In a time of great change, c-store retailers continue to show remarkable vigor and resiliency in satisfying evolving consumer needs. Throughout the COVID-19 crisis American consumers have consistently turned to the convenience store channel; retailers are growing in-store sales and c-store as a business is once again growing.
Here we look at consumer purchase trends on a monthly basis through the end of May. Key findings:
- Trip growth has shifted significantly in several categories
- Loyalty members are growing in both trips and baskets, leading the recovery
- Estimated in-store gross margin contribution dollars is also returning to historical levels
Monthly Trips by Category Trends
The why behind the buy has changed for some consumers as work-from-home, employment disruption, and other trends have played out since March.
Ranking category contribution by monthly trips we see several winners leading the growth: beer, chocolate bars, and bottled water. Alcohol has experienced increased demand across all channels and we’ve covered what’s happening in multi-pack in our previous post. Bottled water and chocolate candy categories have also seen growth throughout the pandemic.
A few categories have experienced significant drops - primarily fountain coffee and chips. Fountain coffee is fighting two battles in growing trips: reduced morning trips as more consumers drink coffee at home, and reduced fountain offerings for hygiene reasons fueled by consumer demand. We have seen demand for chips shift to grocery as consumers buy in bulk for consumption at home rather than for lunch or snacks during work hours.
Loyalty Members Driving Growth in Trips and Baskets
C-store retailers are reaping the benefits from investments made in recent years in loyalty programs. Loyalty members have sustained trips and grown baskets during the crisis.
Loyalty members are modestly growing in trips throughout 2020 and retailers are signing up new loyalty members at historical rates. Also, loyalty baskets are out-performing non-loyalty baskets and interestingly, new loyalty accounts are consistently purchasing at higher basket level. All of this is good news for retailers and brands who are consistently engaging consumers digitally with valued offers – engagement translates into loyalty which is critical in a time of great change.
In-Store Gross Margin Recovers
C-store retailers have recently profited from higher fuel margins to compensate for a significant drop in fuel sales, but it is in-store that has traditionally represented the primary profit pool and the opportunity to engage consumers with the brand.
The evolving mix of in-store sales by category described above has impacted c-store retailers in multiple ways. Gross margins by category vary widely and it is critical that retailers are able to maintain gross margin to remain profitable given shifting demands across categories. For example, Food drives the highest gross margin percentage for retailers whereas other categories, like Alcohol, contribute very modest gross margins by comparison.
When we evaluate changing trends in estimated gross margin by store over 2020, we see that a significant drop in sales translated directly into lower gross margins.
This important development of improving in-store gross margins is a clear signal that c-store retailers are returning to the healthy financial foundation required to innovate and grow.
We will continue to monitor trends, share additional insights, and keep you informed over the near term. We anticipate continued modest growth in sales and trips across most categories with basket size (value) returning to historical norms throughout 2020.
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