C-store Retailers Face Three Hurdles to Sales Growth

STATE COLLEGE, Pa. — While year-over-year revenues from in-store products for convenience stores held steady in 2022, c-store retailers face three major hurdles to sales growth, according to a new analysis by VideoMining. 

Last year ended on a high note due to price hikes on almost all in-store products. The average basket size for a c-store buyer was $10.49 in December 2022, the highest on record for the channel.

However, VideoMining's CSI Tracker also revealed three obstacles which could potentially hamper revenue growth in 2023. The trend analysis of key behavioral metrics against prior year and pre-pandemic data highlights the three challenges:

• Loss in fuel trips (-2.5 percent vs. 2021, -20 percent vs. 2019)
• Loss in pump-to-store conversion rates (-3 percent vs. 2021, -8 percent vs. 2019)
• Loss in in-store traffic (-2 percent vs. 2021, -15 percent vs. 2019)

Loss in Fuel Trips

Two factors possibly explain the decline in fuel trips: gas prices and a drop in work commutes. Though costs eased by the end of year, the high prices for most of 2022 hurt demand with a direct correlation between average weekly gas prices, the number of gas trips and the number of gallons purchased per trip. However, as gas prices continue to decline, the number of fuel trips will possibly bounce back, according to the research.

The bigger decline from pre-pandemic levels is seen in work commutes, with a growing work-from-home and hybrid workforce. VideoMining also saw accelerated adoption of electric vehicles playing a small factor and believes these are all part of longer-term trends to watch out for.

Loss in Pump-to-Store Conversions

While the declines in fuel trips could be explained by external factors, VideoMining's analysis struggled more to explain the loss in pump-to-store conversions. In 2022, only 23 percent of gas customers bought any other product in-store, a steep drop from the pre-pandemic conversion rate of 31 percent in 2019.

The report suggests that most of the decline stems from those who paid at the pump. In 2022, 71 percent of all gas customers paid at the pump, compared to 69 percent in 2019, so payment behavior didn't significantly change. However, in 2022 only 20 percent of those who paid at the pump bought anything in-store, 11 percent less than in 2019. The report recommends c-stores begin to take measures to attract these shoppers into the store, which could make a significant positive impact on performance.

Loss in In-Store Traffic

The erosion of fuel trips and pump-to-store conversions impacted in-store traffic. However, 75 percent of total in-store visits were from direct store, non-fuel trips. These trips seem to have been impacted by both short-term trends such as inflation and long-term changes such as the rise in remote work.

VideoMining believes the 15 percent decline of 2022 vs. 2019 should be of particular concern, as it could indicate long-term changes to the channel beyond the temporary disruptions from the pandemic. That said, declines in store traffic varied quite a bit by store location and could be positively affected by portfolio adjustments or mergers. 

Jumping Over the Hurdles

The CSI Tracker data did reveal some bright spots. In-store sales were solidly supported by key trip missions. Purchases focused on refreshments, snacking, caffeine boost, nicotine and meal building trips all did well in 2022, with caffeine boost and meal building trips growing year-over-year. Energy drinks and pre-packaged foods, along with smaller categories such as wine and pet foods, also saw gains.

Despite some of the hurdles stores faced, the CSI tracker did see a number of high performing stores and chains, and the report suggests other c-store operators follow their lead, such as creating effective merchandising strategies to drive more impulse purchases.

State College-based VideoMining helps retailers and consumer packaged goods companies optimize retail performance and experience by decoding in-store behavior.