ALEXANDRIA, VA, 2016-1-5 — /EPR Retail News/ — Convenience store retailers expect the robust sales in 2015 to continue into the first quarter of 2016, according to the results of a survey released today by the National Association of Convenience Stores (NACS).
Retailers said that overall sales in 2015 were strong, with more than three in four (78%) reporting an increase in foodservice sales and nearly two in three (64%) reporting an increase in fuel gallons sold.
Nearly 8 in 10 convenience store retailers (78%) said that they are optimistic about their business for the first quarter of 2016, compared to only 6% who are pessimistic.
Lower Gas Prices, More Fresh Food Grow 2015 Sales
“People seem to have a bit more money available—maybe due to lower gas prices—and are buying more inside the stores,” said Richard Parry with Aloha Petroleum (Honolulu, HI).
“Customers are willing to spend more inside the store after spending less money at the pump,” said Stephen Lair with Harrison, AR-based Petromark Inc., which operates White Oak Station stores.
“The price of fuel seems to have helped with inside sales,” said Herb Hargraves with Jacobs Entertainment (Lafayette, LA), who added that customers are more willing to purchase additional items inside the stores, including higher-ticket items such as sportsman coolers and even $399 hoverboards for the holiday season.
A proprietary food rollout has helped grow sales at Anderson, IN-based Ricker’s convenience stores. “We’ve seen sales growth inside our stores after adding foodservice—and it has had a halo effect on other in-store items,” said Jay Ricker.
Stores also grew sales by offering a variety of better-for-you items. Nearly two in three retailers (65%) say that sales of better-for-you items increased.
“We had a significant increase in selling healthy foods,” said Jeff Armbruster with Armbruster Energy Stores (Grafton, OH). At Marshall, MI-based Walter-Dimmick Petroleum, better-for-you beverages, especially water, had strong sales, according to Michael LeBerteaux.
Grab-and-go food items helped drive sales in 2015, according to Gregory Cobb with Freedom Oil LLC (Warsaw, IN).
Trends for 2016
Retailers are also bullish on the convenience store industry’s business prospects. More than three in four retailers (78%) said they are optimistic about the convenience store industry, an increase from 73% last year.
Retailers expect to see continued demand for healthy items in stores. James Lynch, with Burley, ID-based Triple S Oil, expects better-for-you foods sales to grow, especially in the first quarter following New Year’s resolutions.
Breakfast is also a positive growth opportunity for convenience stores in 2016, according to Dee Dhaliwal, with Dhaliwal & Associates (Pleasanton, CA).
While retailers are optimistic about 2016, they also have a number of concerns, especially related to labor. More than two in five retailers (41%) said that labor issues are a threat to their business in 2016. With tight labor markets and pushes to increase the minimum wage in many areas, meeting the demand for more prepared food programs, which require more employees on the payroll, will be challenging.
“With our low unemployment rate, the labor pool has become a puddle,” said Kim Robello with Minit Stop in Kahului, HI. “Employment is near full capacity in the Minneapolis market and is causing serious issues related to a stable workforce,” added Steve Williams, with Bobby & Steve’s Auto World (Minneapolis, MN).
Distribution issues are also a concern for retailers who seek to grow their foodservice offer, including Lisa Dell’Alba, with Square One Markets (Bethlehem, PA).
While competition is always a concern for retailers—47% of retailers said that competition from other convenience retailers was the biggest threat to their business, while 33% cited competition from other channels—the biggest threat in 2016 is over regulation and legislation, cited by 61%.
What factors will most influence sales? Four broad factors emerged from the survey: gas prices (cited by 33%), the economy (15%), the weather (14%) and the embrace of better-for-you items (10%).
“If gas prices stay low, inside sales will be strong,” said John Long, with Dyno’s Convenience Stores (Spencer, IA).
Even with a variety of external factors, it will likely be internal strategies that drive success in 2016. “Those who have successfully found their visions for the future will continue to make large strides and rally their teams behind them. Our success will depend on our ability to adapt to new trends and deliver a truly different experience than other competing retailers,” said Lonnie McQuirter with Lovingsons Service Center (Minneapolis, MN).
The quarterly NACS Retailer Sentiment Survey tracks retailer sentiment related to their business, the industry and the economy as a whole. A total of 100 member companies, representing a cumulative 1,248 stores, participated in the survey.
Founded in 1961 as the National Association of Convenience Stores, NACS (nacsonline.com) is the international association for convenience and fuel retailing. The U.S. convenience store industry, with more than 152,700 stores across the country, posted $696.1 billion in total sales in 2014, of which $482.6 billion were motor fuels sales. NACS has 2,100 retail and 1,600 supplier member companies, which do business in nearly 50 countries.