Overall, retailers are optimistic about current business conditions, with 77% describing them as excellent or good, a drop of just 1 percentage point from last year’s survey. Looking to 2023, 28% anticipate great improvement and 36% some improvement.
“I think our future is super bright,” says Raymond Huff, president of Lakewood, Colo.-based HJB Convenience Corp., which runs Russell’s Convenience stores.
Many people discovered c-stores during the pandemic as an alternative to grocery stores to lessen the chance of contracting COVID 19, he says. “The pattern changed, and it has stuck.”
The pandemic forced Huff to close 14 c-stores located in high-rise buildings.
He now operates nine stores in office buildings. His traditional location in Hawaii enjoyed 40% sales growth in consumer staples such as milk, bread and produce during the pandemic.
Addressing the future, Huff points to “some of the brightest minds out there creating great convenience-store concepts,” noting high-end food, self-checkout and autonomous checkout—the latter two of which aren’t cheap. One self-checkout terminal can run upward of $20,000, Huff says, while it can cost up to $250,000 to equip an entire c-store with autonomous checkout technology.
“The customers are reacting to the fact that we are meeting their needs,”
he says. “The next big thing we are trying to figure out is what technology we need to handle the customer of the future,” Huff says.
Huff ’s insight aligns with survey responses, in which 36% cite frictionless transactions (up from 2021’s 23% and 21% mobile ordering (down from 2021’s 39%) as amenities they’re planning to invest in for 2023.
Beyond the cost, however, enacting technology presents a litany of challenges of their own, Huff says, noting “a mishmash of rules” across the country on issues such as identity protection and facial recognition. These rules could affect the implementation of technology such as autonomous checkout.
“I really see regulation as being a big problem for the industry going forward,” he says.
“The next big thing we are trying to figure out is what technology we need to handle the customer of the future.”
Another problem is manufacturers reducing their offerings to just core items and limiting innovations, such as flavor extensions.
“There’s less of an assortment in the stores,” says Frank White, regional manager for Falls Church, Va.-based Petroleum Marketing Group. “The other side of it is that there are more out-of-stocks due to high demand. And I don’t know if the high demand is being driven by fear of missing out, people buying things in bulk rather than their normal purchasing practices.”
White adds, “We’ve got to put pressure on the manufacturers and the supply chain, or we’re never going to get out of this hole that the pandemic put us in on products.”
Pony Express, a c-store chain with six rural locations, has also been feeling the supply-chain pinch. The chain gets many of its supplies from the local community, including farmers, says Danielle Gutierrez Stone, senior director of retail operations for the Winnebago, Neb.-based chain.
“The recent drought has affected the crops, and this will reduce the number of loads being hauled in our area the rest of the year,” she says.
Another problem is credit-card company swipe fees, White says, an issue on which survey respondents concur: These fees rank fourth, at 25% (up from 2021’s 19%), among greatest business challenges facing c-stores today.
“They’re charging more now on swipe fees when there’s no reason to,” says Huff, who’s on the NACS board and chairman of the Conexxus Advisory Group, the standards committee for the c-store industry. “They’re making more money on it than they should.”
Another difficulty is navigating government regulations regarding what c-stores can sell, says Huff, noting the U.S. Food and Drug Administration in June ordering Juul Labs’ e-cigarette products be pulled from shelves (a decision that was later stayed) and the agency’s proposal to ban menthol cigarettes and flavored cigars. Survey respondents reflected Huff’s sentiments, with the percentage of those citing regulatory pressures as a business challenge doubling from 8% in 2021 to 16% this year.
If menthol cigarettes are banned, c-stores will lose those customers, Huff says. “If they want to smoke it, they’re going to find it, and you’re just creating this black market because you can buy them in Mexico and in Canada.”