HARRISBURG, Pa. As Scott Hartman, president of Rutter's Farm Stores, took the reigns of the National Association of Convenience Stores this past week as the association's chairman, he noted to his local news paper that technological innovations will drive the future of convenience stores, including the ability to pull up to the gas pump at the local convenience store and download travel directions and music while filling up the tank and even to pay your bills at a self-serve kiosk.
During his one-year term as chairman, which began at The NACS [image-nocss] Show last week in Las Vegas, Hartman hopes to improve the profitability of the 40-year-old industry, he told the Harrisburg, Pa., Patriot-News.
You could say the business is in Hartman's blood. His grandfather, George Rutter, was one of the founders of Rutter's Dairy in York in 1921. His father, Stewart Hartman, was the first president of Rutter's Farm Stores, which started in 1968 with one location in York, Pa. Now, the chain has 50 stores.
But Scott Hartman brings his own credentials, including an accounting degree from George Washington University, a master's degree in business administration from Duke University and a seven-year stint at Price Waterhouse in Baltimore.
On a recent Friday, Hartman, 46, sat in his modest office in a strip shopping center next to the Rutter family farm, which dates to 1747, and reflected on his evolving industry. Rutter's cows grazed in a nearby field.
Hartman called convenience store operators "some of America's best entrepreneurs" because they have to quickly adapt to rapidly changing market trends. Most older convenience store chains started out either as gas stations or dairies, Hartman noted.
Today, the typical convenience store must integrate widely disparate technologies for selling gasoline, groceries, fresh food, prepaid long-distance telephone calls and, increasingly, financial services. "It's only getting more complex," Hartman said. But up to 75% of Rutter's revenue still comes from gasoline sales, he noted.
Hartman, who fielded angry calls when gasoline prices soared after Hurricane Katrina, said convenience stores' profit margins on gas remain the same regardless of the price. That compares to typical profits of 18 cents on a pack of cigarettes and 30 cents on a candy bar, he said.
Hartman said high gas prices actually hurt convenience stores. "The typical convenience store shopper only has so much money to spend," he said. "We're not making much on gas, so we want to sell them something else. The fewer dollars they have in their pocket, the less likely they are to buy something."
To accommodate the growing variety of merchandise and services convenience stores offer, the stores have been getting larger. A good-sized store used to be 2,800 square feet, but a 6,000-square-foot store is not unusual now, Hartman said.
Because convenience stores sell so many different kinds of products, the association follows legislation and issues ranging from food safety to homeland security, which can affect the amount of paperwork involved in processing money orders, he said.
The association also is part of a federal class-action lawsuit alleging that 10 major credit-card companies engage in collusive fee-setting practices. Credit-card companies typically charge convenience stores 3% of every transaction paid by credit card, Hartman said.
Hartman helped the Alexandria, Va.-based association establish technology standards and form the Petroleum Convenience Alliance for Technology Standards, which he also heads. Those standards, which better integrate the industry's retail and wholesale network, lower costs for the suppliers, store owners and customers, according to David McCorkle, president of the Pennsylvania Convenience Store Council.
Hartman also was involved in developing the industry's voluntary Responsible Tobacco Sale Certification Program. It helps retailers follow state laws and avoid selling tobacco to minors, McCorkle said.
Despite being the scion of a convenience store family, Hartman started out at the bottom of the business. His father hired him when he was 12 to stock shelves, paying him 5 cents for each year of his age, or 60 cents an hour. Over summer breaks in college he managed a store. "That wasn't an easy job when you're a college kid and you've got friends at home and you've got to open a convenience store at 4 or 5 a.m.," Hartman said. But, he added, the experience taught him discipline.
Hartman returned to Rutter's Farm Stores at age 30 as CFO. Five years later, he became vice president of operations, and in 2000, at age 41, he replaced his father as president.
Hartman said his generation of the family has had to "try to take what we have and try some new things" while boosting sales. In the 1990s, they opened Rutter's first superstore, at 4,300 square feet, and started the chain's private label Famous Express Deli and Famous Express Grill. Annual sales for Rutter's Farm Stores totaled about $50 million a decade ago. This year they will probably reach about $300 million, he said.
Rutter's is part of a tradition that has made Pennsylvania-based convenience stores a prominent part of the industry. Past presidents of the national association include Steve Sheetz and Stan Sheetz of another family-owned chain, the Altoona-based Sheetz stores, and Dick Wood, former CEO of Wawa.
"If you go back in time, Pennsylvania was one of the states that 7-Eleven ignored because they didn't sell beer in Pennsylvania," said Stan Sheetz, president and CEO of Sheetz stores. That made the state "more of a fertile ground for smaller entrepreneurial convenience stores."
Both Sheetz and Rutter's started as dairies. That background has helped them excel at food sales, which are more important to convenience stores here. Stores in other states can rely on beer to make up about 20% of their sales, Hartman said.
Sheetz, 50, said Hartman "is a friend as well as a competitor." He predicted that Hartman will be "a good, strong leader, a good, strong executive" of the association.
Despite the fact that Hartman heads a company and a national association, he hasn't forgotten his roots. Sometimes, he said, he'll still stop at a Rutter's store and stock a few shelves. "I hate to see an empty cooler," he said.
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