Industry View: Where Is the Silver Lining?
The past year has been challenging. Weather has been less than ideal, with record cold in the Midwest and severe weather in many other areas. The Affordable Care Act has the potential to increase benefit costs for our labor pool. We have a possible minimum-wage increase on the horizon and a redefinition of the manager exemption requirements in regards to salary.
Two of the major products we sell are shrinking, and overall consumption is down. Gasoline consumption peaked in 2007, followed by more efficient cars and fewer miles driven. Cigarettes sales continue to decrease. Carbonated soft drinks are also struggling.
Technology is affecting how we live, work, and play on a daily basis. Fewer shopping trips and more telecommuting have resulted in fewer gallons of gas sold, meaning fewer stops to the c-store to purchase that quick snack or fountain drink.
Consumer tastes have changed. Young people are more likely to connect on their smartphones and social media than get behind the wheel of a car. Older customers are more health- and price-conscious than in the past.
Fast-food restaurants have stepped up their game in sales of coffee and other drinks. Consumers have more choices for the products we sell from drug stores, grocery stores and coffee shops.
Seeking a Relationship
Although we have challenges, our business is still relevant to the consumer. Our industry won’t go the way of video stores, electronics outlets and bookstores because we still address a basic need. Our customers are time-starved. We offer a great solution, with fast service and easy access for daily items. The customer consumes or begins to consume 80% of what we sell within 20 minutes of purchase.
The image of the industry continues to change and more readily address the changing market. Market leaders are building bigger and brighter stores and offering higher-quality food products. These competitive forces elevate the entire industry.
Also, we build relationships with our customers more actively than any other industry. The frequency of customer shops provides this opportunity. The super-heavy user may be in the store multiple times a day.
I recently moved into a new home, helped by four movers and two trucks. The movers said they stopped at least once in a certain c-store every day. I asked why that particular store and they said that it was a friendly place; the manager and staff called them by name. Interestingly, I discovered there was a c-store closer to their office, but service ruled over location. A sincere “Thank you” or “Good morning” means a lot to a relationship-starved customer.
Some productive regulatory changes also are occurring. Liquor laws in many areas are adapting. Dry counties are going the way of the blue laws of the ’60s. Wine consumption and spirit sales are increasing in c-stores. As retailers such as CVS quit selling cigarettes, the c-store could be the last retailer offering the product.
We have always been technology leaders with pay at the pump, credit and debit and scanning. Our image has changed, from our physical structures to our overall brand. We are more often viewed as a place to get lunch than a place where teenagers loiter. Our employees are hard workers, selected deliberately to serve customers.
Time to Change
Here are five ways to embrace change in the industry:
▶ Invest capital to improve the image of your stores.
▶ Embrace technology. Improve the customer experience, including mobile payment capabilities.
▶ Define your chain by the people you hire.
▶ Work with NACS to frame the future on regulatory issues, both locally and nationally.
▶ Use business intelligence to maximize your gross profit and control expenses, including labor.
In the face of dark clouds, there are silver linings. We still serve an immediate need, we can adapt and we can deliver authentic service. If we do it right, then not only do we enjoy the silver linings of our business, but we also spot the rainbow and find the pot of gold: the financial valuations of our stores. They have increased from 4x or 5x earnings to 7x to 9x earnings. That is a great reward for being in this highly competitive business.