Stores are convenient places to pick up premade salads, soups and cut flowers.
By NACS Online // April 09, 2019
ALEXANDRIA, Va. —Convenience stores have long been the perfect place to grab a sandwich and soda after filling up with fuel. But now shoppers have discovered that the little stores are an ideal source for fresh fruits and vegetables —and even a bouquet of flowers, reports CNBC.
Sales of produce in convenience stores totaled about $242 million per year last year, according to Jeff Lenard, vice president of strategic industry initiatives, National Association of Convenience Stores. While this is small compared to the $3 billion in produce sold at grocery and big box stores each year, it is an example of new opportunities for convenience retailers.
Last week, NACS released data showing that 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, especially busy millennials, are keeping fewer foods in their pantry and reaching more often for prepared foods, even when dining at home. Shoppers with higher incomes are making fewer grocery trips, and millennials prefer to grab a ready-to-eat salad after work than go home, prepare a meal and then clean the kitchen.
For 20 years, the growth among large North American grocery chains has been just 2%, according to a recent McKinsey report. The consulting firm predicts that by 2026, $200 billion to $700 billion in grocery sales could move toward nontraditional channels, such as convenience stores. Amazon-owned Whole Foods recently launched Daily Shop, the grocer’s first “grab-and go” convenience outlet in an affluent part of New York, offering Whole Foods staples, prepared foods, fresh produce and flowers, plus self-check-out, from 6 a.m. until 11 p.m.
While products are changing, busy lifestyles aren’t, and consumers still want efficiency. A trip to a grocery or big box store averages about 40 minutes with the aim of stocking up for one to two weeks, but 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 [what you want] now,” said Lenard. “It’s not for tomorrow, it’s for today.”
Gas price is still the top reason people choose where to fuel up. Convenience stores sell about 80% of all gasoline in the United States, according to Nielsen. There was a 13.2% increase in fuel sales in 2018, which accounts for about 70% of total sales, according to NACS. Because gas prices have stayed 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 for convenience retailers. Determining how to order properly and not lose money is a challenge, which also may cause c-stores to raise prices. But consumers are willing to spend more at convenience stores than they would at a grocery because they 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,” he added.
