NATIONAL REPORT — Citing negative influences such as the COVID-19 pandemic, accelerated competition from e-commerce, retailer consolidation and increased government regulation, the nation’s convenience store industry suppliers, distributors and brokers began 2021 with a darker outlook than last year.
Only 54 percent of convenience channel suppliers say they have a positive view on the U.S. economy for the year ahead, compared to 79 percent of last year’s respondents in the Convenience Store News Forecast Study. Those with a negative economic view more than tripled to 28 percent this year vs. just 9 percent in 2020. Eighteen percent have a neutral view.
The supplier community’s less-than-savory outlook on the economy likewise extends to their disposition on their respective product categories. This year’s Forecast Study findings show that slightly more than half (54 percent) believe 2021 will be a good year for their category, a 31-point drop compared to one year ago when 85 percent felt positive about their category.
Like the c-store retailers they serve, the supplier community ranks COVID-19 as the foremost factor that will impact their sales and profitability over the next 12 months.
As one study participant commented, the global pandemic “affects travel and transaction counts in the convenience industry, which is the lion’s share of our P&L.” Another noted: “It impacts manufacturing capabilities and the ability to bring enough product to the market.”
Suppliers are also wary about the acceleration of e-commerce that’s been fueled by the pandemic, with nearly a quarter citing it as a hindrance to their sales and profitability in 2021.
“E-commerce is pulling foot traffic out of the brick-and-mortar stores and impacting impulse sales and what consumers are buying,” one supplier stated. Another added: “Habits have changed during the pandemic and many of them will stick. More dollars are heading online.”
Other roadblocks that convenience channel suppliers and distributors anticipate this year are the cost of raw materials (cited by 24 percent), retailer consolidation (22 percent), a decline in consumer spending (22 percent), and rising labor costs (15 percent).
Despite many reservations, the c-store industry’s supplier community is enthusiastic about some 2021 business prospects. When asked to list their top three reasons for optimism in the coming year, the arrival of COVID-19 vaccines, pent-up shopper demand, new product development and emerging technologies (particularly electric vehicles and contactless payment) frequently appeared in the remarks provided.
“Our new product has the potential to disrupt the industry and addresses health and wellness, which is a top consumer concern,” one supplier told CSNews.
Another remarked: “With shopper development, convenience has opportunities to present itself as a solution center and a meal center to additional consumers than typical commuters.”
And another particularly optimistic respondent concluded: “Once we turn the corner on the pandemic, the bump will be a doozy! Our business has invested heavily in supporting takeaway dining, which will continue to grow. The only way is up!”
Suppliers are more bullish about the convenience channel than any of the other retail channels they serve. Specifically, 71 percent rate business conditions in the convenience channel positively, placing it ahead of grocery (62 percent), mass merchandisers (47 percent), dollar stores (46 percent), and drugstores (43 percent).