Las Vegas- The 2024 NACS Show demonstrated why it’s the industry’s most comprehensive event, drawing a record 26,124 attendees to Las Vegas from October 7th through the 10th for four days of education, networking, and a look at what’s hot and new in the global convenience and fuel retailing industry.
As most MSSA members know, in the past several years going back to COVID, MSSA members are dwelling in uncertain times and looking for many answers from inflation impacting their store and customer, Future of loyalty programs, and the latest state of the industry data.
This year, NACS hosted just over fifty education sessions, presented by retailers on a panel for retailers averaging about 250 attendees per session. The 2025 NACS Show will take place October 14-17 in Chicago; question is, will you be there? (Please See Executive Director Recap on page)
Every year as your Executive Director I navigate the NACS show seeing old friends and meeting new ones! Always finding my way to the Altria booth searching for my industry contacts and reviewing what is in store for 2025 as for regulatory updates and challenges. Basically, adapting to our great environment around the C-store industry. This year a few MSSA board members made the trek with me ultimately sharing their thoughts about the 2024 NACS show.
In attending my State Executive Roundtable meeting with other state association Directors, NACS Grassroots staffers, lobbyists and other NACS government relations team focusing on trends within the C-store/petroleum industry allowing Executive Directors like myself to have a first-hand look inside what is happening in other states.
In the states of California and Oklahoma coming in 2025 all EBT cards will be chip and pin enabled. As usual, a unit of government thinks it knows what’s best for everyone. The EBT chip and pin enabled cards will reduce fraud in using these cards. However, POS systems (Passport, Commanders etc.) were not ready for the roll-out of the new government endorsed chip and pin EBT cards. Not only is this an issue for POS systems, credit and EBT card processors also. The USDA is currently endorsing this change to chip and pin EBT cards in every state. As we know, whatever California does, Minnesota will soon follow. MSSA members will have to be ready for this.
A few months ago, Illinois passed a law exempting retailers from paying credit-card fees on state and local taxes and fees. A great opportunity and a blueprint in how to pass state legislation as banks argue preemption. Update: a day after our State Executive Round table meeting, President Biden was pursing the Illinois Governor to repeal the new legislative activity. Business as usual in the jungle. May have to look at a new Blueprint.
I did frequent five educational seminars, however felt three of them really fit the needs of small independent retailers, like all of you I represent.
Please see my recap of my top three educational sessions below -Lance
Breaking Down the Latest State of the Industry Data
As many MSSA members navigated through COVID and the past four years of Bidenomics also known as inflation, always good to measure industry data from a few years ago to as many as fifteen years ago. Reviewing fundamental changes in our business, inside store performance, operational metrics and what’s next.
Let’s time travel back to 2009. Major themes from the 2009 SOI (State of Industry) Summit showed in store sales were up 5% over 2008 when total retail sales declined by 7%. Flat was the new up in some major categories. Fuel margin volatility was our friend, creating margin stability forcing margin compression. Tobacco (flavored) made the category come back, although years later, came at a large price. Food service offer opportunities but retailers were asking, how and what products to offer? Last, but not least, focus on generating cash.
The major themes from that 2009 ROI Summit were the margin pressures on our traditional profit centers- fuel, cigarettes and packaged beverages. Political challenges looming in front of us, looking at increased business expenses because of greater government regulation and less spendable income because of unemployment. (COVID spending) MSSA members also will remember access to capital was a challenge in 2009, banks were not investing in the fueling/C-store industry due to low margins and high credit card fees, a time of uncertainty. (MSSA Counsel Randy Thompson always said, “times are tough right now, whoever can withstand market pressures, will do very well in the long run”)
Motor fuel price trends from 2007 were $2.70/gallon and 2009 price of fuel was $2.26. In 36 months stemming from 2007 through 2009, Credit card fees indexed outpaced wages and benefits expense by nearly 30%. In 2003, Credit card fees in the C-store industry rose from $3.2 billion to as much as $8.4 billion in 2007 eventually dropping to $7.4 billion in 2009. Considering in 2023, credit/ debit card fees cost our industry $19.7 Billion.
In store operating Measures from 2009 versus 2024 are interesting to say the least. Fuel gallons sold in 2009 the average fueling site sold 152,608 gallons, in 2023, the average fueling site sold 186,572 gallons. (Stores closing creating opportunity for others) Inside merch sales increased from $176,973 to $188,635 as foodservice sales averaged in 2009 $37,877 to an all-time high of $70,623 in 2023 (See the growth trend?) Even over the past fourteen years, in-store GM% increased from 31% to 37% as cigarette margin increased from 13.6% to 15.4%.
