Jared Scheeler moved from his home state of North Dakota nearly 25 years ago to attend college at the University of Minnesota. He, like many college students, took a part-time job at a convenience store to earn some extra spending cash.

The rest, as they say, is history.

“I made money for my former company before I had even walked out the door of my first SOI Summit,” he said, adding, “I can confidently say that the SOI Summit brought a seven-figure return to my former company over a five-year stretch. Without that knowledge and operational precision, I wouldn’t have been able to start my own company.”

This year from April 12-14 in Chicago, NACS hosted its first live and in-person SOI Summit in three years—and the first Summit hosted exclusively by NACS. More than half of attendees raised their hands when Chuck Maggelet, NACS vice chairman of research and chief adventure guide at Maverik Inc., asked who was attending their first Summit.

Retailer and supplier attendees were also first to witness the impressive 2021 industry numbers:
• Total in-store sales increased to a record $277.9 billion.
• Total industry sales reached $705.7 billion. 
• The average in-store basket size increased 6.3% to $7.59.

From in-store categories to fuel, labor, supply chain concerns and inflation, NACS Research and Technology Committee members and convenience channel category experts delved into the past three years of data, trends and performance metrics to gauge how the industry is bouncing back since the pandemic. They shared positive news, watchouts and obvious headwinds gusting in the wrong direction.

Charlie McIlvaine, chairman and CEO of Coen Markets Inc., revealed the convenience and fuel retailing industry’s financial and operational performance metrics, beginning with two that every retailer should keep in mind: Inside transactions were down 6.9%, and fuel gallons were down 7.2% in 2021 versus 2019. “This suggests that we are not out of the woods,” he said.

INDUSTRY EXPENSES

Overall, the industry paid or collected $159 billion in taxes in 2021 and exceeded 22% of industry sales, which translates to this: For every $1 of pretax profit earned in the convenience retail channel, the government made 9.2 times that in revenue. 

“We are a major revenue generator for the government, which should motivate us to use our voice,” said McIlvaine.

Direct store operating expense (DSOE) growth outpaced inside gross profit dollars in 2020 and 2019; however, this shifted in 2021: Gross profit dollars outpaced DSOE growth to offset costs, particularly inflation. Total DSOE was up 14.3% in 2021 versus 2020 and up 15.6% in 2021 versus 2019.

“I don’t suspect anyone in the room remembers an economic time like this where inflation and pandemic-impacted demand are forcing business model shifts,” said McIlvaine.

LABOR HEADWINDS

Digging deeper in DSOE, nearly every category was up double digits, with the largest gains coming from wages and benefits: up 10.7% in 2021 versus 2020 and up 17.1% in 2021 versus 2019.

The convenience retailing industry provided 2.38 million jobs across the United States in 2021, but there are still “a lot of people on the sidelines,” said McIlvaine, noting that there were more than 11 million U.S. job openings at the end of 2021.

Compared to total U.S. compensation, the convenience retail industry “outspent” employers on average to get and keep employees. However, even with higher wages, turnover did not improve: Nearly 7 out of 10 separations were due to voluntary quits, up 12.4% in 2021 versus 2019.

Average wages increased 10.5% for fulltime and 12.3% for part-time employees to $13.14 per hour and $12.45 per hour, respectively. Total industry turnover in 2021 was 150%—the highest it has been since 2012, according to the NACS State of the Industry Compensation Report of 2021 Data.

During the pandemic, personal savings for individuals increased while credit card debt decreased due to COVID-19 stimulus checks, less spending outside the home amid lockdowns, reduced travel, etc. That gap, however, is becoming smaller, which suggests that those who may have opted out of work are now running thin financially. The solution? Re-enter the workforce.

Unfortunately, there is no silver bullet or quick fix to a long-term issue. The labor force participation rate has been declining for the past decade. Today, 50% of the U.S. population is over the age of 55 and retired— the demographic with three-quarters of the country’s wealth.

There is also concern about new workforce entrants. According to U.S. Census data, between 2000 and 2019, the number of daily births fell by an average of 0.39% a year. This pace of decline grew between 2010 and 2019, when the number of daily births dropped on average 0.96% a year. This decline grew even steeper during the pandemic: The average number of daily births in 2020 was 4.06% lower than in 2019.

“How do we replace an increasing rate of retirees, a high labor force dropout rate and a lower birthrate? We need to use our voice,” McIlvaine said, suggesting that our industry is best positioned to help shape business-friendly policies like immigration and energy in Washington.

RISING INFLATION

Consumer spending is being impacted by inflation, which hit a 40-year high of 8.5% in April, according to the Bureau of Labor Statistics. Inflation impacts three expense buckets: food, housing and energy. Compared with 2019, food inflation was up 7%, home costs were up 5.2% and energy was up 9.7% in 2021.

“For perspective, the 2021 versus 2019 labor costs for the industry are up 17.1%, so workers are making more, but inflation is eating into their purchasing power,” said McIlvaine.

Change, as they say, is opportunity. Amid the headwinds facing convenience retailers and customers, people still crave human interaction—and our industry is best positioned to provide it. There are more than 148,000 convenience stores in the United States, and half the U.S. population frequents a store each day.

“Every two days all of America enters a convenience store, and 90% of Americans are within 10 minutes of a convenience store. This is our differentiator,” said McIlvaine, adding, “People want personal connections.”