The future direction of the convenience store industry is becoming increasingly uncertain as margins on traditional impulse items (i.e. chips, chocolates and drinks) are being progressively squeezed by competition coming from the small format stores that are being introduced by a range of non-traditional industry players.
“Anecdotally, we are hearing that profit margins for the convenience side of the business have fallen by up to 15% over the past year as traditional petrol convenience businesses seek to compete with larger chains”, said ACAPMA CEO Mark McKenzie.
These declining margins, coupled with an increasingly competitive retail fuels market, gives rise to a very important question – what will petrol convenience businesses need to do to be successful in the face of these market changes?
One answer to this question was provided by the Chairman of the American Association for Convenience Stores, Mr Jack Kofdarali, during his opening address at the 2016 NACS Show in Atlanta (Georgia) earlier this week.
“More than ever, I truly believe that food is our future,” Kofdarali said.
But Kofdarali suggested that although the industry’s future was likely to lie in sales of prepared food, converting this future opportunity into a reality was likely to be hard work.
“We’re going to have to fight for customers in an already crowded marketplace,” said Kofdarali.
“We’re also going to have to tell our story and correct misperceptions about our offer. And we’re going to have to address an increasingly long list of regulations that stand in our way—whether related to food or our other products”, Kofdarali continued.
Kofdarali stated that it was ‘eye-opening’ to retailers throughout the USA and Europe executing at a very high level with food.
“Their focus is not just on food made fast, but on food that is really good—both in taste and in quality,” said Kofdarali.
“And the most important thing is that it’s making money for these businesses.”
During the course of his speech, Kofdarali shared industry data from the 2015 NACS State of the Industry Report that showed how high prepared food sales also push the sales of other items higher. “Prepared food is bringing in more customers, and retailers are selling more food and other items as a result,” Kofdarali said.
In an ominous sign that rings true in Australia, Kofdarali cited increasing (and inconsistent application) of regulations such as tobacco legislation and food handling legislation, as being two of the key barriers to the realisation of a ‘prepared food’ future for the petrol convenience industry.
“Despite being on the other side of the world, poorly conceived legislation and inconsistent enforcement seems to be just as much of a problem in America as it is in Australia”, said Mark.
Clearly, there is a need for our industry to address this issue by demonstrating our industry’s ability to accommodate public health objectives without the need for onerous legislation, continued Mark.
“The key message for me was that there appears to be a role for ACAPMA to play in working with Australian policymakers to create the opportunity for Australian businesses to be grow revenue from prepared sales in the future, said Mark.
And so the work begins….