In 2009, Fuels represented 67.5% of total sales, while in-store merch sales were 29% and foodservice at a low of 4.4%. Gross profit dollar contribution- fuels represented 32%, in-store merch 47.7%, food service 14.9% and other income 5.4%. Looking at 2024’s sales and gross profit contribution, Fuel sales represented 67.1% in-store merch 24.6% and foodservice at 9%. Gross profit dollar contribution- fuels 37.9%, in-store merch 37%, foodservice 19.5% and all other 5.6%. What’s staggering is the difference of nearly 6% increase in fuel margin while foodservice margin increased by nearly 5%.
Since July 2019 Gas and fuel margins have stayed above 35-cents per gallon. In 2009, breakeven pool margins were compressed at less than 20-cents per gallon. In looking back in the past three years, Direct Operating Expenses Growth Remains high. Wages and benefits have seen an increase of 25%, Card fees 32%, and repairs and maintenance 7%. Store Operating Profit Generation continues to climb. In July of 2019, average store operating profit grew from $30,000/month to $75,000/month. Of course, backout the direct expense, in July 2019 net profit averaged $11,000/month and in May of 2024, net profit averaged $46,000/month. In comparing first half of 2009, average store operating profit $11,223 vs. first half of 2024 average store operating profit was $40,202.
Inside store sales in 2024 versus 2023 are flat while inflation continues, squeeze on margin and the battle for foot traffic. In the first half of 2024, in-store merch market basket value (sales) averaged $8.98. Minus COGS at $5.84, facility expense and labor cost of $1.88 per transaction, inside operating profit per transaction is -$.11. So… if fuel margins go away, so will your business- need to continue watching inflation, labor costs, staying ahead maximizing margins in very key categories, and of course, foodservice will be a necessity.
How Inflation is impacting your Consumer
This educational session answered a key question “How does a retailer combat inflation?” In the past four years, 41% of executives and store owners report inflation as a threat to their business. Average retail prices show Year-over-year increase in all categories. The largest inflated retail prices, grocery with a 17% increase while refrigerated category has increased at 14%. Operating in an economy through the past four years seeing an increase in energy prices and other goods, consumers continue to increasingly show concern for their personal finances. In the past year, the average household debt increased by 4.3% largely driven by credit card debt and only 38% of the consumers surveyed expect their finances to improve over the next year.
As I travel visiting members of the MSSA, I hear many members talking about the struggle of inflation and staying on top of their margins. Many vendors/wholesalers have taken price increases not because they wanted to, because they had to. Energy prices, cost of goods and as all of us know, cost of labor and regulated labor mandates. Now, for suppliers who have taken the price throughout the inflation, now is the time to “reclaim ground you’ve lost to them”. Suppliers have built cushion in their margins as a retailer’s margins have tightened. Make brands compete harder for space in your store, maybe threaten private label products? Increase customer service execution as a tool that may be a primary differentiator.
Key strategies MSSA members to consider, adjusting inventory levels and product offerings (80/20 rule- increase inventory turns) based on consumer demand. Re-negotiate supplier agreements and cost mitigation and as always, manage shrink and waste to protect margin.
MSSA members can also stay on top of price adjustments through dynamic pricing and responsive adjustments. (candy bar increased in cost of $.05 increase retail $.10) Introduce private label offerings, leverage bundling and value- based promotions (BOGO, free product when you buy something else-bake in margin) and regularly review assortment strategies with a promotional calendar.
As for cushioning the customer experience while battling inflation, focus on improving customer engagement and driving loyalty through tailored promotions and discounts to value conscience consumers. Optimizing loyalty programs, every MSSA member should have a loyalty program. Enhancing convenience through mobile ordering, digital payment solutions. Improving the in-store experience, speed, cleanliness, customer service while investing in technology to gain customer behavior.
The Future of Loyalty: Unlocking enhanced Customer Experiences
As mentioned in my previous recap, all MSSA members should have a loyalty/rewards program. doesn’t have to be the most robust program, but something to unlock an enhanced customer experience, winning the customer today and tomorrow while identifying a store’s loyalty successes and failures.
Today’s loyalty programs are still relying on dated structures leading to an oversaturated market and dissatisfied consumers. An average consumer is enrolled in 18 plus programs, active in 8 programs and truly cares about 3 programs. Winning loyalty programs are well run, designed affording tremendous value by acquiring new customers, key sources of customer data, increasing existing customer share of wallet while providing meaningful differentiation from competitors.
There are three key loyal customers based on rewards access, bargain hunters, families on the move and commercial players. A positive experience within these three segments provides improved customer experiences with an average of 17% more visits per month.
Five key objectives to a successful Loyalty/Rewards program are pricing and promotions, Marketing and communications, customer loyalty, product design and operations and payments (mobile wallets). Personalize targeting promotions and communications while leveraging loyalty currency instead of discounts and reflecting and reinforcing loyalty propositions.
