Where Has Everyone Gone?

Whether the deportation program is fully implemented or not, it is going to have a major impact on the convenience industry in two distinct ways, neither of which I've heard talked about enough in the media: labor and sales.

The Labor Impact

Here is how I think it is going to play out: The labor issue is not the obvious one where thousands of c-store employees are arrested and sent out of the country. On the contrary, I believe the great majority of c-store employees are legally employed and that most c-store business owners follow the labor laws. The problem will result from the impact the deportation program will have on other industries.

The first round of any deportation program will focus on efficiency and low-hanging fruit, targeting places where there are many immigration violators in one place. The most obvious places to strike are farms, service-sector businesses and jails/prisons.

It is the farm and service-sector scenario that is going to cause the chain reaction affecting convenience stores. Let's say, conservatively, that half of the illegal immigrants are employed in the farm and service sectors. If the plan is successful, that is almost 6 million people who will disappear from the workforce within a matter of months, according to Trump.

Under the plan, two things will happen: arrests will be made, removing employees from their jobs; and employees will stop showing up for work because of fear they will be arrested while they are on the job. Regardless of the causation, the shortage of labor will need to be filled by either legal workers or technology.

The majority of the affected jobs will not be filled by technology, or the technology will be very expensive. Therefore, in order to attract legal workers, employers are going to have to offer higher wages and better benefits to job candidates than they have in the past. The competition for the low-skill workers usually employed by c-stores will become fierce. Employee costs will go up significantly, and there will be a repeat of the labor scarcity issue that was experienced immediately after the pandemic.

Retailers' profit margins will be squeezed as labor expenses go up and the cost of goods rise due to inflation. Shifts at stores will be understaffed, resulting in overtime costs or reduced operating hours (with the accompanying reduced revenue opportunities). Product deliveries will be disrupted due to shortages of warehouse staff and truck drivers because they take better-paying jobs elsewhere.

Bottom line: Retailers need to be ready for a major shift in their business model and learn to do more with less.

The Sales Impact

My second concern will compound the economic impact of the labor situation: a decline in sales. C-store customers tend to come from the lower economic demographic groups.

They include low-skill day workers (think farm hands, landscapers and construction workers — three industries that will be impacted by deportation), and people who treat the local c-store as their grocery store due to lack of transportation or limited purchasing power (oftentimes, the families of low-skill day workers). These will be the groups most impacted by deportation.

It sounds like the perfect storm for retailers: fewer customers cause sales to fall, rising wages increase operating costs and higher product costs reduce margins. Not a pretty picture.

So, what to do? First, put programs into place to attract and, more importantly, retain your employees. Offering competitive wages and benefits is only the starting point. You must also provide comprehensive training and skill development programs, and create a sense of mission and community within your company so that employees don't want to look elsewhere for a job. The focus must be on empowering your workforce and having the attitude that every person who works for you is the most important person in the company.

Second, make sure you have a diversified group of reliable suppliers that will look after you when disruptions start. What are the companies that are going to work with you on cost control and order fulfillment? If one of your suppliers can no longer provide you with the products you need, who is your alternative? You need to plan now and build alternative business relationships.

Third, upgrade your store offer with a focus on foodservice to become a destination for the broadest customer base possible. You need to fight for every customer. What can you sell to keep your regular patrons coming into your store and attract new ones? This could mean changing your core product offer and introducing new programs and services.

You may also want to think about participating in community outreach programs if the neighborhoods around your store are heavily impacted by the new deportation program. Regardless of your political views, there may be a way to help the people in your market area in such a way that it will promote your business.

And fourth, review every element of your operations to make sure it is as cost and labor efficient as possible. How can you do more with fewer people? Are there jobs that technology can do for you? Are there tasks that are no longer necessary and can be eliminated? My suggestion is that you develop a plan to operate your store with 75% of your current employee base and at 150% of your current labor cost.

Yes, I think it is going to get that bad, and you don't have much time to put these plans into place as the deportation plan is supposed to start right after the inauguration. Even if it is not activated immediately, anticipation of the program will have the same effects as people will either lay low or start to self-deport to avoid the traumatic experience of being arrested. 

Snap! It is very possible that in a few months, you may look up and wonder where everyone has gone.

Editor's note: The opinions expressed in this article are the author's and do not necessarily reflect the views of Convenience Store News.