Convenience Stores
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Industry Overview
The US convenience store (c-store) industry includes about 120,000 stores with combined annual revenue of an estimated $400 billion. Major companies include 7-Eleven; Circle K (a division of Alimentation Couche-Tard); and The Pantry. Large oil companies own and operate some c-stores. The industry is fragmented: the top 50 companies account for about 35 percent of industry sales.
The industry generally includes establishments that are gas station/c-store combinations.
Competitive Landscape
Consumer and commercial driving trends drive demand. The profitability of individual stores depends on competitive pricing, effective merchandising, and the ability to secure high-traffic locations. Large companies have advantages in purchasing and finance. Small companies can compete effectively by acquiring superior locations or offering specialized merchandise or services. Average annual revenue per worker is about $500,000 for gas station/c-store combinations and $150,000 for c-stores without gas.
Because c-stores sell gas, food, and other types of merchandise, companies compete with a wide range of retailers, including gas stations, grocery stores, mass merchandisers, and warehouse clubs. C-stores that sell prepared meals also compete with restaurants.
Products, Operations & Technology
Major products sold include fuel (60 to 70 percent of sales); groceries and cigarettes (15 percent each); and beer (5 percent). Fuel includes regular, mid-grade, and premium unleaded gas; and diesel fuel. Groceries include soft drinks, candy, snacks, and dairy products. Stores may also sell meals or lottery tickets. Services include money orders and check cashing.
The industry includes national chains, franchises, and independent retailers. The majority of c-stores are small and independently owned. Almost 80 percent sell motor fuel, according to the National Association of Convenience Stores (NACS). Some independent retailers have dealer relationships with large oil companies.
Store size can range from about 800 square feet (for a kiosk) to 5,000. A traditional c-store averages 2,000 to 3,000 square feet, has eight to nine fuel pumps, and offers six to 12 parking spaces. Most modern gas pumps have digital displays and allow customers to pay at the pump using a variety of methods, including credit and debit cards. Underground storage tanks (UST) store fuel; average monthly gas volume is just over 100,000 gallons. The average c-store generates about $4 million annually.
While location types can vary, most companies target high-traffic sites. C-stores off major interstates and highways tend to attract travelers and truckers. Stores at high-traffic intersections and in densely populated areas may depend on local customers. The shopping radius for many c-stores is two to six miles. Many stores operate 24/7. Store layouts can vary, but may include fountain drink stations, hot beverage centers, or food preparation areas.
C-stores sell more than 80 percent of gas sold in the US. Companies may sell branded or unbranded gas; the most common type of fuel sold is regular unleaded gas. Fuel suppliers include oil companies, refineries, or distributors (also known as "jobbers"). Companies may have supply agreements, which typically require minimum annual purchases and may offer volume-based allowances. The purchase price may be a Dealer Tank Wagon (DTW) price set by the supplier or a fixed markup over the "rack," or market, price. While motor fuels are the majority of c-store sales, gas generates low margins; thus, getting the lowest possible wholesale cost is critical to profitability.
Typical non-fuel merchandise includes high volume goods (beverages and cigarettes); impulse items (snacks and candy); and staples (milk). Prepared foods include sandwiches, pizzas, and/or hot dogs, and some chains offer nationally branded products from restaurant franchises. Many items are immediately consumable and some are perishable and require refrigeration. Depending on merchandise offerings, companies may buy non-fuel goods from a variety of sources, including manufacturers, grocery wholesalers, or distributors. Large chains may have long-term contracts with suppliers; some offer private-label brands. Non-fuel merchandise carries higher margins than fuel and typically generates the majority of store profits.
Many c-stores have computerized information systems linking point-of-sale (POS); gas pump; inventory; accounting; and finance operations. Scanners track individual items by Universal Product Code (UPC). Inventory management systems identify slow- and fast-moving products. Most c-stores with gas pumps offer cashless, pay-at-the-pump systems. Gas tank monitoring systems detect leaks, monitor tank levels, and may trigger purchase orders when gas levels are low. Innovation in payment technology includes using radio frequency identification (RFID) tags or biometric identification (fingerprints) to pay. Database systems manage customer loyalty programs.
