While the industry backpedaled somewhat in 2013, petroleum and convenience-store retailers maintained strong sales and profit figures despite numerous competitive and demand-rooted challenges that will only get worse in the years ahead, according to key presenters and preliminary numbers released at this year’s NACS State of the Industry (SOI) Summit.
The statistic clearly indicative of this continuing buildup was NACS’ inside-sales number: It passed the $200-billion threshold to hit $204.0 billion in 2013, up from $199.3 the year before.
“It’s quite an accomplishment,” said Glenn Plumby, SOI presenter and vice president of operations for Speedway LLC, Enon, Ohio. “It’s something we need to happen when we see the competitive nature of our business changing.”
Using data provided by 200 firms representing 27,000 stores, the preliminary SOI data showed store count up 1.4% over the previous year, coming in at about 151,000 locations across the United States.
Inside sales were up 2.4%, slightly better than 2012, which was 2.2% above 2011 levels. Overall sales—inside and forecourt—were actually down 0.7%, but Plumby dismissed any concern, attributing it to the falling price of gasoline in that time frame. In 2012, the industry achieved $700 billion in total sales; in 2013, that number fell back to $695 million.
The 11th annual summit, held in partnership with CSP Business Media in the Chicago suburb of Rosemont, Ill., attracted 244 retailers and more than 400 attendees overall to review trends and benchmark against their own figures.
Plumby helped attendees by assessing many statistics over the course of his presentation, showing comparable numbers against those of cross-channel competitors, disparities between regions and insights into categories such as foodservice that seem to be losing valuable momentum. But he also addressed important trends outside the numbers that retailers need to consider going forward:
▶ Core consumer struggles: Blue-collar males, the industry’s bread-and-butter demographic, are treading water financially. Plumby suggested that c-store retailers continue to address that segment’s needs but take active steps to lure new customer groups such as females and millennials.
▶ Operating below foodservice potential: In addition to showing how the industry’s momentum with foodservice appears to be flagging, Plumby pointed out that quick-service restaurants continue to dominate and that c-stores need to do more to claim market share.
▶ Big-box trends: Mass merchants are evolving into smaller formats, Plumby said, and in some cases they’re clearly entering convenience retail.
▶ Online threats: Citing Seattle-based Amazon as a clear threat, Plumby said retailers need to consider the disruptive effects of online and mobile shopping.
▶ Industry strengths: Plumby emphasized that the industry is not down for the count. As a destination for grab-and-go snacks, drinks and food, the c-store channel maintains its stronghold on the quick purchase. “In the last five years, the percent of product consumed after an hour of purchase has gone [from 79.8%] to 83.5%,” he said. “It’s something other channels will have a difficult time replicating.”
Paging Rod Serling
Looking back at 2013, Plumby cautioned retailers not to take the SOI numbers at face value. Gasoline consumption was up slightly (0.6%), and fuel and sales margins were up, yet multiple factors cast shadows on these apparently solid statistics, creating an analytical “Twilight Zone” that required additional scrutiny, he said.
For instance, foodservice gross-profit dollars were up 2.5% for same firms in the NACS survey, but not as high as the previous year at 8.7%. Nor was the increase greater than the loss in cigarette gross-profit dollars, which according to the preliminary SOI numbers dropped 5.7%.
The good news/bad news scenarios went on. Credit-card fees were down slightly and overall relatively flat. But the bad news was that “the banks are still the most profitable firm in our [industry].” And with gas consumption, Plumby said yes, the number was up 0.6%, but it was a “slight blip” of a recovery, considering that in 2007, consumption fell 7.4%.
And one of the largest concerns was the comparison of gross profit dollars to operating expenses. While total gross profit dollars rose 4.4% from 2012 to 2013, direct-store operating expenses for the same time period rose 5.1%, he said.
Part of the issue is labor. The number of employees per store reported in the NACS data is up 19.5%. And from 2009 to 2013, the number of employees per store went from 11 to 15. Plumby attributes some of the activity to companies getting ready for the Affordable Care Act (ACA) or Obamacare.
“Our part-time workers are up 32.2%,” Plumby said. “In 2013, part time actually doubled what it was in 2010. We’re reacting to ACA [by adding] four more employees to the store. That costs money.”
Plumby also pointed to the pressure of an increasing minimum wage. He showed a map of the 20 states that have enacted minimum-wage increases and an additional 17 considering it.
“When minimum wage goes up, it’s not good for our industry,” Plumby said.
Locally Speaking
Revealing a new element of the SOI research, Plumby pointed out that recently developed regional charts can help retailers benchmark better by minimizing local differences in numbers. NACS defined the regions as the Northeast, Southeast, Midwest, South Central, Central and the West Coast.
Citing another “Twilight Zone” moment, he mentioned that many of the lower scores came from Texas. “Everything I’ve read about Texas is that it’s booming,” Plumby said. “A lot of our competitors down there are doing well, yet that’s not what the data shows.”
For instance, for in-store sales, the West was up 4.4%, while South Central (which includes Texas) was down 0.4%. The Northeast was up a meager 0.8%.
