PASSAIC, N.J. — A recent CNBC survey of chief financial officers informs that as the Biden administration and the Fed step up efforts to reverse an intemperate inflation that just hit a four-decade high of 8.6%, businesses should begin gearing up for a recession.
Recession clouds are already moving in:
Wage increases slowing. Yes, many retailers and other businesses continue to elevate wages to recruit talent as the industry remain understaffed (and we applaud Rutter’s on announcing its its sixth wage increase in three years). But several reports indicate more working-age folks who have sat on the sidelines for the past two years or more are now returning to work.
Bearish stock market. Macro trends suggest the New York Stock Exchange will fall up to 10% from where it is today, and 15% to 20% below its 2022 high.
Oily reality. The most dire forecast comes from JPMorgan Chase CEO Jamie Dimon, who believes crude oil could climb as high as $175 a barrel. Today, prices stand at about $119. Even if we accept some hyperbole in Dimon’s message, his panoramic perspective is likely on target.
So, what can we in the convenience-store channel do to ready ourselves for another shift in the economy, one being manipulated by federal monetary policies in its version of behavioral modification?
I recently shared some considerations to more than 100 c-store executives and have heard back from many of them. Here are some of the steps we discussed that are critically important if our channel wants to have a strong 2022 and ’23:
- Inventory control. Big picture, be super diligent not to be over-leveraged with stock. Critically diagnose flat-liners and consider following Target’s announced move of taking a short-term hit for the next quarter or two to liquidate slow movers.
- Wages and staffing. Can you be operationally lean while also becoming an employer of choice? For instance, can you operate your stores at 90% staffing (vs. pre-pandemic numbers) and generously reward associates to reduce turnover?
- Gas prices. According to multiple reports, it is now highly unlikely that gas will fall below $4.50 per gallon for most of the country any time soon, and that summertime averages will be at least $5 per gallon and more than $6 in California.
- Consumer-centric. In that spirit, we know customers are hyper-sensitive about gas prices. At the same time, there is great COVID fatigue. Indications from Energy Information Administration (EIA), AAA and GasBuddy show that Americans want to travel this summer and will bite the bullet on higher pump prices.
- Forecourt/backcourt. Americans need to fill up their cars but could be forced to cut discretionary spending if retailers don’t demonstrate a willingness to work with them. To preserve your market basket, look to tie fuel discounts with in-store purchases, akin to how companies for years have doled out 10-cent per gallon savings with car washes.
Don’t sit back. Go on the offense and turn the recession into an opportunity.
Mitch Morrison is vice president, retailer relations for CSP/Winsight. Reach him at mmorrison@winsightmedia.com.