%: will serve their business now and in the future dates will place commonly used on the continued support of POS software out of compliance, operating system and application leading to potentially expensive providers. If provider support hardware replacements. For is withdrawn based on supplier large scale c-stores with multiple product lifecycle decisions, POS devices, this expense could the implications for c-stores run into millions. are significant. The number of

12 13 Embracing Customers in a Different Way Survey respondents have laid out the current c-store landscape and the pain points c-stores are looking to overcome in order to “embrace their customers in a different way.” Once c-stores have the foundational IT structure that is needed to succeed, respondents said their top five IT initiatives to support their future business strategy are:

identified home delivery capabilities as a top priority, as c-stores seek to cut 38%  into the current grocery store competition with home delivery said that mobile pay at the pump is key, allowing consumers to pay for fuel 34% and order items from the store that can be delivered to their cars 33% deemed self-checkout capabilities as their #1 priority prioritized order online pickup in-store throughout their c-store chain 32% as their top future initiative put mobile payment apps at the top of their wish list, for a fifth-place 29% tie with order at the pump initiatives

Wawa’s CIO, John Collier, summed up the reasons the company looks to deliver new IT innovations to its customers: “It’s not about Wawa becoming a tech company; it’s about enhancing our relationship with our customers.” ⁷

⁷ https://www.cio.com/article/3391396/wawa-brings-digital-integration-to-the-convenience-store.html 14 15

Zynstra Powers C-Stores to Deliver Innovation at the Retail Edge Convenience is still king in the eyes productivity and the IT bill of materials of c-store shoppers. However, today’s and cost. The right infrastructure can be consumers demand a digitally enabled transformational, providing a platform for and connected shopping experience, and increased ROI, innovation and engagement - c-store retailers must evolve with consumer and Zynstra provides a best-in-class answer demands to continue gaining market share for these challenges. and deliver on the promise of convenience. Conversely, the wrong infrastructure can be The caveat here is that c-store retailers a barrier to achieving business strategy, while can’t do it alone. They need the right at the same time being highly costly and technology to meet customer needs and inefficient. As the store continues to build gain a competitive advantage. New retail on its role as the key customer experience edge software is now available to make this differentiator, forward-looking c-store happen, enabling c-stores to optimize their retailers are moving to an infrastructure that existing in-store IT and digitally transform provides the flexible, cost effective platform their stores, without going through an for innovation that they require. All of this expensive ‘rip and replace’ exercise. is done in a way which avoids big bang changes, optimizes past IT Zynstra’s experience and expertise with investment, and eliminates leading c-stores and travel centers helps vendor-imposed technology c-store retailers transform their in-store life cycle costs. In short, it’s technology. Zynstra’s proven results include CLICK HERE the Zynstra way. rapid innovation, lower infrastructure costs, To connect with shorter checkout lines, faster transaction Zynstra today times, easier upsell and better experiences and learn more about how you for their customers and associates. can deliver a new level In-store IT infrastructure, across both of convenience with back office and front of store, is a critical Zynstra. determining factor when assessing the level of customer service innovation, staff

16 17 Powering the Retail Edge Powering the Retail Edge About Zynstra Zynstra enables retailers to deliver superior customer and employee experiences through faster innovation and radically reduces cost to serve in-store. Purpose built for the edge, our powerful software optimizes existing store technology and enables digital transformation.

Zynstra virtualizes back and front office store technology, with Powering the Retail Edge Powering the Retail Edge intelligent automation to deliver Software Defined Stores. Specific virtualization solutions include Store, POS, mobile POS Tablet, Kiosk, Self-Checkout and Enhanced PCI-DSS Compliance.

Zynstra delivers its patented retail edge software for the world’s largest, most distributed, innovation-driven enterprises. With Tier 1 PCI-DSS compliance Zynstra is committed to security excellence at the edge.

Zynstra is backed by Octopus Ventures, one of Europe’s leading investors in fast-growth companies, focused on backing unusually talented entrepreneurs.

zynstra.com UK Bath Innovation Centre, Broad Quay, Bath BA1 1UD +44 (0) 333 355 7055

USA Office Zynstra Inc. 1700 7th Avenue, Suite 2100, Seattle WA 98101 USA +1 (844) 996 7872