Convenience Stores: Winners Now, and in the Future
The convenience store industry once again deserves a well-earned round of applause for turning in another record-breaking year of profits, while growing in-store sales at a faster pace than nearly every other retail trade channel.
According to the 2017 Convenience Store News Industry Report, lower gas prices once again depressed total industry revenues by about 6 percent last year, not nearly the kind of plunge we saw in 2015 when total sales fell by 14 percent. Meanwhile, the industry set new highs in motor fuel gallons sold and fuel profits, in-store merchandise and foodservice sales, and gross profits.
In our Report Card at a Glance, we give the industry a grade of “C” in total sales because revenues declined for the fourth year in a row. We also give the industry a “C+” in store count, as only about 340 net new c-stores were added in the United States last year. However, in-store sales (up 3.8 percent), motor fuel business (revenue wasn’t down as much as 2015 and volume was up), profits (record gross profits for a third year in a row), and foodservice (continued impressive growth) all scored “B” grades, by our subjective grading system.
From 2001 to 2016, the drugstore channel’s share of total retail sales declined from 10 percent to 8.9 percent, and supermarkets’ share fell from 34.2 percent to just 23.1 percent, according to Nielsen. During that same timeframe, c-stores’ share of total retail sales increased from 7.4 percent to 8.2 percent. The biggest gainer, of course, was e-commerce, which skyrocketed from 2.3 percent to 13.2 percent of total retail sales over the past 15 years.
And Nielsen foresees c-store growth continuing in the near future. By 2021, c-stores will be the only brick-and-mortar channel to show a larger share of total retail sales, according to the market research giant. C-store share of total retail will reach 8.6 percent by 2021, while drugstores will decline to 8.9 percent and supermarkets will fall to 21.2 percent. Dollar stores and warehouse clubs are projected to remain static at 2.1 percent and 7.1 percent of sales, respectively.
“I think the future is bright for c-stores,” said Carl Elliott, director of Nielsen’s convenience channel segment. “Technology is going to have a significant and positive impact on the convenience industry.”
Developing technologies such as mobile ordering and payment, checkout-free stores, and same-day and drone delivery, will become pervasive in the c-store industry, predicts Elliott.
What’s more, c-stores are perfectly positioned for the next generation of consumers. “Millennials grew up with their phones. Their first thought when they need something is to go to their mobile devices,” explained Elliott. “The c-stores that are investing in technology to serve these consumers will be the winners within the channel.”