Sales Way Up, Profits Way Down for C-Stores

Discussion
Apr 12, 2007

By George Anderson

The good news, according to the National Association of Convenience Stores (NACS), is convenience store sales increased 15 percent last year. The bad news is profits tumbled 23.5 percent at the same time.

According to the trade association, convenience store sales numbers were helped by higher prices at the pump along with an increase in the channel’s share of total fuel sales. The flip side of that coin was lower margins associated with those sales along with high credit card fees tied to much of the gas sold in 2006.

Motor fuels sales, according to NACS, account for 71.3 percent of total convenience store industry sales while contributing only 33.7 percent of its profits.

Credit card fees soared 22 percent in 2006 to the point that those charges now exceed total industry profits. Credit card fees rose to $6.6 billion last year while total industry profits were $4.8 billion.

On the positive side, in-store sales were up 8.3 percent with the foodservice portion of the business up five percent for the year. Foodservice now represents 12.1 percent of total in-store sales within the convenience channel.

Discussion Question: What do you make of the convenience store sales and profit numbers released by NACS? Are efforts to increase fuel sales in the channel a wise strategy?

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12 Comments on "Sales Way Up, Profits Way Down for C-Stores"


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Mark Lilien
Guest
15 years 1 month ago

Credit card fees are rising for every retailer. The credit card issuers offer points, rebates, bonuses, etc. to get more cardholders. These costs are passed on to the retailers who pay much higher fees. There are alternatives, such as Retex, which is a nonprofit cooperative of 2,000 retail companies that negotiates lower credit card fees on behalf of their members.

dane grover
Guest
dane grover
15 years 1 month ago

My only general comment is that the C-store industry is suffering from the “Pay at the Pump Blues,” in which the increasingly easy to use fuel dispensers have all but eliminated the need to enter the store. These retailers must aggressively pursue new ways to capture customers’ attention in the fueling aisles and bring them into the store. C-stores typically lag behind other retailers in taking advantage of new POP technology.

Ben Ball
Guest
15 years 1 month ago

Rather than focusing on the downside of “stay at the pump” customers (I love that phrase!), C-store operators do need to find new ways to transition customers from the pump to the store. One strategy is to “lure them in closer” with exterior merchandising such as soft drinks and the ubiquitous windshield washer fluid display in winter. But something less labor intensive, less susceptible to shrink and–most importantly–more fun and engaging might be in order. Any ideas out there?

Peter Chappell
Guest
Peter Chappell
15 years 1 month ago

I agree with most of the preceding comments. A boring run-of-the-mill presentation of national brands at somewhat competitive prices will not draw customers into the store. A heavy reliance on declining sales categories such as tobacco and low margin fuel sales will continue to create difficulties for the industry. Many stores are tired and appear shop worn and do not attract customers. Sheetz and Wawa do have brightly lit, colorful locations with good food service offerings. That will be the key to growth for the stores in the future.

Mel Kleiman
Guest
15 years 1 month ago

The C-store segment is strong and growing. The leaders in the industry are not talking C-stores, they are talking Convenience Retailing. Yes, profits have been hurt by rising fuel costs and credit card fees. But look at the growth in food service, beverage and snack items. This industry is not lying down and playing dead. Competition is fierce for the retail dollar and overall, the leaders in the industry are winning more then their fare share of the market.

jack flanagan
Guest
15 years 1 month ago

Pay-at-the pump doesn’t have to mean ‘stay at the pump’. Sheetz and WaWa are just two very successful C-store operators who successfully encourage and then capitalize upon an in-store visit by many of those fueling up.

At the end of the day, a boring, non-descript in-store offer, regardless of the types of payment options, is still boring, non-descript and therefore doomed.

Raymond D. Jones
Guest
Raymond D. Jones
15 years 1 month ago

Convenience stores are in a battle over quick shopping trips with grocery stores, drug stores and dollar stores. Even supercenters are attracting many quick trip customers with low prices.

C-stores have become much too dependent on gasoline as both a traffic draw and a revenue producer. As gas prices have gone up, consumers seek out the store with the lowest gas price.

C-stores need to provide shoppers with more compelling reasons to visit the store as a shopping format rather than simply when it offers low gas prices.

Stephan Kouzomis
Guest
Stephan Kouzomis
15 years 1 month ago

Really it is in all of the points stated so far; the issue is that all C-store owners and operators are stuck in a outdated business model and are in a paradigm shift.

That there has been no mention of food offerings or the need to have very knowledgeable part/full time sales associates says a lot about the mindset and strategic direction–and worries–of this industry!

Are the other spending consumers thinking of the c-store, or is it still dominated by Bubba?

The premier c-stores in Pennsylvania have figured it out…where are the others? Hmmmmmmmmmmmmm

David Biernbaum
Guest
15 years 1 month ago

Sales are up but profits down at Convenience Stores? Not surprising, and also, no surprising. The C-store concept works today to at least some extent for the 92% of all working adults that need to grab and go, in a hurry. However, the assortment at C-stores is restricted to only the top branded skus in each category, and these are the most competitive skus in the arena for price, promotion and discounts. Distributors such as McLane and the others probably need to be more open minded about stocking some of the higher profit niche brands, and specialties for C-stores to carry. C-stores will continue to lose profits if they remain restricted to carrying just the usual items.

M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
15 years 1 month ago

There was a time when I lived in a C-Store, literally. During college I managed a 7-Eleven and was so tired by closing that I slept a couple of hours on the (well-mopped) floor with a loaf of bread for an (eventually smashed-down) pillow before heading home to study. As an executive with Southland Corp., I later deepened my C-Store roots.

I haven’t crossed the threshold of a C-Store as a customer in over twenty years. There’s simply nothing there for me. Certainly I’m no longer part of the C-Store demographic, but why is that? Why is there nothing there for me?

Bhupesh Shah
Guest
Bhupesh Shah
15 years 1 month ago
If fuel sales are the traffic draw, then it makes perfect sense to focus on it. There is no point in having the best coffee or other product in your C-store if you don’t have any traffic to draw from. Few people will make a specific trip but if it’s part of a fuel purchase, well, they are already on-site…. Getting the fuel priced right is one thing. As others have mentioned, the challenge is getting the “stay at the pump” customers to go to the C-store. Some companies have POP that directs customers in but without a compelling reason, it’s not worth the time. Nozzle talkers and pump toppers are static–if you are not interested in that coffee+snack promo, you will not bother. But if the “at the pump” communication is dynamic, there’s a better chance of offering something that the customer will find appealing. Even a simple “YOU HAVE WON–see inside for details” on the receipt or at the pay at the pump screen will work to drive traffic into the C-store. Of… Read more »
Nick Brubaker
Guest
Nick Brubaker
15 years 27 days ago

Give the customer a reason to come inside. They pulled in to buy gas and they are going to be at the pump for a few minutes. Just enough time to make a suggestion. So don’t over complicate the opportunity.

Foodservice sales are up and the offerings are significantly improved. You have invested in ready to consume products with favorable margins so now is the time to promote your coffee, sandwiches, chicken, pizza, ice cream, and fountain beverages. Give your gas and go customers an incentive to purchase with coupon discounts dispensed from the fuel island. Even if they are truly in a rush, they can use the discount next time. Keep it simple, get them inside and let your merchandising do the rest! If the experience is good, they will return.

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