Story URL: http://news.medill.northwestern.edu/chicago/news.aspx?id=99957
Story Retrieval Date: 5/22/2013 9:45:19 PM CST
The average visit to a convenience store takes only three to four minutes: 35 seconds to walk from the car to the store, 71 seconds to make a selection, 42 seconds to wait in line before paying, 21 seconds to pay and 44 seconds to leave the store.
According to the National Association of Convenience Stores, which convened at McCormick Place last weekend, the profits of convenience stores are being squeezed by rising credit card fees, but they're holding their own in the tightening retail competition because food processors are developing new consumer-friendly products, and because consumers still want convenience.
“Most of our snack items are priced to sell,” said Paul Larson of Kraft Foods Inc. “We want to go with an item that is priced right for the consumer to come inside to buy. Smaller packaging is a growing trend.”
Frank Mecca, the national account manager for Charms, a product line of Tootsie Roll Industries Inc., said, “What we’re finding now is that lower priced candies are selling a lot better so maybe not the $3 bars but those under a dollar seem to be selling really well. People can afford a 25 or 50 cents lollipop.”
New flavors of candy, soups and beverages, as well as new laborsaving dishwashers, were among the new products showcased at the annual trade show of the association. The event brought together thousands of retailers and suppliers in the global convenience and petroleum retailing industry. The NACS show concluded Tuesday.
Convenience stores, the association stated, are remaining resilient with $577.4 billion in sales in 2007, 70 percent or $408 billion from motor fuel sales. The overall U.S. gross domestic product is $13.8 trillion, meaning that the convenience and petroleum retailing industry accounted for 4.17 percent of the U.S. gross domestic product, or 1 of every $24.
Jeff Lenard, vice president of communications for NACS said, “In some respects, we are more resistant to downturns. We sell immediate consumption. If you’re thirsty, you’re thirsty no matter what your 401(k) did. Same with snacks. And some retailers are seeing a bump in sales. Consumers are combining trips, and buying food where they buy gas. They’re also trading down from sit-down meals to take-out meals, and that’s good for our business. However, all retailers are rightfully concerned.”
Cliff Eisenberg of Eisenberg hot dogs and sausages, in Chicago, said while his company hasn’t felt a significant downturn, he is aware of the crunch that consumers are facing and believes his product can compete in the economy.
“I think the one thing we have going for us is, our premium hotdogs and sausages are really an economical meal,” he said. “So, we feel the convenience store side is a good place to get an economical meal-on-the-go."
Sara Lee Corp., based in Chicago, touted new store equipment billed as labor-saving and environment-friendly by cutting down on waste. A new coffee maker, for instance, enables the customer to brew his own, avoiding a waste of brewed coffee if demand falls short.
A representative of Sara Lee said the company's success in convenience stores is due in part to the highly recognizable brands. "If you're going to go to a fast-food restaurant to get a breakfast sandwich," said Matt Drew, "while you're in that convenience store, if there's a Jimmy Dean product right there, you can cut that fast-food restaurant out of your commute."
“When you have a powerfully recognizable brand like Jimmy Dean, Hillshire or Ball Park, or a sustainable brand like Good Origin, there’s a halo effect,” Drew went on. “It creates a halo of quality and it makes a consumer more comfortable to make that purchase.”
Convenience store profits, however, are under pressure, according to the association, with a rising concern about credit card fees. Credit card fees in the convenience and petroleum marketing industry reached $7.6 billion in 2007, which was considerably more than the industry’s $3.4 billion in profits. That means the credit card industry took in more than twice what convenience stores actually made.
“Consumers overwhelmingly believe our industry is making a lot more on gas than we actually are – and they are shocked to learn that the profit margins after credit card fees are about 2 cents per gallon on a good day,” NACS Chairman Richard Oneslager said.
If done right, according to the association, food products can help retailers make up for poor motor fuel margins. Nearly 40 percent of the industry’s gross margin dollars come from beverages – whether packaged beverages, beer or dispensed beverages, particularly coffee.
“We offer them convenience. We save them time. We simplify their lives. We offer them comfort,” said Oneslager. “That is why we are well positioned, in good times and bad.”
There are 146,294 convenience stores in the U.S., of which 3 percent are located in Illinois. In fact, Illinois has the eighth highest number of convenience stores in the country with 4,588. Michigan is seventh with 4,843. Texas ranks number one with 14,179 stores.