Friday, December 05, 2008

Will convenience stores thrive or fail in the recession?

Recessions can be funny sometimes, rewarding companies that are usually associated with low-touch, high-margin products that are readily available from numerous competing outlets.  Case in point? Convenience stores. C-Store News noted that 2008 was not a particularly great year for c-stores, thanks in large part to very high gas prices that encouraged consumers to spend less time in their cars, and consequently, less time getting the gas that so often leads to a c-store visit. So, while the total number of stores decreased by about 700 this year, and people have been spending less on impulse items like candy and cigarettes, as Inside the Aisle notes, "two facts offer some
encouragement: consumers are driving fewer miles and stopping luxury
spending, focusing on necessary items, and c-stores sell necessities."

Because consumers are traveling less distance, going out fewer times for dedicated shopping trips, and generally finding ways to consolidate their spending, C-stores might actually see profits rise next year thanks to the lousy economic climate.  That, in spite of the fact that they often charge higher prices for staple items like bread and milk than dedicated supermarkets or megastores like Super Walmart or Super Target do.  Interestingly, Inside's blog post also suggests that this might be a time for C-stores to innovate, finding new ways to encourage shoppers to make unexpected, impulse purchases while filling up their tanks and grabbing a gallon of milk. Indeed, stores are experimenting with self-checkout systems (despite some research that these devices can actually decrease impulse purchases, ironically), and other time-saving conveniences to get customers to spend more.

I'm not convinced that the recession is going to be good for anybody just yet, but considering that people will always be willing to pay something for convenience, c-stores may well indeed be poised to profit from these hard times.

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