Low gas prices helped drive sales increases at convenience stores in 2016—and retailers expect those strong sales to carry over into 2017, according to a survey of retailers released by the National Association of Convenience Stores (NACS).
More than two in three convenience retailers (68%) say that their fuels sales increased in 2016 and nearly the same percentage (63%) say that foodservice sales increased.
“The continued improvement of the economy and low gas prices gave our customers more confidence to buy inside,” said Aloha Petroleum’s Richard Parry (Honolulu). He said that he expects “better-for-you” items to help continue to drive strong sales in 2017.
Industry-wide, better-for-you items like fruits and vegetables, yogurt, nuts and health bars saw strong sales in 2016: 63% of retailers reported that sales of these items increased in 2016. Only one retailer surveyed said that sales were down in 2016. “Healthier-for-you items are beginning to gain some traction,” said Michael Zielinski with Retail Management Services Inc. (New Lenox, Ill.).
Retailer confidence about the U.S. economy also surged. A record 79% of retailers say they are optimistic about the U.S. economy—a 26-point jump from last quarter. This surge in retailer optimism mirrors the optimism of their customers. A record 60% of U.S. fuel consumers said they are optimistic about the U.S. economy, according to the NACS December 2016 consumer sentiment survey.
Retailers also are very optimistic about the overall convenience retailing industry. More than three in four convenience retailers (78%) said they are optimistic about the industry’s prospects in the first quarter of 2017, a seven-point jump from three months ago.
New investments in technology related to loyalty programs and enhanced customer experiences are central to the strategy of growing convenience store sales in 2017. Continued technology enhancements surrounding digital advertising, consumer awareness and loyalty are a priority at Casey’s General Stores (Ankeny, Iowa), according to Terry Handley. Meanwhile, A.H. Jamra Co. (Toledo, Ohio) is investing in point-of-sale technology, said David Oswald. “Go high tech or go blind,” was the advice from Mohammad Khan with Shahani Inc. (Branford, Conn.).
Retailers said that new investments in food and beverage equipment are also growing sales. Kwik Trip (La Crosse, Wis.) saw strong sales from its high-end hot beverage sales with its Franke machines and is investing in new beverage offers to continue the momentum. “We expect explosive growth from our new cold-brew coffee and smoothies in 2017,” said Steve Loehr.
Ready-for-you meals will be a big industry trend in 2017, according to Sam Odeh with Power Mart Corp. (Elmhurst, Ill.). Meanwhile, products produced locally—whether snacks, merchandise or even craft beers—are gaining in popularly, according to Todd Kunkel at Handy Mart (Durand, Wis.).
Increased investments in their stores may have helped reduce retailer concerns over competition. Overall, 39% of retailers cited competition from other convenience stores as a concern, down from 47% who cited industry competition a year ago. Meanwhile, 33% cited concerns over competition from other channels like drug stores or dollar stores. However, the new Amazon Go concept “could be game-changer down the road,” said Lisa Dell’Alba with Square One Markets Inc. (Bethlehem, Pa.).
Retailers are much more concerned over threats to their business that are less in their control. A majority of retailers (55%) said that they are concerned about regulations and legislation that could affect their businesses. And 53% are concerned about labor issues, a sharp increase from the 41% who cited labor as a concern a year ago.
Despite concerns over threats to their businesses, 69% of retailers are optimistic about their own business prospects in the first quarter of 2017, largely because of the combination of convenience and an enhanced food offer.
“More convenience stores are adding foodservice, and our industry is moving to a one-stop shop for local communities,” said Nishant Chudasama with Cadnicks (Orange, Calif.).
“I truly think food will continue to be the trend in 2017—but it’s going to take ingenuity and creativity to continue to entice people to visit convenience stores for lunch and dinner. We’ll need to continually adapt to reflect trends and customer preferences—whether it’s a new burger or a new healthy option,” said Dennis McCartney with Landhope Farms (Kennett Square, Pa.).
The quarterly NACS Retailer Sentiment Survey tracks retailer sentiment related to their businesses, the industry and the economy as a whole. A total of 81 member companies, representing a cumulative 4,052 stores, participated in the December 2016 survey.