The direction of the convenience store industry is becoming increasingly uncertain as margins on traditional impulse items are progressively squeezed by competition from the small-format stores introduced by a range of non-traditional industry players, according to ACAPMA.
“Anecdotally, we’re hearing that profit margins for the convenience side of the business have fallen by up to 15 per cent over the past year as traditional petrol-convenience businesses seek to compete with larger chains,” ACAPMA CEO Mark McKenzie said.
These declining margins, coupled with an increasingly competitive retail fuel market, give rise to an important question: what will petrol-convenience businesses need to do to be successful in the face of these market changes?
American Association for Convenience Stores Chairman Jack Kofdarali provided one answer to this during his opening address at the 2016 NACS (National Association of Convenience Stores) Show in Atlanta, Georgia this week.
“More than ever, I truly believe that food is our future,” he said, adding, however, that while the industry’s future was likely to lie in sales of prepared food, converting this future opportunity into a reality was likely to be hard work.
“We’re going to have to fight for customers in an already crowded marketplace,” he said. “We’re also going to have to tell our story and correct misperceptions about our offer, and we’re going to have to address an increasingly long list of regulations that stand in our way – whether related to food or our other products.”
Mr Kofdarali said it was “eye-opening” to see retailers throughout the US and Europe executing at a very high level with food.
“Their focus is not just on food made fast, but on food that is really good – both in taste and in quality,” he said, “and the most important thing is that it’s making money for these businesses.”
Mr Kofdarali shared industry data from the 2015 NACS ‘State of the Industry Report’ showing that strong prepared-food sales pushed the sales of other items higher.
“Prepared food is bringing in more customers and retailers are selling more food and other items as a result,” he said.
In a statement that rings true in Australia, Mr Kofdarali cited increasing (and inconsistent application) of regulations, such as food-handling and tobacco legislation, as a key barrier to the realisation of a “prepared-food future” for the petrol-convenience industry.
ACAPMA’s Mr McKenzie said: “Despite being on the other side of the world, poorly conceived legislation and inconsistent enforcement seems to be just as much of a problem in America as it is in Australia.”
He added that the industry in this country needed to address this issue by demonstrating its ability to accommodate public health objectives without the need for onerous legislation.
“The key message for me is that there appears to be a role for ACAPMA to play in working with Australian policymakers to create the opportunity for Australian businesses to grow revenue from prepared-food sales,” Mr McKenzie said.
