Americans More Optimistic, Ready to Travel, Spend

Retailers expect gasoline sales to pick up this summer, says NACS

ALEXANDRIA, Va. -- As many as 85% of Americans taking vacations this summer will be traveling by car, and more than four in five (82%) will be stopping at convenience stores along the way, according to consumer responses captured in the May 2013 NACS Consumer Fuels Survey.

Besides gasoline purchases, 82% of vacationers said that they plan to stop at a c-store as part of their summer trip, and they cited buying a drink (59%), using the bathroom (59%) and purchasing a snack (55%) as the top three reasons. Vacationers also are much more likely to buy a sandwich or meal (21%) or use the ATM (20%) in the warmer summer months; only 4% of consumers said that they would go inside the store for either item when surveyed in January.

C-stores sell 80% of the gasoline purchased in the country, so they already will see plenty of traffic at the pumps this summer.

The National Association of Convenience Stores (NACS) commissioned a survey of 1,183 American gasoline customers by Penn, Schoen & Berland Associates LLC to find out what else customers would be buying and how they felt about economic conditions.

Vacationers plan to spend a fair amount of time on the road this summer. Nearly half (45%) of all consumers said they plan to take trips outside of their state, and 63% will take at least six days of vacation this summer, including 10% who plan to travel at least 21 days.

"Consumers have told us that they feel better about the economy and are more likely to spend more," said John Eichberger, NACS vice president of government relations. "Our retailer members are equally optimistic--perhaps even more so--about their prospects this summer."

More than half (54%) of retailers responding to a NACS member survey said store sales so far this year have been above those of the last year, and they are even more optimistic about the rest of the year: 68% said that sales this summer will be higher than in summer 2012.

Retailers said weather is the biggest factor in determining sales, with 70% citing it as a factor, followed by gasoline prices (cited by 35%), longer daylight hours (34%), the economy (34%), special events in town (24%) and promotions/discounts (18%).

Retailers also said they expect gasoline sales to pick up this summer. While only 39% of retailers said that their gasoline sales have increased compared to last year, 61% said that gasoline sales will be higher this summer than last summer.

"It seems that customers will be taking more long weekends and holiday vacation road trips. While overall miles driven may go up, many of those miles will be in ever more fuel-efficient vehicles," said Lonnie McQuirter, operations manager at the 36th & Lyndale BP, Minneapolis.

To capture gasoline customers, retailers have cut margins over the past few weeks. Gross margins on fuel across the country stand at 12.3 cents per gallon, according to the May 16 Retail Fuel Watch, a weekly report published by the Oil Price Information Service (OPIS). These low margins mean that most retailers are breaking even or even losing a few cents per gallon after expenses--all to attract gasoline customers who may then buy in-store items.

"The weather will likely be the main reason for any sales increases, and your gas price will dictate the percentage of those sales that you can capture," said John Babb, president of J&S Oil Co. Inc., Manchester, Maine, explaining why margins have tightened.

Virtually anything cold or frozen will likely fly off c-store shelves this summer. Items most often cited by retailers as seeing a sales increase include packaged beverages (cited by 84% of retailers), ice (65%), fountain drinks (59%), frozen dispensed beverages like Slurpees (45%) and ice cream (38%).

Sales data from 2012 supports retailers' high expectations. Several in-store items saw significant sales increases for the months of June through August compared to the prior three months, according to sales data from NACS' subsidiary CSX.

Ice sales increased 100% over the summer months last year, and frozen dispensed beverages (34%), fountain drinks (24%) and general merchandise (12%) also saw big sales increases.

While the warmer months increase sales of cold and frozen items, they can depress the sales of other items; hot tea and coffee sales dropped off 9% last summer. Overall, c-stores last summer saw in-store sales increase 6% and fuels sales increased 4% in 2012.

Retailers also were optimistic about new programs and products in their stores. They cited text alerts to notify loyalty program members of impending gasoline price increases, propane refill programs, loyalty programs linking gasoline discounts to in-store sales and onsite fishing license renewal facilities.

Retailers were also excited about new food and beverage programs in their stores, such as locally produced fresh fruits and produce, fresh-brewed iced coffee and tea, more healthy option items and prepared salads, craft brews and growler fill programs, milkshakes and soft-serve frozen yogurt, breakfast empanadas and other Hispanic fare, grab-and-go meals and sushi at the deli.

The stronger expected sales over the summer months has led to overall retailer optimism. Nearly half (49%) of all retailers say that they are optimistic about the economy, and they are even more optimistic about their industry and their own business: 75% said that they are optimistic about the c-store industry and 76% say that they are optimistic about their own company.

"[Customers] are somewhat less price sensitive if convenience and customer service is delivered at a high level," said Michael Gonzalez, general manager of Arguindegui Pump-N-Shop, Laredo, Texas.

The NACS retailer survey was conducted May 7-17 and incorporates responses from 90 retailer companies, which range in size from one store to large chains operating hundreds of stores.