A CSD Staff Report
There are strange noises circling the c-store industry.
For instance, there’s a buzz about Amazon, which unveiled a 1,800-square-foot convenience location in Seattle that allows shoppers to skip the checkout by using the same technology featured in self-driving cars.
In the other Washington, there are whispers that President Donald Trump and a Republican Congress are intent on dismantling the U.S. Food and Drug Administration like a toy wooden house, throwing out a host of regulatory policies along the way.
It’s all good fodder for shooting the breeze in the break room, but the true sounds that all c-store operators most concern themselves with are those emitting from satisfied customers, a supplier pulling up in the parking lot to make a daily delivery or the distinct ring of busy registers.
Those are the sounds of a retailer doing business, and in 2016, business was good.
Last year, fuel prices were lower compared to a few years ago. Proportionately, in-store sales shot up.
Most convenience retailers don’t wait on outside forces to determine their success. New innovations, streamlined concepts and better product offerings pushed total sales inside of the store, reaching a record $225.8 billion in 2015. While the preliminary industry numbers won’t be published by the National Association of Convenience Stores (NACS) until April, expectations are high for another banner year.
Consumer surveys conducted by NACS in 2016 indicated more than nine in 10 Americans (92%) agree that lower gas prices give consumers more money to spend and 85% say that low prices are good for the U.S. economy. But results were mixed on how the economy has benefitted, according to NACS. While income was up 4.5% in 2015, spending only increased 3.4%, according to the U.S. Department of Commerce.
Consumers were clearly saving more as a whole, but economic growth for the year was only 2.4%.
As gas prices still remain low, the potential for higher spending in U.S. c-stores looks encouraging in 2017.
Those new innovations, streamlined concepts and better product offerings are evident in many in-store categories, especially in foodservice.
Foodservice, a broad category that includes prepared and commissary foods, hot dispensed beverages (coffee) and cold and frozen dispensed drinks, continues to be a key focus for growth in the convenience store channel, contributing 20.8% of in-store sales in 2015 and accounting for 33.7% of gross profit dollars, according to NACS “2016 State of the Industry” report.
More c-stores are offering made-to-order options, while enticing a wider customer base with fresher ingredients and wholesome food options.
To serve those patrons truly on the go, retailers are analyzing Millennials’ proclivity for snacking, offering up broad arrays of fruits, veggies and leaner proteins.
Not surprisingly, there has been a visible shift in certain category sales. For example, dollar sales of dry meat snacks declined in 2016, compared to a noticeable uptick in the sales of nuts and seeds during the same period.
Because of increased legislation and regulatory mandates, some were pessimistic for the fate of e-cigarettes in 2016. However, the category showed resilience in terms of market productivity.
Success can breed complacency when well-to-do convenience retailers fail to heed to the signs pertaining to what the market and the competition are up to. Eventually, that complacency invites inertia and non-productivity. There’s another economic term closely associated with inertia and non-productivity: going out-of-business.
Check out Convenience Store Decisions’ March Issue, featuring our Category Management Outlook, where we examine 38 c-store categories to identify how that respective category fared in 2016, what market influences now loom in 2017, and what some convenience retailers are doing to make their category mix work best for them.