Fuel-gallon throughput was up 4.5% on the West Coast, while in the South Central it was down by 2%. Fuel margins showed a similar disparity, with margins at 20.6% on the West Coast and a negative 8.7% in the South Central region.
From a gross-profit standpoint, the West Coast was also a clear winner, up 11.1%, with South Central again down 8.4%.
Given that the NACS research committee tries to tie its data back to root causes, Plumby said the West has seen extensive growth in recent years, posting the strongest employment numbers of any region since 2011. South Central had the second slowest growth in employment since 2011.
“We’re successful when people are working, going to school,” Plumby said. “It could be a solid reason why we see these types of fuel changes. But note, too, how the Northeast had the least amount of growth, but it didn’t impact fuel much but did impact in-store sales.”
Identifying Problems
Further discussing outlying factors behind the numbers, Plumby said the industry’s core consumer, the young, blue-collar worker, also affectionately called “Bubba,” is struggling financially. Unemployment figures for 16- to 19-year-old males in 2007 was 17.6%. In 2013, that number was 28.1%. Among 20- to 24-year-olds, the disparity is 8.9% vs. 18.9%.
From 2007 to 2013, the unemployment among those groups has gone up 80%. On top of that, income bifurcation goes by the 80-20 rule, Plumby said: “Bubba is in the bottom 80% … He is our core customer, and yet his share of income is down 15%, while the other 20% is up 80%.”
He called the issue something the industry must focus on. “Are we looking at the right consumer?” Plumby asked. “They’re fighting for employment and have less disposable income. [It gives us] more perspective on how we look at our customer base.”
With the core c-store customer in trouble, the competition for new demographics heightens. The Woonsocket, R.I.- based drug store chain CVS is “our biggest competition—because they have the female market,” Plumby said.
Competition from cross-channel retailers is only going to heat up, Plumby said. C-store throughput was up 1.4%, but drug stores are up 1.6% and dollar stores are up 6.1%. He also made note of one of his slides showing a dollar-store chain adding gasoline.
Big-box merchants are also becoming more competitive—by getting smaller. Plumby said Minneapolis-based Target is in its third-generation store and Bentonville, Ark.-based Wal-Mart Stores is in its fifth. Both are taking smaller-format approaches, with Wal-Mart even testing a c-store in its headquarters town.
Finally, Plumby pointed to the threat of online retailers. “Amazon—it’s the gorilla in the room from a sales standpoint,” he said. “Not only are they contemplating using drones to deliver goods, the problem is, they’re going to send in those goods before you want to buy them.”
The retailer is using online tracking to “look at what you’re surfing and before you know it, it will show up at the front door,” he said.
Ultimately, retailers have to consider two key issues, Plumby said, both of which are tied to foodservice. First is market share. The industry has to gain more control of the foodservice category, he said: “We have to drive market share and be premier foodservice operators to be successful.”
A second aspect is working with c-store formats that can go the distance. In that context, he said acquisitions, consolidation and rationalization of the industry’s assets is important. “We have to make sure what we’re putting in front of the consumer will elevate our industry to compete effectively in the food arena,” he said.
A Quick Review of 2013
Preliminary SOI data showed store count up 1.4% over the previous year, coming in at approximately 151,000 locations across the United States. With that slight increase, inside sales were also up a modest 2.4%, which was better than 2012 at 2.2% above 2011 levels. Overall sales—inside and forecourt—were actually down 0.7%, but the shallow dip was most likely due to lower street prices for gasoline. For its survey, NACS used data provided by 200 firms representing 27,000 stores.
Another surprising statistic for NACS officials was the rise in the number of c-store employees, having increased 19.5% last year vs. 0.7% the year before. Officials say this could be a response to the 2010 Affordable Care Act and the industry’s greater use of part-time workers.
| Snapshot | 2012 | 2013 | % change |
| Store count | 149,220 | 151,282 | 1.4% |
| Inside sales | $199.3 billion | $204.0 billion | 2.4% |
| Fuel sales | $501.0 billion | $491.5 billion | -1.9% |
| Total sales | $700.3 billion | $695.5 billion | -0.7% |
| Pretax profit | $7.2 billion | $7.1 billion | -2.4% |
| Credit card fees | $11.2 billion | $11.2 billion | -0.4% |
| Gasoline consumption (barrels/day) | 8.70 million | 8.75 million | 0.6% |
| Employees | 1.84 million | 2.20 million | 19.5% |
| Fuel margin (cents per gallon or CPG) | 18.1c | 18.5c | 2.3% |
| -Net of credit card fees | 12.73c | 13.17c | 3.5% |
Sources: Nielsen, U.S. Energy Information Administration, preliminary figures from the NACS State of the Industry Survey of 2013 Data and CSX LLC
Employee Numbers Rise
Convenience stores increased the number of employees they have by 19.5% to 2.2 million in 2013, far more than the 0.7% rise in 2012. NACS officials say retailers are responding to the 2010 Affordable Care Act by bulking up on part-time employees. The industry has seen a 2x increase in part-time employees since 2010.
| Year | Percent increase in total employees |
| 2012 | 0.7% |
| 2013 | 19.5% |
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