In the "Sweet Spot" of Consumer Demand

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In the "Sweet Spot" of Consumer Demand

By Don Longo, Convenience Store News - 12/10/2007
As we head into 2008, the very real threat of recession looms over the U.S. economy.

The housing bubble has burst, the value of the dollar continues to fall, foreclosures are rising and consumer confidence is waning.

Yet, despite all this, I have to agree with NACS president and CEO Hank Armour, who described the health of the convenience store industry as "terrific" in a conversation last month at the NACS Show in Atlanta.

"Convenience retailing is absolutely in the sweet spot of consumer demand," Armour said as he discussed the future of the industry in an interview you can read on Convenience Store News' popular CSNews at the Trade Show microsite (

The NACS Show itself was great evidence of this. There seemed to be a much higher level of excitement and buzz on the show floor this year. I'm not sure what to attribute that to -- perhaps there were fewer diversions in Atlanta than in Vegas (where the show was held the past two years) -- but more likely it was just another sign of the vibrancy of the c-store industry today.

The state of the economy was also a topic at last month's CSNews' Industry Forecast Council meeting in New York. Retailer representatives, including Gary Braaten of CHS Inc./Cenex, Paul Casadont of Chevron, Sonja Hubbard of E-Z Mart Stores, Dean Dirks of Firsthand Management LLC/Balmar, Michael Zielinski of Royal Buying Group, Michael Scarpelli of Southwest Convenience Stores (Alon USA) and Tony Bartys of Valero, were more concerned than usual about the state of the overall U.S. economy and consumer spending. Most of them expect the price of oil to hit $100 per barrel before the end of this year and were worried about the impact of this and other factors on consumer spending.

"Consumers are nervous," said Maureen Maguire, president of ThinkResearch and the economist who crunches data from a variety of sources to arrive at the CSNews Industry Forecast. With the cost of retail gas and home heating oil expected to rise, "where is the tradeoff going to come from?" asked Maguire, who pegged the probability of a recession at 30 percent during the meeting.

James Russo, vice president of new business development for TNS RetailForward, agreed with Maguire's view that this would be a "nervous" holiday season. The consumer research firm is forecasting only a "moderate" increase in fourth-quarter retail sales of 3.3 percent, down from 4.6 percent in 2006.

It looks like 2008 will be a real test of whether the convenience store industry is really "recession-proof." Despite all the concerns, the consensus of retailers and researchers at the meeting was that other channels (restaurants, travel and leisure, grocery, apparel and department stores and the like) are much more susceptible to a business downturn than are convenience stores, which continue to supply everyday essentials (coffee, fuel, food and beverages) to consumers in the most convenient format available.

Let me extend the best wishes of the Convenience Store News staff to you and your families for a happy and prosperous holiday season. May you stay in that sweet spot throughout 2008.

For comments, please contact Don Longo, Editor-in-Chief, at (646) 654-7489 or [email protected]