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Convenience Industry Pivots for Long-Term COVID-19 Impact
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Convenience Industry Pivots for Long-Term COVID-19 Impact

NACS State of the Industry Summit reinforces the importance of industry’s strong 2019 operational and financial results,

ALEXANDRIA, Va. — Looking back at the U.S. convenience and fuel retailing industry in 2019, in-store sales increased 4.4% ($251.9 billion in 2019 vs. $242.2 billion in 2018), according to newly released NACS State of the Industry data that reflects a pre-coronavirus pandemic climate.

Total industry sales, which include $395.9 billion in total fuel sales, declined by 1.0% ($647.8 billion in 2019 vs. $654.3 billion in 2018), largely reflective of a 4.7% decrease in the price of fuel in 2019. Overall, total convenience store sales in 2019 were 3.1% of the U.S. gross domestic product of $21.4 trillion.

NACS State of the Industry data is released each year at the NACS State of the Industry Summit. Due to the current coronavirus pandemic, however, this year’s summit was recast as a virtual, on-demand event at convenience.org/SOISessions that launched April 14 for viewing. More than 1,300 attendees are participating in the virtual experience, which includes 10 educational sessions on topics such as analyzing 2019 industry performance, trends and economic forces as well as forward-looking topics such as how COVID-19 is changing consumers’ shopping behavior in ways that could shape long-term buying patterns.

Fuel Sales

According to NACS State of the Industry data, fuel sales at convenience stores, which sell approximately 80% of the fuel purchased in the United States, were down 3.9% from 2018 ($395.9 billion vs. $412.1 billion). In 2019, gas prices averaged $2.57 per gallon, compared with $2.70 for the year prior.

Fuel sales accounted for 61.1% of total convenience store revenue dollars and 36.2% of gross profit dollars in 2019. Of the 152,720 convenience stores operating in the United States, per the 2020 NACS/Nielsen Convenience Industry Store Count, 121,998 stores sell fuel.

There were signals that fuel demand would slowly erode in 2020. Even with a lower price per gallon at the pump in 2019, consumers said they were making fewer stops to refuel, which translates to fewer trips per week to a convenience store. A January 2020 NACS consumer survey echoed a similar finding: More than half of American drivers (59%) were driving the same amount as they did in 2018, while 20% were driving less and 22% drove more. Job- and family-related driving obligations were most often cited as the reason for more driving (51%), compared to lower gas prices (27%).

Fuel demand collapsed beginning in mid-March as social isolation practices curtailed commuter and highway traffic. As of April 1, all but five states had issued stay-at-home orders, which will surely translate to significantly fewer vehicle miles traveled, vehicle sales, fuel consumption and trips to convenience stores to refuel in the months ahead.

Workforce Investments

Increases in direct store operating expenses (DSOE) continued to create challenges for convenience retailers, with new business investments contributing to a higher DSOE, which increased 6.4% in 2019 compared with 5.1% in 2018. Credit- and debit-card fees increased 6.3% to a record $11.8 billion as more consumers paid by plastic: 74.6% of all c-store sales were with a credit or debit card.

Considerable changes in DSOE are expected in 2020. Many retailers could see added DSOE costs related to more frequent and deep cleaning and sanitation procedures and new safety measures such as installing plexiglass guards and other personal protective equipment investments. However, it’s possible reductions in other expenses could help offset increased spending in other unplanned areas, such as less energy usage at stores closing during nighttime hours and for some foodservice equipment due to reduced use in self-serve options (roller grill, coffee, fountain), as well as less waste generated both inside the store and at the pump.

Overall in 2019, wage expenses increased 7.2% and hourly wages for full-time employees reached $11.75 per hour; they were $10.83 per hour for part-time. These figures are expected to increase even further in 2020 because many convenience retailers announced temporary hourly wage increases and bonus pay for front-line hourly and part-time employees during the coronavirus pandemic.

Foodservice: 2019 Bright Spot

In 2019, foodservice growth suggested that consumers rely on their local convenience store for snacks and meals. Foodservice sales saw a 4.4% increase in 2019 and represented 25.4% of inside sales–up from 22.6% in 2018. Foodservice also drove overall success at stores: Top quartile-performing companies sold 7.7 times more foodservice than bottom-quartile performers.

Considered “essential businesses” by the U.S. government during the pandemic, convenience stores are often the only and/or closest location for much-needed fuel and food and grocery items, particularly in smaller towns, where 8 in 10 rural Americans (86%) said in a 2018 NACS consumer survey that a convenience store was within 10 minutes of their homes.

An April 2020 NACS Retailer Member survey found that overall foodservice sales had decreased, while 52% said grocery sales had increased during the pandemic.

Foodservice sales in 2020 have been affected by the extra precautions that retailers have taken to decrease the risk of potential contamination by removing self-service options for roller grills, bakery cases and cold, frozen and hot dispensed beverages. For some retailers, that meant moving self-serve foods and coffee behind the counter so that an employee can serve the customer. For others with extended prepared foodservice programs, this meant shutting down seating areas or continuing foodservice menus and barista services via touchscreen ordering.

See Also

In-Store Sales

In 2019, the main categories as a percentage of overall in-store merchandise sales were:

  • Tobacco: Cigarettes 27.1%; other tobacco products 7.3%
  • Foodservice: 25.4%
  • Packaged beverages: 14.8%
  • Center store (salty snacks, candy, packaged sweet snacks, alternative snacks): 10.1%
  • Beer: 7.4%
  • Other: 7.9%

In the absence of on-premise licensed beverage sales during the pandemic, many c-stores this year could see an increase in beer, wine and liquor sales as consumers comply with stay-at-home orders and dine at home.

A Look Ahead

“The extent to which the global coronavirus pandemic will ultimately affect the convenience industry throughout 2020 and into 2021 is unknown; there is no precedent in modern history that can provide context or modeling for this level of economic uncertainty. Factors such as temporary or permanent store closures, government regulations, the length of stay-at-home restrictions, the spread of the virus and finding a cure all influence both short-term and long-term economic impacts,” said NACS Vice Chairman of Research Andy Jones of Sprint Food Stores Inc., based in Augusta, Ga.

“Even with these considerable challenges, the convenience industry has shown, over decades of its existence, that it is resilient to economic depressions, natural and man-made disasters and yes, even pandemics,” Jones said.

NACS, the global trade association dedicated to advancing convenience and fuel retailing, serves as a trusted adviser to more than 1,500 retailer and 1,800 supplier members from more than 50 countries. Founded in 1961, NACS ensures the competitive viability of the convenience and fuel retailing industry–which accounts for 165 million transactions daily and generates almost $650 billion in annual sales in the U.S. alone–through knowledge, connections and advocacy. For more information, please visit convenience.org.

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