From growlers to gourmet food options, many convenience stores are focusing on new profit centers
By NACS Online
“Unusual offerings” at the Phoenix Mart are resonating with customers, thanks to new ideas about to service shift workers at a nearby hospital, busy commuters and local businesspeople taking a lunch break, writes WilmingtonBiz.com.
When Springer Eubank opened the Phoenix Mart about a year ago, company owner Cecil Worsley decided that local workers would welcome a convenient lunch, as well as a small pub where they could wind down after work.
“We called it The ER Pub because workers from the hospital emergency room come in at the end of their shifts,” Worsley told the news source, adding that he and pub manager Tricia Sandoval said 7 am and after dinner are busy times in the pub, with crowds ranging from a handful of people to a group of 20 or 30. “Is this something I thought would do huge volume? No. But it’s catering to a specific crowd.”
The news source says that the Phoenix Mart is one of many convenience stores across the United States that is using diverse business models to fill community niches and increase profit margins, “as changes in fuel prices, buying trends and customer expectations have changed the way business is done.”
Jeff Lenard, NACS vice president of strategic industry initiatives, told the news source that merchandise, foods and drinks no one considered finding in a c-store in years past are becoming the norm, mainly because “the definition of convenience continues to evolve.”
Lenard said that the average convenience store’s core offerings are changing. “While demand for motor fuels is strong with relatively low prices, electric vehicles will grow in sales, and new options like autonomous vehicles will affect demand and fueling,” he said.
In addition, convenience stores “are turning toward prepared food, even gourmet food, to address consumer demand,” Lenard said. “And craft beers and growlers are part of that trend.”
Worsley agreed that although customers are expecting more, the costs of doing business also have increased. “The biggest change is that the cost of entry is huge,” he told the news source. “To build a facility takes a lot of money. The price margin on gas and cigarettes is small, so you have to up your game.”
Citing NACS State of the Industry data, the news source notes that U.S. convenience stores experienced record in-store sales of $233 billion in 2016, the third straight year of more than $10 billion in pretax profits. But despite the dramatic increases, direct store operating expenses (DSOE), including wages, payroll taxes, health-care insurance, card fees, utilities, repairs/maintenance and supplies, as well as other categories including franchise fees and property taxes, outpaced inside gross profit dollars for the second consecutive year in 2016.
“Retailers know that consumers are incredibly price sensitive and will go somewhere else to save as little as a few cents per gallon. Even with these low margins, retailers can still make a profit, usually only a few cents per gallon before taxes,” according to the NACS State of the Industry Report of 2016 Data. (To participate in the 2017 survey, click here.)
As customers’ appetites for more food, drink and impulse purchases continues to grow, the convenience store industry is looking ahead to keep up with those appetites in more creative ways, notes the news source. For Worsley, his company plans to focus on growing through acquisitions. “It’s just so costly to build new ones, and the appetite for new construction just isn’t there,” he said.