In-Store Sales More Important Than Ever as Retailers Face Double Whammy at the Pump
By Wolfgang Manz, President/CEO, PWM Electronic Price Signs
American convenience store operators have seen a drop in fuel demand before. They have also seen fuel oversupply. Just never at the same time.
In the realm of normal analytics this simply should not happen, but the combination of a screeching halt to U.S. travel due to the coronavirus pandemic, plus the oil price war between Saudi Arabia and Russia has produced a double whammy at the pump.
“Never before have we seen a supply shock and demand shock at the same time, and we’re seeing some real ramifications from that,” said Denton Cinquegrana, Chief Oil Analyst with Oil Price Information Services, to CSP Daily on April 20.
In-Store Sales Decline but Avoid Pump Plummet
The good news is that in-store sales did not plummet like pump sales and have held fairly steady.
Skupos, which provides convenience store industry data analytics, reported on May 5 that while fuel revenue declined by 42 percent between March 15 and April 26, in-store revenue declined just 14.2 percent for the same time frame.
The current environment should accelerate a trend that has seen in-store sales increase their share of profits in the convenience store market with NACS State of the Industry data showing fuel down to 36.2 percent of gross profit dollars, a decline from 40 percent in 2014.
Operators will need to keep increasing those in-store sales, especially with bleak numbers released on May 12 by the U.S. Department of Transportation.
Travel across the country in March fell some 18.6 percent or by 50.6 billion less miles from the previous year, according to U.S. Department of Transportation numbers.
At the same time, U.S. Energy Information Administration (EIA) reported that the average U.S. retail fuel price fell some 35 percent to an average of $1.85 per gallon. The EIA forecasts that oil demand will fall overall in 2020 by some 2.2 million barrels per day.
Convenience Stores Become Lifelines in Shutdown Communities
While communities across the country shut down, convenience stores remained open as essential businesses.
Consumers looked to their local convenience store as they scoured the landscape for hard to find items such as toilet paper, paper towels, and various cleaning supplies.
Also, the “in and out” nature of the convenience store makes a quick milk and bread run feel a little safer than a trip to a larger supermarket in the age of COVID-19.
A guest columnist in the State Journal newspaper summed it up best when he wrote, “Thousands of Kentuckians begin their day at their local gas station, filling up and buying a cup of coffee, grabbing a breakfast sandwich, and striking up conversations with neighbors. Places like these are linchpins for our communities and right now those moments, and those convenience stores, feel more important than ever.”
Lean In and Get the Message Out
Skupos said in that May 5 post that “Convenience stores should lean into their business’ strengths, be transparent about store operations (i.e. sanitation and safety) and identifying new growth opportunities in order to gain customer loyalty and grow revenue post-pandemic.”
Prior to the coronavirus pandemic in-store sales were driven by consumers stopping first at the pump. Now retailers need to find a way to get the message out to those with full tanks.
In uncertain and challenging items, the right answer might be innovative sign options such as a Profit Board, an eye-catching LED message center.
Messaging that can be easily changed can play an important role, alerting customers to such things as:
· Community messaging during the pandemic from #StayStrong to alerting customers to food drives to those in need or specials for first responders.
· New policies your location has put in place from special hours to increased safety and cleaning standards.
· Specials on items such as beer and supplies available on hand from TP to the ever-elusive Clorox wipes.
If you want to learn more about how a Profit Board might be a good fit for your operation please give us a shout.
And remember if we keep working together, we can make the best of this trying situation.