Author: Maggie Fitzgerald
- People, specifically millennials, want to keep fewer foods in their pantry and are buying more prepared foods on the go from convenience stores.
- Convenience stores experienced a 16th straight year of record in-store sales in 2018, according to the National Association of Convenience Stores.
Convenience stores used to be the stop to shop for a soda and a bag of chips after getting gas, but now more consumers are using them as an efficient way to grab a bouquet of fresh flowers, a premade salad, a cup of soup or bakery item.
In fact, the amount of fruits and vegetables sold in the convenience stores has grown to be roughly the same as popcorn or pretzels.
Bucking past trends, produce sales in convenient stores are now about $242 million per year, according to Jeff Lenard, vice president of strategic industry initiatives at the National Association of Convenience Stores. While this is still a fraction of the $3 billion in produce sold at grocery and big box stores annually, it demonstrates new opportunities for convenience store operators.
This past week, the group released data that showed convenience stores experienced a 16th straight year of record in-store sales in 2018, with total sales surging 8.9% to $654.3 billion.
“The value of convenience has never been higher,” said Lenard.
People, specifically millennials, are keeping fewer foods in their pantry and reaching more often for prepared foods. And the higher the income, the fewer grocery trips that consumer is likely to make. Millennials would prefer to grab a premade salad after work than go home, make a meal, eat alone and clean up dishes.
In the past two decades, growth among large North American grocery chains has been just 2%, according to a recent report by McKinsey. The consulting firm anticipates that by 2026, $200 billion to $700 billion in grocery sales could move toward other nontraditional channels, like convenience stores.
Amazon-owned Whole Foods is catching on. The Whole Foods Market Daily Shop is the grocer’s first “grab-and go” convenience store in the upscale New York neighborhood of Chelsea, where shoppers will find Whole Foods staples, prepared foods, fresh produce and even a curated flower section.
Just because the products are changing doesn’t mean people want to spend more time in convenience stores. Efficiency is still paramount. While trips to grocery and big box stores average about 40 minutes with the intention of shopping for one to two weeks, convenience store shopping is all about immediate consumption.
The average time spent in a Wawa, Sheetz or Cumberland Farms is less than four minutes, said Lenard, and 83% of the items sold are consumed within the hour. Sixty-five percent are consumed immediately.
“With all the competition for convenience, including the internet, what convenience stores provide is they have it now,” said Lenard. “It’s not for tomorrow, it’s for today.”
Gas price is still the No. 1 reason people choose where to stop to fuel up.
Convenience stores sell about 80% of all gas in the United States, according to Nielsen. Data from the convenience store association said there was a 13.2% increase in fuel sales in 2018, which accounts for about 70% of total sales.
Because gas prices have been below $3 a gallon for several years, Lenard said, fewer people are picking where to buy gas based on price (59% down from 71% in 2015) and more people are choosing fuel-stops based on the quality of its convenience store.
Carrying produce and perishables is new territory for convenience stores, and figuring out how to order and make the appropriate amount without losing money is a challenge they face, which also may cause them to raise prices.
People are also willing to spend more at convenience stores than they would a grocery store because people view them as dissimilar experiences — one long-term and one short-term.
Profit margins at convenience stores are not that different than for grocery stores, said Lenard. Grocers’ margins are around 1% and convenience store margins come in around 2%.
“If there are higher prices, it’s because you generally don’t get a better deal on product when you’re buying it by the handful as opposed to the pallet,” said Lenard.