Lower gas prices boost convenience store sales
Dallas — For hungry drivers like Whitney Scott, the current below-average gas prices offer a measure of freedom.
When local gas prices last spring hovered close to $4 a gallon, drivers may have wanted to grab some snacks or sodas after filling up the tank “but didn’t because gas was high,” said Scott, who stopped earlier this week at a Dallas 7-Eleven/Chevron station to fill up her Chevy Equinox.
“Now,” she said, toting a box of barbecued chicken wings from the 7-Eleven, “they have the funds to freely get what they want.”
Nationwide, gas prices plunged in the second half of last year, as fracking boosted U.S. shale oil production and the OPEC oil cartel kept the spigot open.
Increasingly, experts say, drivers are taking the windfall saved at the pump and spending it at convenience stores.
Because profit margins on a gallon of gas are so thin, sales of drinks and merchandise are much more profitable for a convenience store operator than fuel sales, the experts said.
For convenience stores in general, gas may bring consumers onto the lot, but drinks lure them into the store. And drinks, from Gatorade to craft beer, saw sales rise as gas prices fell.
Convenience store patrons “go inside to get a beverage … whether it’s for a cup of coffee or a fountain drink,” said Jeff Lenard, vice president for strategic industry initiatives with the Virginia-based National Association of Convenience Stores. “And while there … they’ll say ‘I’ll get a snack’ also. It’s the beverage sales that you see mostly increasing and the other items increase because of the beverage sales.”
Bonnie Herzog is a senior analyst with Wells Fargo Securities, where the research department recently surveyed retailers representing more than 15,000 U.S. convenience stores.
Based on the survey results, she estimates that non-alcoholic beverage sales gained nearly 6 percent in the fourth quarter of 2014, compared with a year earlier. That follows a 6.2 percent gain in beverage sales in the third quarter.
Of all gas purchased by consumers in the U.S., roughly 80 percent flows from convenience store pumps, according to Lenard of the trade association. Only 10 percent of sales come from traditional service stations. The other 10 percent is sold at larger grocery and big box stores, he said.
Out of the nearly 153,000 convenience stores in the U.S., more than 80 percent have gas pumps, he said.
The average convenience store gets about 300 customers a day at the pump, Lenard said, and about 35 percent of those customers also fuel themselves.
Seeing lower gas prices “doesn’t make you hungrier or thirstier,” he said. “It gives you permission to go inside.”
Each soda and bag of chips sold helps blunt the impact of lower gas prices on the store’s profit and loss statement.
“It’s likely that total C-store revenues (for 2014) will be lower due to the lower gas prices,” said Don Longo, editorial director for Convenience Store News. “However, in-store sales, merchandise and food service combined, are likely to grow more than usual, which will have a positive impact on bottom lines because” of the higher profit margins.
In 2013, the most recent year available, motor fuels accounted for 70.7 percent of total convenience store sales but only 35.6 percent of profit dollars, according to a report from the convenience store association.
Meanwhile, consumers are assessing what spending options the lower gas prices bring.
“It makes the economy better when you don’t have to worry about gas prices being so ridiculous,” said Dallas resident Karmon Robinson.
“It allows you to get snacks when you’re hungry,” he said. “Now you can get maybe $7 (of gas) and pick up some beef jerky or a Snickers or something.”