The convenience store industry continues to evolve, becoming a bigger part of the American consumers’ daily lives. In 2012, the industry achieved record sales of $700.3 billion, according to the 2013 NACS State of the Industry report.
Beyond sales, convenience stores are an important part of the economy. The industry employed 1.84 million people and generated $171 billion in federal, state and local taxes in 2012. Overall, convenience store sales represent 4.5%—or one out of every $22 dollars—of the entire $15.68 trillion U.S. gross domestic product.
“These numbers demonstrate that Americans turn to us for their daily needs,” said NACS Chairman Dave Carpenter, president and CEO of J.D. Carpenter Cos. Inc. “We are a vital part of consumers’ daily lives and the U.S. economy. We also continue to innovate and deliver on our promise of providing fast, one-stop shopping to consumers, whether they are on the road or in their communities.”
Carpenter took the helm as NACS chairman in October. He exudes leadership and confidence. Prior to being named chairman, he served as NACS treasurer, where he was responsible for overseeing the association’s financial plan. He has been a member of the NACS Board of Directors since 2002.
J.D. Carpenter Cos. was founded by Carpenter’s grandfather in 1935. Carpenter began his career by opening Prolube Oil Change Centers in the early 1990s. He also started a small chain of high-volume ShortStop convenience stores, which were sold in 2010. Today, Carpenter directly operates 7-Eleven stores in Colorado.
In addition to NACS, Carpenter is also active in a number of state and community organizations, serving as former chairman of the Petroleum Marketers and Convenience Stores of Iowa and as national chairman of the ConocoPhillips National Advisory Council for two years. He currently is a member of the NACS/Coca-Cola Retailing Research Council.
Carpenter sat down with Convenience Store Decisions to discuss his term as NACS chairman and the issues facing convenience store and petroleum marketers in the year ahead.
CSD: In your session at NACS in October, you urged retailers to think big and develop game-changing ideas to define the industry’s future, whether in fueling or payments. What are some of these game-changing ideas that define the c-store industry right now?
DC: There is no doubt that the days of surviving on cheap gas and smokes are over. With credit card fees being so high, you can’t sell gas for pennies over cost. Customers are demanding more inside the store and cigarettes will continue to decline. Big box is getting more serious about tying inside purchases with gasoline and giving significant discounts at the pump. Our industry must figure out a way to deal with this. Creating loyalty programs with smaller grocers in your area or creating your own loyalty program is becoming a necessity.
A two-for-one is a loyalty program to help battle the decline in fuel volume and also fight credit card fees. Many companies around the country have created loyalty programs where the card also serves as a payment using ACH debit, which takes the payment directly from the customers’ checking account for significantly less than the cost of a credit transaction.
From a NACS perspective, we are engaging the technology entrepreneurs around the country to help engage them in our industry. We are challenging them to help us solve and create game-changing technology for our industry.
CSD: With foodservice becoming such an important part of the industry and technology impacting every aspect of our lives, what do you think the convenience store of the future will look like 10 years from now?
DC: Most successful operators will either have a sophisticated onsite food offering where meals are created in front of the customer or they will have a distribution system in place with a local or company-owned commissary that can deliver high quality, fresh foods to the store every day.
There will also be operators who have a combination of both. As customers are exposed to operators who offer high quality facilities with food and beverage offerings that compete with or exceed the quality available at QSRs, it will push their expectations even higher. This isn’t something that happens overnight, but it will slowly evolve customers to a point where they won’t accept anything less.
NACS Café was developed to help operators establish these high quality standards and consistency,
CSD: The industry, through NACS, has earned a reputation for being able to put up a good fight to influence legislation, as it has done with card fees and menu labeling. Where do we stand with card fee legislation now?
DC: We have the fed lawsuit that is challenging the ‘reasonable’ charge for debit from the Durbin Amendment. Reasonable was established to be between 7-14 cents. They ended up with 24 cents plus a fraud percentage charge. I think we have a good argument on this. Durbin was already a good win for us, but if successful here it would make it a huge win. Thousands of companies (from small shops to the largest) have opted out of the credit card settlement. This settlement is worse than doing nothing. We must continue this fight and we will.
CSD: How important is retailer advocacy for NACS? What kind of a difference can retailers make at the local, state and federal levels?
DC: This is incredibly important. There are so many regulations being offered up nationally, statewide and locally that its absolutely critical for retailers to be involved. Retailers have an incredibly powerful voice when engaged. We saw this with the fight on credit cards. NACS continues to work on creating solid grass roots efforts to fight for our members on the continual onslaught of these regulations.
CSD: What are the issues retailers need to be aware of on a national level that could potentially impact their businesses over the next few years?
DC: Fuels is a moving target with all the café standards, renewable fuels, E85, E15, etc. This affects everything that we do, hence the creation of the NACS Fuels Institute. Obviously Obamacare will be implemented over the next few years and nobody knows the true impact of this new legislation, but I would suggest there will be some significant impact on our industry because of it.
CSD: Convenience store retailers currently sell 80% of the country’s motor fuels, but the fuel industry is changing. What is the next step for industry retailers? Should they be investing in things like renewable fuels or electric charging stations at this time?
DC: I would certainly tread carefully as it relates to renewable fuels. Even experts are having a difficult time determining what, if any, fuel source can really compete in an unsubsidized market. My philosophy is until the consumer begins demanding it, I don’t want it. There is a fine balance here, but certainly when remodeling or building a new store be sure to give yourself flexibility with tanks, piping, etc.
CSD: Like swipe fees, tobacco has been scrutinized for some time. Do you expect the industry to see a drop-off in tobacco sales going forward or can the category continue to persevere in c-stores?
DC: I expect the cigarette business to continue declining. It’s still a very important piece of our business, but everyone should be working to grow other parts of their business that can and will substitute it as a major category. I know several operators where cigarette margin dollars are now third or fourth in their margin dollar basket. E-cigarettes could certainly help and indications are that this could be a very strong segment for c-stores.