C-store sales hit new highs in 2016

The most recent data on U.S. convenience store sales indicates strong growth in an industry that must constantly adapt to consumer demands and technology innovation. According to the State of the Industry report compiled by the National Association for Convenience and Fuel Retailing, in-store C-store sales reached $233 billion in 2016, the highest annual revenue figure for inside sales on record. Pre-tax income across the industry also exceeded $10 billion for the third year in a row. Compared to 2015, in-store revenue grew by approximately 3.2 percent.

These figures are all the more impressive considering the multiple losses which the industry had to simultaneously withstand. Thanks to a precipitous drop in oil and gasoline prices in 2016, overall revenue from fuel sales was down 9.2 percent on the year. As a result, C-stores as a group saw total revenue decline 4.3 percent to just under $550 billion. Pretax income also fell 3.8 percent to around $10.2 billion.

The data shows that low gas prices were both a blessing and a curse for C-store owners. It’s already known that American motorists drove many more miles in 2016, according to data from the U.S. Department of Transportation, thanks in part to cheap gasoline. A new eagerness to refuel probably also drove higher foot traffic, and thus higher in-store sales, at C-stores. But even this growth in in-store spending could not outweigh lost fuel revenue nor rising operating expenses. The NACS reported that routine costs related to wages, payroll taxes, health insurance, credit card fees and general maintenance all posed a greater burden than inside sales could counteract.

Revenue drivers by category

Breaking down in-store sales by category, C-store consumers followed familiar trends but with some notable changes compared to previous years:

• Tobacco sales comprised the lion’s share of in-store revenue at 36 percent. However, these sales accounted for only about 18 percent of gross profit dollars, according to the NACS report. In addition, smoking rates among American adults have continued to decline each year since 2001, while those who do smoke began to move toward alternative tobacco products that many C-stores do not carry.
• Foodservice, a broad category encompassing prepared food, packaged goods and beverages, comprised 21.7 percent of in-store revenue. But these lower cost items were the biggest profit generator for C-stores, accounting for 35.2 percent of gross profit. Prepared food sales were a notable driver of growth in this category.
• The NACS noted that traditional snacks, like potato chips and candy bars, had become a tough sell to younger consumers who have become increasingly health conscious. Still, sales of snack foods remained strong in 2016, contributing almost 10 percent of C-store inside sales. The NACS noted that much of the growth in this sector was from products that emphasized nutrition benefits, like protein bars and gluten-free items.

Overall, despite some financial headwinds, the NACS report found that the C-store industry remains strong and continues to be a vital component of the American economy. C-stores employed some 2.5 million people in 2016, with the average wage for a store associate pegged at almost $10 per hour. Total wages for the C-store industry rose 8.1 percent compared to 2015, although turnover rates increased for in-store associates. A tighter, more competitive labor market is the most likely factor behind this trend.