Consumer pessimism drops, as economic confidence slowly returns.
Eight-five percent of Americans taking vacations this summer will be traveling by car—and more than four in five (82%) will be stopping at convenience stores along the way, according to consumer responses captured in the May 2013 NACS Consumer Fuels Survey.
Besides gas purchases, 82% of vacationers say that they plan to stop at a convenience store as part of their summer trip, and they cite buying a drink (59%), using the bathroom (59%) and purchasing a snack (55%) as the top three reasons why. Vacationers also are much more likely to buy a sandwich or meal (21%) or use the ATM (20%) in the warmer summer months; only 4% of consumers said that they would go inside the store for either item when surveyed in January.
Convenience stores sell 80% of the gas purchased in the country, so they already will see plenty of traffic at the gas pumps this summer. The National Association of Convenience Stores (NACS) commissioned a survey of 1,183 gas customers by Penn, Schoen and Berland Associates LLC to find out what else customers would be buying — and how they felt about economic conditions.
Vacationers plan to spend a fair amount of time on the road this summer. Nearly half (45%) of all consumers say that they plan to take trips outside of their state, and 63% will take at least 6 days of vacation this summer—including 10% who plan to travel at least 21 days this summer.
Consumers Are Less Pessimistic
American consumers will likely enjoy their coming vacation more given that they are feeling better about the economy. Consumer pessimism appears to have bottomed out; 54% of consumers say they are “pessimistic,” the lowest percentage of pessimism recorded all year in NACS’ monthly surveys. Relatively stable gas prices may also play a role, as 84% say that gas prices affect their feelings on the economy.
“Consumers have told us that they feel better about the economy and are more likely to spend more,” said John Eichberger, NACS vice president of government relations. “Our retailer members are equally optimistic—perhaps even more so—about their prospects this summer.”
Retailers Expect Stronger Sales
More than half (54%) of retailers responding to a NACS member survey said that store sales thus far this year have been above those of the last year and they are even more optimistic about the rest of the year: 68% say that sales this summer will be higher than in the summer of 2012.
The main factor behind the optimism: hopes for nice weather that encourages Americans to enjoy the outdoors. Retailers say that weather is the biggest factor in determining sales, with 70% citing it as a factor, followed by gas prices (cited by 35%), longer daylight hours (34%), the economy (34%), special events in town (24%) and promotions/discounts (18%).
Retailers also say that they expect gas sales to pick up this summer. While only 39% of retailers say that their gas sales have increased compared to last year, 61% say that gas sales will be higher this summer than last summer.
“It seems that customers will be taking more long weekends and holiday vacation road trips. While overall miles driven may go up, many of those miles will be in ever-more fuel-efficient vehicles,” said Lonnie McQuirter, operations manager at the 36th & Lyndale BP, in Minneapolis.
To capture gas customers, retailers have cut margins over the past few weeks. Gross margins on fuel across the country stand at 12.3 cents per gallon, according to the May 16 “Retail Fuel Watch,” a weekly report published by the Oil Price Information Service. These low margins mean that most retailers are breaking even or even losing a few cents per gallon after expenses—all to attract gas customers who may then buy in-store items.
“The weather will likely be the main reason for any sales increases, and your gas price will dictate the percentage of those sales that you can capture,” said John Babb, president of J&S Oil Co. Inc., based in Manchester, Maine, explaining why margins have tightened.
If It’s Cold or Frozen, It Sells
Virtually anything cold or frozen will likely fly off convenience store shelves this summer. Items most often cited by retailers as seeing a sales increase include packaged beverages (cited by 84% of retailers), ice (65%), fountain drinks (59%), frozen dispensed beverages like Slurpees (45%) and ice cream (38%).
Sales data from 2012 supports retailers’ high expectations. Several in-store items saw significant sales increases for the months of June through August compared to the prior three months, according to sales data from NACS’ wholly owned subsidiary CSX, the industry’s largest online database of financial and operating data.
Ice sales increased 100% over the summer months last year, and frozen dispensed beverages (34%), fountain drinks (24%) and general merchandise (12%) also saw big sales increases.
While the warmer months increase sales of cold and frozen items, they can depress the sales of other items; hot tea and coffee sales dropped off 9% last summer. Overall, convenience stores last summer saw in-store sales increase 6% and fuels sales increased 4% in 2012.
New Store Offerings Also Add to Optimism
Retailers also are optimistic about new programs and products in their stores. Among the new services cited were text alerts to notify loyalty program members of impending gas price increases, propane refill programs, loyalty programs linking gas discounts to in-store sales and onsite fishing license renewal facilities.
Retailers are also excited about new food and beverage programs in their stores, such as locally produced fresh fruits and produce, fresh-brewed iced coffee and tea, more healthy option items and prepared salads, craft brews and growler fill programs, milkshakes and soft serve frozen yogurt, breakfast empanadas and other Hispanic fare, grab-and-go meals and even sushi at the deli.
The stronger expected sales over the summer months has led to overall retailer optimism. Nearly half (49%) of all retailers say that they are optimistic about the economy, and they are even more optimistic about their industry and their own business: 75% say that they are optimistic about the convenience store industry and 76% say that they are optimistic about their own company.
“They (customers) are somewhat less price sensitive if convenience and customer service is delivered at a high level,” said Michael Gonzalez, general manager of Arguindegui Pump-N-Shop, Laredo, Texas.
Perhaps the optimism comes down to one difference between this summer and last summer: “There are fewer complaints about gas prices,” said J.P. Nolan, general manager at Golden Sands Mini Mart, Marinette, Wis.
This NACS consumer survey was conducted by Penn, Schoen and Berland Associates LLC, with 1,183 gas consumers surveyed from May 7-9, 2013. The margin of error for the entire sample is +/- 2.85 at the 95% confidence interval and higher for subgroups. Summary results from this and previous surveys can be found at http://www.nacsonline.com/gasprices.
The NACS retailer survey was conducted May 7-17 and incorporates responses from 90 retailer companies, which range in size from one-store owners to large chains operating hundreds of stores.