Are Standalone Costco Gas Stations (and Warehouse Clubs in General) Big Trouble for Convenience Retailers?

With the opening of Costco’s first standalone gas station in Mission Viejo, California, and plans to develop at least another, the notion of whether or not these gas stations — and warehouse club fuel stations more broadly — might threaten convenience store competitors is cast into the spotlight.

“Regardless of Costco’s long-term plans for standalone gas stations, the new Mission Viejo location will almost certainly put pressure on nearby convenience retailers, which are unlikely to match the wholesaler’s aggressive fuel pricing. According to Costco’s website, the station is selling regular gasoline for $4.59 per gallon — roughly 71 cents below the Orange County average, according to AAA,” wrote C-Store Dive’s Brett Dworksi.

“While the site does not include a Costco warehouse or convenience store, it could divert traffic from nearby retailers. Circle K, ExtraMile, United Pacific, BP and Shell locations are all in the area, and could see declines in visits and merchandise sales,” he added.

The wider framing on this issue was highlighted by Modern Retail’s Anna Hensel in a recent piece discussing the plight faced by many convenience stores as customers increasingly showed hesitance to spend — or even visit — as gas prices soared and competing warehouse clubs offered a much more attractive one-stop solution.

“If people don’t visit gas stations as frequently, it stands to reason that they may not make impulse purchases there as frequently,” Hensel wrote.

“And there’s data to suggest that gas station owners have a right to be worried. Location analytics firm Placer.ai, which tracks weekly foot traffic to different retailers year over year, has noted a consistent decline in visits to gas stations since mid-April. For the week of June 29, visits to gas stations were down 4.1% year over year,” she continued.

Will Lowered Gas Prices and Increased Support From Vendors Help Convenience Retailers Compete Against Costco and Other Clubs?

One method of attack was outlined as Hensel quoted Casey’s General Stores CEO Darren Rebelez, who indicated that Casey’s was already targeting the lower end of gas pricing ranges in order to attract consumers increasingly attentive to fuel prices — and their attendant impulse spending. Rebelez believed that Casey’s was pulling more shoppers to its locations through affordable fuel prices, and seeing results down the line (with pizza sales being up 10% YoY, as one example).

And Ramon Laguarta, chairman and CEO of PepsiCo., recently spoke to similar findings during a recent earnings call. Laguarta noted that sales via “impulse channels” for Pepsi products had seen headwinds, and despite international business showing promise, a short-term game plan was necessary.

“In those particular channels, we’re working with our customer partners in solutions to convert more of the traffic in store — bundles, linking to meals, solutions to address that particular channel,” he said during the call.

As for Hensel, her take was that whether or not shopper psychology — and these negative associated trends for convenience retailers — would have a long-lasting impact generally would be tied to the longevity of the inflationary pressure being exhibited on the U.S. economy.