Will Promos Be Enough to Lift Sales Out of the Doldrums?
If you ask Americans what they think of the economy, they'd tell you things are not so good. Forget the recent 1,000-point crash of the stock market, they are stressed out by everyday budget concerns. Pocketbooks are stretched to meet daily needs for food and shelter. Continued inflation is making things even worse.
According to The Conference Board, consumer confidence has been stagnant for the past two years. Its most recent index showed consumer confidence in the Present Situation declined slightly last month, while the Expectations Index improved very slightly.
"Uncertainty reigns across groups," said the independent think tank. "While views of the labor market remain largely positive, consumers are still concerned about elevated prices and interest rates — things that may not improve until next year."
Interestingly, confidence improved among consumers under the age of 35 and those 55 and older, while the 35-55 age group saw a decline in confidence. Over the past six months, confidence was highest among the younger consumers.
This sluggish consumer confidence is one of the main reasons for the slower sales many U.S. companies are experiencing. Restaurant chains have certainly reacted to flagging consumer spending caused by inflation and higher prices. We see chains like McDonald's and Burger King launching value meals to compete with Wendy's $5 Biggie Bag. Sonic recently unveiled a new Fun 99 Menu of items for $1.99 each, and White Castle for the first time is slashing the price of its traditional sliders.
The convenience store industry experienced a 4.7% sales decline in 2023, according to the latest Convenience Store News Industry Report. Consumers are making fewer trips to c-stores — the percentage of shoppers who visit a c-store once a month is down 4 percentage points from a year ago, according to CSNews' annual Realities of the Aisle Study. And most recently, CSNews' 2024 Midyear Report Card showed that key convenience store product categories have seen increasingly negative results through the midpoint of 2024.
The majority of the major c-store categories saw both dollars and units decrease from January through June, with the remainder posting higher dollar sales but lower unit volume. The biggest unit volume declines are coming from cigarettes (down almost 10%), candy (down 8.4%), salty snacks (down 6.1%) and other tobacco products (down 4.5%). U.S. consumers may have reached their limit in what they can or will pay for c-store products.
Like the restaurant industry, it appears c-stores are already battling this trend with aggressive sales promotions of their own. Recent examples include Wawa's free drinks program for teachers in Florida and Alabama, Krispy Krunchy Chicken's $4 value meal (outdoing the fast-feeders by a buck), and several deals and cashback offers from 7-Eleven Inc. I expect to see more c-store retailers focus on their loyalty programs and digitals offers in the weeks ahead.
Will that be enough? It'll help, but retailers are going to continue to scramble until the federal government gets inflation under control, while lowering interest rates and unemployment.