Every now and then MSSA board members attend the NACS Show investing their time, money and energy in the Industry and Association. I personally challenged each board director to share with MSSA members their thoughts and what they gained from the 2024 NACS show… enjoy!
Chan Smith- MSSA President
My concerns about our industry, or more specifically, my place in it were calmed. The following facts and statistics I found valuable to confirm that there is and will be a place for small operators for a long time to come.
*60% of locations nationally are still considered small operators
*EV sales have decreased and last year’s sales were less than 2% of all vehicles sold
*93% of daily transportation energy is liquid fuel
*Half of new cars sold each year will stay in service for 16 years
*Fuel economy has a larger impact to gallons sold than EV vehicle sales.
NACS is a good place to spur reflection and strategic thinking. Here are a few takeaways that will help me measure, review or guide near term decisions in our business.
*Nation average basket size is $7.83 (remember most of the country includes liquor)
*Industry shrink has doubled since 2021
*78% of all transactions are credit cards (are you using Delta payment relationship)
*Average remodel or update at C stores is 11-12 years
*41% of c store employees are fulltime
*Only 7% of locations are compatible for higher ethanol blends (huge opportunity for our market)
*EV ROI is not expected to be through selling energy, requires converting customers to inside sales
*Average age of sites fuel infrastructure is 27 years
*Research indicates customers are pushing back on price increases and are not trading down but instead reducing visits.
From my perspective all the information I gathered was through the lens of an overall theme. That theme was we need to get back to the basics, the cornerstone of basics being clean, friendly, quality and don’t do everything but what you do- make sure it is done well. Some examples of basics are to review margin by sku and to review vendor relationships for pricing and promotion etc. Membership with MSSA provides immeasurable opportunity for support of getting back to the basics.
Rick Bohnen- MSSA Vice President
I always enjoy having the opportunity to attend the NACS convention. This particular year there was a lot of focus on AI and how it will impact our industry. Looking forward, it’s clear AI will be integrated into self-checkouts, cameras, and payment systems. I also felt there was much uncertainty in the direction of this industry pending the outcome of the election.
Brian Brehmer- MSSA Treasurer
I attended the NAC’s show on behalf of MSSA and as usual I learned things from how to understand generation Z, which appears to be impossible, reaffirming the procedures and practices Ralphie’s currently uses are effective. I would recommend it for anyone who wants a better understanding of the industry we are in and things to come.
Thank you, Brian Brehmer
Jeff Bagniewski- MSSA Past President
Once again, I enjoyed the NACS show, especially visiting with the other MSSA members as well as people I have met over the years in the industry. I truly enjoy going to as many seminars as possible. As we move forward the overriding theme is -without a good food program and a modern attractive loyalty program you will be falling behind and it will get harder to catch up as others expand.
One of the seminars I attended was titled “Spilling the tea on Gen Z.”. Loyalty programs were greatly emphasized as this age group wants fast, simple choices and wants to be rewarded for their loyalty and purchases. Value for the money spent is more important than ever. With all the social media avenues it is easy for them to track where the best deals are.
Another seminar was on promotions and crafting their maximum impact. Digital marketing, gamification, and push notifications are ways of reaching todays’ consumer.
A seminar that included the Retailers of the Year in the Industry was a great way to get ideas from them. Topics that were stressed were-Partnering with your Fuel supplier, understanding technology, making and using loyalty programs for the consumer something that they want. They stress -Look at tomorrow, don’t wait and have to catch up later- will you be able to? How will you adapt?
I think any MSSA member who goes to the NACS show would find it worthwhile from the contacts made, the networking, the educational seminars and the chance to see products on a large scale. You are able to get many ideas and knowledge that can improve and help you run your store.
Ron Feist- MSSA Past President
On October 8th and 9th, I attended four learning sessions covering key topics in retail management. The first session emphasized creating a safe store environment, highlighting the importance of security cameras, organized store layouts, and clean restrooms, along with building relationships with law enforcement and using de-escalation techniques like the BLAST method.
The second session focused on increasing workforce efficiency and retention, noting that half of customers do not enter stores and suggesting curbside services along with unique marketing strategies to attract them to come inside.
The third session addressed training and development, recommending clearer and updated training programs, structured schedules, annual updates, mentorship programs, and a referral incentive for new hires.
The final session discussed the growing popularity of private label products, particularly in food and automotive categories, and the increasing consumer preference for generic over name-brand labels.
Overall, these sessions provided valuable insights into improving store operations, enhancing customer experience, and strengthening workforce management, all of which will be crucial in staying competitive in the evolving retail landscape.