Gas prices may be down now, but high quality offerings will ensure steady c-store traffic if prices jump again.

By Jim Callahan

During the last few months, the convenience store industry has garnered kudos and a measure of goodwill from customers based upon the incremental drops in gas prices, which has put more dollars in consumers’ pockets.

As a result, convenience stores have enjoyed a healthy dose of discretionary sales generated through additional food and drink purchases. Nonetheless, I’m here to sound a warning bell that positive economic waves don’t last forever. Tides always turn.

PAST AND PRESENT
The sustained drop in crude oil from more than $100 per barrel to less than $30 per barrel over the past year has been a curse to oil companies and a boon to consumers. Because of a sluggish global economy and a recovering housing market, the Fed has been reluctant to bump up interest rates until this past December.

That period marked the first time in many, many months that the federal interest rate has climbed since 2006. It was a fraction, but this old industry veteran worries that every c-store—small or large—might be vulnerable should inflation rear its ugly head.

A majority of Americans are frugal when the economy doesn’t go their way just as they’re now demonstrating their penchant for spending a little extra after gassing up.

Inflation, coupled with the eventual increase in gas prices, can quickly convert customer kudos into complaints and smiles into bad feelings, erasing the small fiscal gains convenience stores are enjoying now. However, our industry can get out ahead of the potential fallout of an economy strained by inflation and the inevitable rise in fuel prices.

DOLLAR VALUE
The convenience and fuel retailing industry sells 80% of the fuels purchased in the U.S. at approximately 128,000 convenience stores—that’s about 40 million fill-ups per day, according to the National Association of Convenience Stores (NACS).

Of course, c-stores don’t live and die with gas sales—not in this day and age. Retailers have found that foodservice can deliver new customers inside their locations, and at a higher profit level than for items like gas. The trick is promising high-quality offerings and delivering every time.

Once customers know that your food options are high quality and delivered consistently, then a bond of loyalty is developed that is only broken when that level of quality service is interrupted.

Inside its upcoming February issue, CSD will recognize three Front-runners in Foodservice—retail professionals who have had an important hand in transforming their company’s foodservice strategies into leading industry programs.

Delivering quality foodservice isn’t regulated to just ham and eggs, pizza and chicken cacciatore.

Coffee is the hot beverage of choice in convenience stores and the No. 1 subcategory of the hot dispensed beverages category, generating nearly 77% of the category’s sales. Broken down, this segment delivers nearly three-quarters of its sales during morning hours.

Combine that trend with your freshest baked goods and you can deliver a value-added offering to patrons that can easily neutralize the creep of inflation via increased in-store sales.

Also, high-margin categories such as frozen dispensed beverages can chill the ill-will of customers should fuel prices spike again.

Of course, frozen concoctions gain even more traction through creative promotions, to include channeling the power of social media.

INFLATION NATION
We already live in a nation of inflation and that’s without federal officials making waves by hiking interest rates to even out the U.S. economy. The price of doing business in America is always on the uptick.

Has anyone been to the grocery store recently and checked the outrageous cost of beef or fish? Have you purchased toner for your computer lately or new tires or parts for your vehicle? I know you’ve had to notice restaurant bills. Yesterday at a steak house, a guest and I were presented with a luncheon bill of $50 for one hamburger steak and one small piece of salmon—with no appetizers or dessert.

Americans want a deal, and there’s no better deal than offerings that speak high quality and value. Enough said.

Just don’t make me say ‘I told you so.’

Jim Callahan has more than 40 years of experience as a convenience store and petroleum marketer. His Convenience Store Solutions blog appears regularly on CSDecisions.com. He can be reached at (678)485-4773 or via e-mail at [email protected].