Climate, Vladimir Putin and the Federal Reserve pose the three greatest risks to the economy, notes the chief technical analyst for United-ICAP.

By Erin Rigik, Senior Editor and David Bennett, Senior Editor

After a morning filled with plenty of numbers to chew and digest, attendees at the NACS State of the Industry (SOI) Summit at the Intercontinental Hotel in Rosemont, Ill., were privy on Tuesday to a global view of economics and consumer trends impacting the industry.

Factors that combined last year to play havoc on c-stores’ electric and gas bills, according to Walter Zimmerman, Jr., vice president and chief technical analyst for United-ICAP. Zimmerman said the harsh Polar Vortex weather system that settled on the country this winter taxed natural gas capacity, causing c-store energy costs to spike for an extended period of time.

Unfortunately, reverberations from a capacity strained system are expected to continue, meaning the supply and price issues can continue into summer, even after the Polar Vortex has long since broken up. And we may see similar issues next winter as well.

“We’re seeing the migration of the polar vortex South due to sudden stratospheric warning. What’s to prevent it from happening next winter? Absolutely nothing. Scientists say we should get used to it,” Zimmerman warned.

Zimmerman listed the top three risks to economy as climate, Vladimir Putin—the president of Russia—and the Federal Reserve.

“The Federal Reserve is a destabilizing index,” Zimmerman said. “The Fed lowered interest rates by buying trillions in long bonds. It wants people out of bonds and into the stock market. This has led to a golden age of the speculative bubble.  The new batch of bubbles being inflated includes the stock market—the S&P 500 index and Nasdaq.” He added, “Bubbles burst. They never slowly leak.”

Looking forward, Zimmerman advised operators to pay attention to how the Fed addresses interest rates.

Consumer Trends
Todd Hale, senior vice president of consumer and shopper insights for Nielsen spoke on the consumer and retail trends impacting the industry.

He pointed to many factors, good and bad that are impacting the convenience store business. Inflation is subsiding, but units remain soft. Gas prices are falling. We’re seeing a $5 billion reduction in SNAP Benefits. Natural gas prices are rising. Home heating oil prices are falling. Social security recipients receive 1.5% cost of living increase, minimum wage increases are happening in 13 states, while wages remain stagnant elsewhere. Some 1.3 million lost extended unemployment benefits at the end of last year and population growth remains low.  Many of these factors are leading to little growth in the industry. Center store departments are struggling.

As wages are not growing, consumers are making decisions to shift spending or cut it out altogether, noted Hale. The bright spot is the perimeter of store—fresh matters. Consumers are flocking to fresh foods, and dollar growth and volume gains are seen across the board for most fresh products.

Hale noted an increasing economic divide is becoming obvious as grocery stores especially are popping up to target low income shoppers and others are opening to attract upscale shoppers on the other end of the spectrum.  Dollar store and c-store are among channels with customer bases comprised of low income shoppers. “Shoppers in your stores can’t afford to spend these days, while people with money can shop a lot different places,” Hale noted.

While all demographic groups have lost since 2000, blacks and Hispanic demographics have suffered the most, and while they’re no longer falling in terms of wealth, they still lag pre-recession levels. Despite economic woes, consumers will still pay more if the benefits outweigh the price—even in a tough economy, Hale noted.

The biggest retail growth trends are coming from value stores, with c-stores showing the second fastest growth at 1.5%. “C-stores driving more growth because of store count and how fast you’re adding stores,” Hale noted.

C-stores can win by gaining the shopping trips of superior shoppers, and capitalizing on meal trends, such as the snack and meal blurring and healthy/fresh demand. Retailing at extremes will drive store expansion and product innovation, Hale said. He noted c-stores should be chasing the right customers who drive sales in your stores, not just the competition.

Super Customers
Finally, Eddie Yoon, principal of the Cambridge Group, said one entity that c-stores should be following is the “super consumer,” who tends to be above average when it comes to economics and emotion.

“Super consumers are key to profit and growth,” he said. “Take data you already have and get insights about who these people are and what they care about.”

Just who are these super customers? Yoon noted that the top 10% of c-store shoppers drive 40% of all food and beverage sales. These super customers shop more frequently and in high margin growth categories. They take twice the number of food and beverage trips per month, and have four times the food and beverage spend per month. What’s more, they buy and eat food all day long, instead of gravitating toward one daypart and 42% of what they’re buying they want to eat now. “How does that drive your assortment?” Yoon proposed.

C-store super consumers have common demographics, and tend to be more male (71%), than female (29%). Super customers have different needs and shopping missions when they visit your store. A super consumer of one category, tends to be a super consumer of nine other categories too—which can vary depending on the person. For example, a super customer of milk, might also be buying doughnuts, cereal, candy, cookies and carbonated soft drinks.

Yoon noted that to find your super customers, use big data and rank your stores by category sales to find them. C-store operators can also ask suppliers to help with information that can help them pinpoint super customers and what categories they’re shopping. Once you understand them, you can optimize store layout to attract them.

“You are probably sitting on more data than you realize,” Yoon said. “Which of your stores do a disproportionate amount of that business? Work together to build joint growth plans with your suppliers and create a win-win opportunity.”