Gas Prices and the Impact on Convenience Stores

Is the old $4 the new $4.50? NACS shares with CNBC how gas prices are an indicator to what customers will pay at the pump, making inside sales more important than ever.

April 09, 2012

WASHINGTON - Last week on CNBC??s Friday morning "SquawkBox," NACS Vice President of Government Relations John Eichberger provided an overview of current gas prices and the effect on in-store sales.

Coming off the heels of the NACS State of the Industry Summit, Eichberger shared industry performance data that reveals the price of fuel at the pump is higher, but inside sales have not suffered. "So far this years most of my [NACS] members are telling me sales inside the store are going up. The prices we're seeing at the pump aren't having the same effect at consumer buying locations as they have in the past," he said.

Asked about the importance of inside sales, Eichberger noted that although the gas island generates about three quarters of total industry sales, gas sales are responsible for less than one third of total industry profits. "The gas price is the indicator to the customer to try to draw them to our locations. We make our money by selling coffee, sandwiches??"

Eichberger said that in 2008 when gasoline hit $4 a gallon, c-stores saw a shift in consumer purchasing behavior. Convenience retailers have adapted to this mindset, where consumers have cut back on discretionary income, by evolving in-store offers on categories like foodservice and packaged beverages. "We actually convert about 20% of our gas customers to buy stuff in the store," said Eichberger. "Any change in that behavior, the customer having a couple extra buck to come in the store, has a significant effect on the retailer's ability to make a profit."

Although there are markets pushing above $4 a gallon, the national average has held just below this threshold at $3.93 a gallon. "We're going through the spring transition. The refineries have already changed to producing summer grade gasolines??so hopefully we're going to see stabilization in terms of costs associated with producing the gasoline," said Eichberger, adding that "we can't do anything about crude oil prices, which are driving most of the prices but the manufacturing side ?" hopefully we're seeing the end of the increase of the cost of production."

After gas prices, the discussion oddly shifted to the price of vanilla ice cream. Watch the full interview for more.

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