CHICAGO -- Would the c-store industry break another record?
That was the question on everyone’s minds coming into this year’s NACS State of the Industry Summit. And while we ended our streak of record-breaking profits, we remained above the trend line and broke a big record elsewhere: in-store sales, which grew 3.2% to $233 billion and reiterated the crucial importance of driving traffic to the store.
While our industry continues to show its resilience and strength, we must remain laser-focused on the disruptive unknowns in the year to come ...
The fluctuations of fuel
Fuel revenue declined last year, and data suggests demand and margins have been weak through February 2017. Meanwhile, longer-term projections provide no definitive forecast: The Ford F Series was the top-selling vehicle in 2016, yet Tesla has become the highest-valued car manufacturer in the country. Vehicle miles traveled is on the upswing, yet fewer Americans are choosing to obtain a driver’s license.
The war for talent wages on
While campaigning, President Trump pushed his promise to bring jobs back to U.S. soil, but 88% of job loss in U.S. manufacturing from 2000 to 2010 was a result of technological change, according to SOI speaker David Nelson. What happens to the American worker—our customer—will greatly influence our industry’s health.
On the other side of the counter, the tight labor market will mean further investments in wages and benefits to attract the best people and turn around our turnover trends—particularly for store managers, which jumped from 10% turnover in 2015 to 27% in 2016.
C-store industry wages have increased 17% over the past four years, according to the NACS Compensation Report, and overall direct-store operating expenses rose 6.2% last year. Stringent recruitment processes, competitive market-based wages and solid retention programs are serious investments, but the returns are exponential.
The future is food
With a 5.6% sales increase and a 7% increase in gross-profit dollars last year, foodservice is driving profits. New competitors such as foodservice-forward grocers and meal-kit services are joining the fight for sales, while traditional restaurants are seeing sales soften. For years, leading c-stores have looked not to their industry peers as foodservice competition, but to leading restaurants. As restaurants face their own disruption, it’s time we watch those restaurant disruptors for new threats, and our own opportunities to ride the wave of change.
Retail disruption culminates online and on the street
Convenience and fuel retailing is at the center of a confluence of consumer-driven disruptors, from electric and autonomous vehicles to technologies that aim to remove the retailer from the transaction altogether.
As Robert Wolcott of Northwestern University said on the closing day of the summit, “Innovation is not about being first. It’s about finding someone already doing it somewhere and then translating that idea into your business or market before anyone else to give you a competitive advantage. In other words, being a ‘fast second.’ ”
As these disruptive forces come to a head, we must understand how they may affect our industry—not just the products we sell, but also our core value proposition.
The battle for the impulse buy begins
The war between Amazon, Wal-Mart and smaller startups is really about format, and small format is in everyone’s crosshairs. But as SOI speaker Todd Hale said, there are winners and losers in every segment; the key is understanding your brand positioning and delivering on it.
For Amazon, that positioning has been the convenience of digital shopping, but its value proposition is moving more toward immediacy.
Today, Amazon offers free same-day delivery to 77.6 million Americans, and it has a fulfillment center within 20 miles of 42% of the U.S. population. But perhaps most important is the increasingly shrinking delivery window for Prime Now customers.
Yes, 83% of c-store shoppers consume their purchase within one hour, and 65% of those shoppers
consume it immediately. But as Amazon and other e-commerce players increase the speed at which they get products into consumers’ hands, will our domination of the impulse buy be at risk?
All eyes on Washington
The implications of potential changes from the White House could greatly alter how our businesses are run. Retailers should keep a close watch on deregulation, infrastructure funding and tax reform and how it could affect how they go to market.
“We grow far more when the chips are down and things are tough,” Wolcott said during his session.
We’ve had a profit run worthy of the record books but, as Wolcott said, stress is good, too. It forces us to stop and look at the changing dynamics around us: retail evolution, workforce wars and political curveballs.
Our industry is one of nimbleness and resilience. Armed with the right data-driven strategies, we’ll continue to evolve through these latest tests of adversity.
Michael Wood Jr. is president and CEO of Winsight LLC. Reach him at firstname.lastname@example.org.
Henry Armour is president and CEO of NACS. Reach him at email@example.com.