ALEXANDRIA, Va.—The main product at a gas station is gasoline, a global commodity with deep ties to the world’s economy and geopolitical relations abroad. Over the years, gas station owners have seen much volatility in their industry, but the recent pandemic has created unique pressures, reports Cheddar.com.
Lower gas prices typically cause more people to drive, but during the outbreak that's not happening. “Our business has dropped about 35%,” said Bill Douglass, owner of 30 Texas gas station convenience stores. But “that 35% is the gasoline/diesel portion of the business. That's the driving public. The inside of the stores have not fallen that much.”
As of Tuesday, the national average for regular gasoline was $1.76 per gallon, according to AAA, the lowest average in more than 40 years. “Overall, we’re looking at about the half the fuel sales that we had this time last year,” said Jeff Lenard, NACS vice president for strategic industry initiatives.
The price drop puts pressure on gas stations to adapt their business models to meet other needs, such as offering beer and grocery items, and is forcing retailers to explore new ways to reach customers who aren’t necessarily looking for them.
“It’s going to help shift our business to one that will have to include delivery,” Douglass said. “People have gotten used to the fact that they can buy online, order online and get it delivered.”
While many stations bear logos of oil companies, those big-name giants own just a fraction of retailers. Most gas stations are independent, one-store operations that rely on convenience store sales to make a profit.
Fuel sales account for 61% of convenience store revenue, but they make up just 36% of gross profits, according to NACS. The remainder comes from in-store sales, and gas stations have expanded their offerings accordingly.
“What we see with a lot of convenience stores is they've evolved to the point where they want to be seen as a restaurant that happens to be selling gas as opposed to a gas station that happens to be selling food," Lenard said. “Food is definitely the future.”
But COVID-19 has disrupted the future. Many gas stations have closed their prepared food operations in line with state shutdowns. Gas station customers have since switched from on-the-go items to basic groceries and shelf-stable products, such as tobacco products and 12-packs of warm beer, which have seen a recent surge in sales.
“People are buying toilet paper, paper towels, the things people used to buy at convenience stores moons ago,” said Lisa M. Dell Alba, CEO of Square One Markets, which owns seven gas station-convenience stores in northeastern Pennsylvania. “People are trying to find the product wherever they can.”
During the past few weeks, there has been a slight increase in traffic from early days of the pandemic, but people are still skipping over that extra “fill-in” trip that drove sales of on-the-go items, Dell Alba said.
“People are looking to maximize what they put in their car per exposure risk,” Lenard said. “To a certain extent, convenience stores are starting to look more like they did 50 years ago when they were more like mini-marts or small grocery stores.”
While the pandemic has forced gas stations to rely even more on their convenience business, that trend did not emerge overnight. The industry has been moving in that direction for decades.
NACS has compiled resources to help the convenience retail community navigate the COVID-19 crisis. For news updates and guidance, visit our coronavirus resources page.