NATIONAL REPORT — The last few years have been a mixed bag of expectations for the convenience store industry's small operators. After heading into 2019 with a glass-half-empty headspace, they beamed positivity heading into 2020 as they planned to implement several new initiatives to boost their bottom lines. That momentum continued heading into 2021, despite facing one of the most unique years in history with the outbreak of the coronavirus pandemic, and industry consolidation that saw some of the channel's biggest chains get even bigger by picking up small operators.
Last year, as 2022 approached, the c-store industry's small operators were trepidatious, still plagued by the continual unprecedented economic pressures brought on by the COVID-19 pandemic and worried about the potential impact on their business for the coming year.
The small operators surveyed for the 2023 Convenience Store NewsForecast Study don't feel much different than those who participated in last year's study. Sixty-seven percent of this year's respondents view the U.S. economy in a negative light, which remains unchanged from those surveyed for the 2022 forecast. Nineteen percent say they are neutral.
There is one bright spot, however. Fourteen percent report a sunny disposition on the economy, which is an 8-point increase compared to those surveyed for the 2022 forecast.
When asked about their respective businesses, a higher percentage of small operators this year than last year predict their sales will increase year over year — 60 percent vs. 50 percent a year ago. Alternatively, a higher percentage of respondents also believe their sales will decrease year over year — 19 percent vs. 11 percent a year ago. Fewer small operators this year believe their sales will stay the same year over year.
On a scale of one to five — where 1 represents "Terrible, wake me when it's over" and 5 represents "It's going to be our best year ever!" — the majority of small operators (72 percent) rate their optimism for 2023 at a 3 or 4. Only 7 percent put their optimism rating for the new year at a 5, while 5 percent put it at a 1.
About a quarter of small operators (26 percent) plan to increase their store count in 2023 vs. 78 percent of large operators. Sixty-seven percent of small operators anticipate their store count will remain unchanged, while 2 percent expect a decrease in store count. Five percent of small operators expect to exit the c-store industry during the year.
Keeping an Eye Out
On a positive note, 43 percent of this year's small-operator respondents expect that foot traffic to their stores will increase in 2023 — the highest level seen since the 2020 Forecast Study when 70 percent predicted foot traffic would improve. Forty-one percent expect the status quo. The other 16 percent are bracing for a year of decreased foot traffic.
When it comes to the factors that will impact their sales and profitability in 2023, the convenience store industry's small and large operators share some common concerns. Not surprisingly, inflation and economic issues rank No. 1 among both groups, followed by labor turnover and hiring, and supply chain issues. Other issues that both small and large operators are weary of are fuel prices, tobacco/e-cigarette regulations, and declining foot traffic.
One area in particular that is of more concern to large operators than their smaller counterparts is the expectation that cross-channel competition will increase in the year ahead. This was cited by 83 percent of large operators vs. 60 percent of small operators. Just 3 percent of small operators expect cross-channel competition to decrease in 2023, while 36 percent expect it to remain the same.
Small operators view dollar stores as posing the biggest threat to their business (cited by 52 percent). These retailers are also more cautious of Amazon (35 percent) and mass merchandisers (28 percent) than large operators. Interestingly, when compared to their larger counterparts, small operators are less concerned about the threat of online grocery delivery sites (38 percent vs. 53 percent) and quick-service restaurants (17 percent vs. 33 percent).
Turning Negatives Into Positives
Despite their trepidations, small operators are determined to make their stores more attractive to consumers in 2023. To keep pace with the larger c-store chains when it comes to offering "enhanced convenience" services, slightly more than three-quarters of small operators (76 percent) currently offer mobile pay in-store, with 16 percent planning to add this offering in 2023. More than half of small operators (53 percent) currently offer mobile payment at the pump, with 16 percent saying this feature will be added in the coming year.
The top three initiatives planned by small operators for the new year are contactless payment using a mobile app, at-the-pump ordering for in-store items and implementing a drive-thru. Comparatively, large operators' top plans for 2023 call for the implementation of third-party delivery and contactless payment via either a mobile app or AI/sensors.