Two years ago at the NACS State of the Industry Summit, the overarching theme was disruption. There were high inflation rates that had not been seen in 40 years, fundamental shifts in the labor market from the Great Resignation and new Covid variants, not to mention the global ripple effects of the first ground war in Europe in 70 years.

“Today, a lot of that fog that we talked about over the past two years—the uncertainty, disruption and what’s going to happen—has lifted,” said John Benson, partner at AlixPartners LLP, at this year’s summit.

Although there’s still a fair amount of risk, the challenges and opportunities for our industry are clearer for 2024, he said, noting that convenience retail is “highly complex, competitive and rapidly changing.”

“Companies and leaders need to be adaptable and agile,” Benson said, adding that the overarching theme now and heading into 2025 is resilience—“resilience of the economy, resilience of the consumer and how we [retailers] need to become more resilient to succeed in this environment.”

We’re spending extra in the channel to find and keep good people, and it’s working some. We’re still a long way from home.” 

The ‘Goldilocks Economy’

Recession? What recession? As Lemony Snicket said, “We’re not out of the woods yet.”

Benson noted that there’s still a chance we could dip into a recession this year, but the picture is rosier than it was in 2022 and 2023.

Most CEOs (82%) surveyed by AlixPartners in 2023 were expecting a recession or economic downturn in their region that would last more than one year. In 2024, 62% of CEOs surveyed said they now expect economic growth in their region over the next 12 months.

Inflation was 3.2% in February 2024, a reduction from 5% in July 2023 and 9.1% in June 2022. Although consumer spending has been strong, consumer debt has increased 24% since 2019. Meanwhile, supply chain disruptions have subsided.

These factors put us in a “Goldilocks economy” at a macro level: Not too strong, not too weak, but just about right. The U.S. unemployment rate was low at 3.9% in February, U.S. GDP growth has accelerated from 2022 levels and inflation could continue to come down, noted Benson.

On a micro level, however, convenience retailers seem unconvinced, citing concerns around costs (sales are up, but profits down) and low consumer sentiment.

A March 2024 AlixPartners survey found that rising prices and high interest rates are the primary sources of concern for consumers, with credit card debt on the rise.

“U.S. consumers are spending 11% of their total household income on food, and that’s the highest percentage they’ve spent in 30 years,” Benson said.

Among the competing channels, the good news is that consumers have a higher perception of value for convenience retail compared to QSRs, fast casual restaurants, casual dining and grocery.

“Companies will need to remain vigilant and shift from pricing to productivity initiatives to protect margin and combat sustained inflation,” said Benson.

What to Focus on Now

The rest of 2024 is likely to only confirm just how complex and competitive the convenience industry is, said Benson. He noted six priorities that could help deliver success:

1. Go back to the basics on merchandising and operating our stores well. “Are we succeeding at the basics of forecasting, ordering, stocking, managing out of stocks and shrink?” he asked.

2. Invest in your people through training, upskilling and developing high-performing teams.

3. Embrace digital capabilities that can enhance how you do business, not add complexities.

4. Break the tradeoff between profits and growth.

5. Make data-driven decisions that drive sales, merchandising and the customer experience.

6. Act now so you can respond to future disruptions.