Expanded fresh food offers and continued lower gas prices drove strong convenience store sales in the second quarter of 2015 and these factors — along with the warm weather — are expected to continue to grow sales in the upcoming quarter, according to the results of a retailer sentiment survey released today by the National Association of Convenience Stores (NACS).
More than 8 in 10 convenience store retailers (83%) say that they are optimistic about their business for the third quarter of 2015, a slight decrease from the 86% who were optimistic three months earlier. By comparison, less than 8% expressed pessimism about their prospects for the upcoming quarter.
Strong sales both at the pump and inside the store continue to drive retailer optimism. More than 4 in 5 retailers (82%) say that in-store sales are higher in the first half of 2015 compared to the first half of 2014. And a majority of retailers (55%) also say that fuels sales so far in 2015 are stronger than the same period in 2014. The convenience store industry sells an estimated 80% of the gas sold in the country.
Overall, retailers cited three factors that will affect sales in the third quarter: the economy and consumer sentiment (cited by 21%), low gas prices (cited by 20%) and a continued emphasis on fresh food (17%).
Food Sales Expected to Grow
Seven in 10 retailers (70%) say that they are optimistic about food sales in the upcoming quarter. Almost as many (69%) are also confident about their ability to compete with quick-service restaurants (QSRs), an increase from 63% the previous quarter.
One advantage of convenience retailers is a greater ability to customize food offerings, compared to traditional QSRs. “We are trying to create food products that are targeted to the local customers that the QSRs won’t do,” says Kim Robello with Minit Stop Stores (Kahului, HI).
“Our deli has complete freedom to develop any type of sandwich or dish they choose. They can provide the changing variety that branded foodservice locations cannot,” adds Anthony Shupert, with Freshfields Convenience Store (Kiawah, SC).
A Continued Focus on Fresh
In addition, convenience stores are adding more healthy and fresh items. More than 3 in 4 (77%) say they sell fresh fruits and vegetables, almost 6 in 10 (57%) sell packaged salads and nearly half (47%) also sell cut fruit and vegetables. Convenience stores also have expanded selections of these items. Over the past six months, 50% of all convenience retailers say they have expanded their fresh fruit sales, 30% have increased their cut fruit and vegetable offers and 21% are offering more salads.
Stop ’n Go (Medina, OH) is offering more fresh fruits and vegetables, plus dedicated “healthy-for-you” sections, according to Becky Shotwell.
McGill’s Gas & Grocery (Dadeville, MO) also is optimistic about growing sales through its healthy food and beverage programs, says Charity McGill.
Better-for-You Items Also Growing
Beyond fruits and vegetables, convenience stores are selling other better-for-you items: 97% say they sell nuts and trail mix, 93% sell healthy bars, 80% sell yogurt, 80% sell string cheese and 56% sell boiled eggs. Of these items, retailers are most expanding selections of health bars (41% expanding) and yogurt (21%).
Gil Moore Oil Co. (Sacramento, CA) has added packaged salads and a yogurt shop. The company is optimistic about its “quality stores and new products” says Gil Moore.
Payan’s Fuel Center (El Paso, TX) also expanded its yogurt selection and is very optimistic about the coming months. “The summer months bring more travelers and special events held in the city and increase traffic in the area,” says Samantha Carpio.
“We’ve always supplied these [better-for-you] items,” says Matthew Seymour of Ada Inc. (Brainerd, MN).
“It doesn’t have to be complicated” to add new items, notes Tom Robinson with Robinson Oil Co. (Santa Clara, CA). The company’s Rotten Robbie brand is “upgrading, refreshing stores and focusing on some key products like bananas, coffee, fountain beverages and beer.”
Less Optimism Over the Economy
While convenience store retailers are extremely optimistic about their own business prospects in the second quarter, they are slightly less optimistic about the convenience retailing industry (79%, down slightly from 80% in the second quarter) and the economy as a whole (61%, down from 70% in the second quarter).
These concerns about economic conditions also affect some retailers’ views about their business prospects for the upcoming quarter.
Even while expanding fresh fruits and vegetables, health bars and nuts and trail mix displays, M.E. Dujka, with Landmark Industries (Houston, TX) is only “somewhat optimistic” about business prospects, raising concerns about the “influx of new competitors into the market.”
Ray Smith, with Jane Lew Truck Stop (Jane Lew, WV) is among the 9% of retailers who is neither optimistic nor pessimistic about the third quarter, predominantly because of local natural gas layoffs in the market area.
Despite some concerns about the economy, overall convenience store confidence remains high heading into the third quarter. Mike Griffith of Golden Pantry (Watkinsville, GA) sums up retailer optimism by stressing the convenience store industry’s long-held competitive advantage: “The fact is we are still more convenient.”
The quarterly NACS Retailer Sentiment Survey tracks retailer sentiment related to their business, the industry and the economy as a whole. A total of 102 member companies, representing a cumulative 1,786 stores, participated in the survey.