A contingent of UK fuel and convenience retailers and suppliers visited Atlanta, Georgia, last month and came back with a new word ’petropreneurs’.
These are the market-leading entrepreneurs of petrol retailing, showing the way in the American convenience market in terms of growth, innovation and execution. The expression was coined by Jeff Murphy of the Murphy Group, a global management consultancy, as he briefed the UK party about the American market. It was part of a series of events on the US trip, which was organised by the Association of Convenience Stores and Insight Research, the European partner for NACS (America’s National Association of Convenience Stores).
The main event was the annual NACS show, which took place on October 5 to 8 at the Georgia World Congress Center in Atlanta. It featured a 370,000-plus sq ft exhibition floor with 1,300 exhibitors from all sectors of the convenience and fuel retailing industry. It also ran 75 educational workshops and five training sessions, as well as three days of general sessions, including a closing general session address by President George W Bush. It was attended by nearly 22,000 representatives of the global convenience and petroleum retailing industry.
The US market has more than 144,000 convenience stores, accounting for $511.1billion in sales in 2009 significantly down on the $624bn figures for 2008, according to figures provided by NACS State of the Industry (SOI) report 2009. The volatile crude oil markets were the chief contributors to the downturn, but other factors included an unemployment rate in the 10% range, more fuel-efficient cars and less summertime driving in recent years. Motor fuel sales represented 64.3% of all convenience store sales in 2009, down from 72.1% in 2008 but still up 145% over the past decade.
The number of convenience stores decreased by 0.2% in 2009, the second straight year the count has declined and only the fourth time in the past 15 years. But despite the extreme price and profit volatility for motor fuels, convenience store retailers still consider motor fuels operations to be important, according to NACS SOI. Nearly 80% of convenience stores sell fuel, accounting for more than 80% of all fuel sold in the US put at 121,000 gallons per store per month. Motor fuel gross profit was estimated at $16,767 per store per month in 2009, a 21.2% decrease over the previous year; while c-store gross profit rose 5% to $39,810 per store, per month.
According to Murphy, as in the UK, the major oil companies are retreating from operating their own stores, preferring to hand over to independent retailers. BP North America, for example operates only 37 out of its total store count of 4,727; Shell Oil Products US operates 29 corporate stores out of 4,636. From a total of 16,350 major oil company stores, 14,802 are run by franchisees/licensees.
However the "petropreneurs" have been "marching on" according to Murphy, with their compelling value proposition; people, value and solutions; consistent brand execution; value-priced, quality food offer; destination food offers; beverage focus; increase of private-label products; and community involvement. He gave examples of companies such as Wawa a chain of fuel/convenience stores employing 16,000, in the mid-Atlantic states which is reportedly moving into Florida, building 20-25 stores a year starting in 2012. Sheetz, founded by Bob Sheetz in 1952, which now has around 11,500 employees, apparently has plans to build 25 new stores a year and renovate 150 stores in five years. "The next generation stores have developed a fresh food focus," says Murphy. "They also have larger footprint convenience restaurants, with seating inside and outside, creating a niche between fast casual and convenience. They are restaurants that sell gas."
Both Sheetz and Quik Trip a private company based in Tulsa, Oklahoma have developed their own food production operations. The QT Kitchen in Ellenwood, Georgia, featured in the ACS/Insight study tour provides QT’s 117 stores in Atlanta with daily deliveries. All deliveries are done at night with all stores receiving supplies before 6am to ensure product availability, and so as not to get in the customers’ way. Referred to as a ’commissary’, the state-of-the-art facility produces more than 40,000 bakery items a day and 9,000 food items including doughnuts, cinnamon rolls, muffins, cookies, sandwiches, cheesecake slices and fruit salad packs. QT trades in 11 different markets with over 500 stores and sells over 6.5 million gallons of gasoline a day, according to a report by Nicholas Scherzer, retail director of Insight. "QuikTrip is more than c-stores and gasoline retail," he said. "It is about the human element of the business its success comes from its people and this stems from a business culture that looks after its people and in return they look after their customers. It’s a winning formula developed over time that results in a very high standard of retail. The principle is quite simple: they hire better, pay better and train better. They demand a lot and in return they reward well."
Other stores visited included RaceTrac Petroleum, which operates more than 545 gasoline convenience stores in 12 south eastern states. A standard RaceTrac features 20-24 fuelling positions and a 4,000sq ft or larger convenience store. The RaceTrac McDonough store featured a wide range of fresh food to go. A key category is alcohol, with a wide range of chilled beer. In fact multi-packs of chilled beer were a common feature in the stores visited on the study tour; as were banks of carbonated drinks, snacks and fast food of all shapes and sizes, and coffee of all hues. According to NACS SOI more than three out of four adult Americans drink coffee either daily or regularly and c-stores are one of the preferred destinations for coffee drinkers.
But while petropreneurs grab the headlines, the smaller independents are a growing force. "Remarkably independent operators have been a source of convenience store growth, rising 50% in the past decade to 90,049 stores," said Scherzer. "About 62% of all stores are now classified as one-store operators, up from 50% in 2000.
"The desire to run one’s own business is a paramount factor in single-store operator growth, but the ease of entry into the industry for new Americans is undeniable. These entrepreneurs bring motivation to the business energy a chain operator often can’t duplicate."
Swipe fee success
NACS president and CEO Hank Armour hailed the moment "our industry has been waiting for" when a comprehensive financial services reform bill was signed into law by President Obama on July 21. The law contained debit card swipe fee reforms that NACS and its members had called on Congress to support. It was a battle the industry had been fighting for a decade. "Since credit cards were introduced more than 60 years ago, no one dared step in to challenge the powerful banks," said Armour, at last month’s NACS show. "We did. And we got change." The reforms mean retailers can discount for different methods of payment in many different ways, eg fuel discounts, loyalty points; they can set a minimum transaction level for credit card transactions; and by May 2011 the Federal Reserve must issue standards for card issuers to adopt debit swipe fees that are reasonable and proportional to the cost of the transaction.