Last August, the National Association of Convenience Store (NACS) shared that two in three (66%) convenience retailers reported higher sales numbers year-over-year. That continues a years-long upward trend in revenue—but when you look at other important indicators of business health, it becomes clear that revenue doesn’t tell the whole story, according to Upside.
Inflation-adjusted daily convenience-store revenue has dropped 19% from January 2021 to January 2024, according to Upside’s C-Store report.
This January marked the largest year-over-year decline (12%) observed over the last four years. That means that observed top-line growth in revenue post pandemic is driven by inflation.
Inflation isn’t the sole challenge, though. NACS reported that labor and direct store operating expenses rose by 14.7% compared to 2021. Credit card swipe fees went up 40% during that same time frame. C-store owners have also expressed concern about labor shortages, government regulation and shoplifting.
The report from Upside, a technology company based in Washington, D.C., features four years of transaction data that the company reviewed from more than 1,700 convenience retail locations. The company contextualized those numbers by surveying 1,500 consumers across the country to gain insights into what’s behind the shift in consumers’ shopping behavior.
CSP pulled some key findings from the report.
Purchasing Habits
Due to cost concerns, 27% of respondents reported shopping less often at c-stores than they did a year ago.
“I shop less often because I am much more strict on my budget this year vs. last year,” said one respondent. “With inflation and the high price of goods, I am much more aware of the small purchases at these types of businesses, and I avoid making them.”
To replace their c-store trips, consumers said they shop for convenience items at grocery stores (77%), big-box retailers (68%) and dollar stores (65%).
“I only shop at convenience stores in emergencies or as a last option,” said another respondent. “They are more expensive [so it’s] silly to pay so much when Dollar General is down the street, or Walmart.”
Of the 13 c-store categories that Upside measured, the only ones that saw growth in how often respondents purchased items this year vs. last year were tobacco/vaping, bottled drinks and cold dispensed drinks. The biggest declines were in bakery, cold prepared food and alcohol.
Digital Personalization
Nearly 90% of fuel-only customers could be enticed to make an inside purchase with the right promotion, according to Upside, if retailers take advantage of personalization.
Only 35% of consumers belong to a fuel or c-store loyalty program, and about 52% of those individuals access the program through a mobile app.
Developments in machine learning and other forms of artificial intelligence (AI) have made it possible to segment a convenience store’s target market into smaller groups based on information like interests, needs, age or region.
Instead of measuring success by looking at changes in same-store sales, retailers need platforms that measure incremental profit on every single transaction, Upside said. Mobile technology opens up the opportunity for rigorous “test vs. control” measurement for each individual user, at scale, so retailers can better understand and change consumer behavior in a way that drives bottom-line profit.
Digital Marketplaces
Digital marketplaces help retailers reach thousands of shoppers well beyond their immediate physical location every day, keeping them top-of-mind when shoppers are looking for a place to buy, according to Upside. With a marketplace, retailers can tailor a user’s experience.
Instead of trying to convince fuel customers to make an impulse buy in-store once at the pump, move toward making the c-store a destination, where customers can also purchase fuel if they need it.
This dynamic will be even more critical in the next few years, in order to grow in spite of declining fuel trips and build relationships with drivers who may be buying less fuel or transitioning to electric vehicles in the future.
Upside is a marketplace that connects consumers with brick-and-mortar retailers through personalized offers. It uses AI-driven personalization technology to enhance purchasing power.
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