A strong 15 percent growth in sales driven largely by higher gasoline prices in 2006 helped the 146,294 convenience and petroleum retailers in the United States set record revenues of $569 billion, while profits dropped 19 percent to $4.8 billion, largely because of a staggering increase in credit card fees. Overall, credit card fees in 2006 cost the industry $6.6 billion, double the level of as recent as 2003. Credit card fees for the industry actually exceeded store profits. A convenience store, on average, posted $4.0 million in sales in 2006, which includes $2.8 million in motor fuels sales.
The top 10 in-store product categories (in terms of consumer sales and exclusive of gasoline):
- Cigarettes
- Packaged Beverages (non-alcoholic)
- Beer
- Foodservice
- Other Tobacco
- Candy
- Salty Snacks
- General Merchandise
- Fluid Milk Products
- Packaged Sweet Snacks
America's fueling station
Convenience stores sell more than 80 percent of all the gasoline purchased in the United States. The industry's motor fuels sales jumped 17.9 percent to reach $405.8 billion in 2006, 71.3 percent of total industry sales in 2006.
Price volatility has contributed to the continued erosion of motor fuels margins, which on a percentage basis are at their lowest level since 1983. One a cent-per-gallon basis, motor fuels gross margins slipped to 13.9 cents. With breakeven on fuels sales estimated at 12 to 13 cents per gallon, that means that, on average, retailers made a penny or two per gallon in pretax profit, despite record high prices.
In-store sales see strong growth
The $74.1 billion increase in industry sales was the largest yearly increase ever recorded, fueled by a 17.9 percent surge in motor fuels sales, which rose to $405.8 billion. The industry's motor fuels sales growth outpaced the 13.0 percent increase in motor fuels prices reported by the U.S. Department of Commerce, meaning that the convenience store industry continued to grow motor fuels market share, which is estimated to now be 82 percent.
In-store sales also showed strong growth, rising 8.3 percent in 2006, surpassing the overall sales growth of virtually all other competing retail channels and surpassing the overall retail sales growth of 5.0 percent in 2006 reported by the U.S. Department of Commerce. Industry merchandise sales rose 8.7 percent, while foodservice sales rose 5.0 percent.
Most stores are independent businesses
The convenience store industry continues to be dominated by small, "independent" operators -- stores that are owned and operated as a one-store business or franchise. Roughly 62 percent of all convenience stores in the United States are owned and operated as one-store operations.
While the majority of stores selling motor fuels are "branded," less than 3 percent of the 115,157
convenience stores selling motor fuels are owned and operated by one of the five major oil companies.
Credit/debit fees a growing challenge
As gasoline prices continue at elevated levels, the problem of credit card fees is expected to be significantly worse in 2007, since fees increase as prices rise while at the same time more customers use plastic to pay for the higher cost of fuel. Escalating credit card fees had an enormous impact on the drop in industry profits in 2006. Credit card fees surged 22 percent, rising $1.2 billion to reach $6.6 billion in 2006 and for the first time ever top overall industry profits. Credit card fees now are the industry's second largest expense, accounting for 8.3 percent of industry gross margin dollars, second only to total labor expenses (33.5 percent).
Texas remains number one
Texas continues to be home to nearly one-tenth of all U.S. convenience stores, with 14,179 stores total. The rest of the top 10 states in terms of stores are: California (10,294 stores), Florida (9,424), New York (7,780), Georgia (6,384), North Carolina (6,255), Ohio (5,176), Michigan (4,843), Illinois (4,588) and Virginia (4,529).