CHICAGO -- Balancing just-reported industry figures showing a robust revenue year for the convenience channel, David Portalatin, who at The NPD Group specializes in consumer behavior, cautioned attendees of the NACS State of the Industry Summit in partnership with CSP that some of the fortune could soon fade.
Speaking during the opening General Session, Portalatin, NPD's manager of gas and convenience store services, said early tracking indicates that consumers may be curbing their driving habits in light of chronically higher fuel prices. In addition, [image-nocss] the oft-reported channel blur seems to be hurting shopper frequency at convenience stores.
Most fundamental is this thought: Over $110 billion has changed direction in this consumer economy, he said, referring the gobbling effect soaring gasoline prices have borne on customer wallets. The question is how is that affecting other purchases?
Indeed, the question was one of several raised for which the answers are not yet revealed. For now, the convenience industry remains solid and mature, but not geared toward high growth, Portalatin said Wednesday.
What we need is an MP3 player for the convenience store industry, Portalatin said, pointing to the item's remarkable 121% sales increase. Convenience stores need that must-have, gotta-get-out-of-bed, just-gotta-have-it thing. Indeed, he suggested that c-stores may want to consider merchandising iPods and MP3 players, even if it's a modest presence.
As is, customers are scaling back on gasoline, with total miles up by just one-tenth of 1%, the smallest uptick since 1980 when miles driven actually declined. The big question for the industry and one that NPD is tracking is: Are higher fuel prices going to cut into gallon and inside purchases? We're taking a real close look at this in 2006.
The two key metrics that Portalatin stressed the industry needs to track are shopper penetration and frequency. Of the former, channel penetration sits at 62.4%, a 2.7% drop from the same period in 2004. Such slippage occurred in every quarter of 2005 vs. year-ago penetration.
Likewise, the industry is seeing declining frequency from its most loyal base, the heavy c-store shopper. Portalatin said the percent of customers frequenting c-stores at least eight times a month has fallen from 35.0% in 2001 to 29.4% in 2005.
He acknowledged that these figures can be found across many retail channels and suggested that customer loyalty to a particular channel is on the wane. It heightens the need for you to be on the forward-thinking, leading-edge part of the c-store segment, as illustrated, he said, by the top-quartile operators.
Distinguishing between dollars spent, which is up, and customer traffic, Portalatin stressed that his intent is not to cast a pall on the convenience channel. Rather, it is to underscore the importance for each operator to distinguish himself and continue addressing ways to be a customer destination.
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