Gas stations line the roads and
highways across the United States, fueling the country's
cars and trucks. 93% of Americans live within
10 minutes of one. They arguably comprise one of the
most important retail businesses in the country. There are 152,000 convenience
stores in the US. That's 30% of all
stores in the country. Put another way, one out of
every three stores in the U.S. is a convenience store. It's a $654 billion industry. But those who follow it say most
Americans know very little about it. And it's actually
rather misunderstood. While convenience store retailing has so
far been spared the sometimes catastrophic disruptions that have hit
other segments of retail, the fuel and convenience business is going
through some profound changes of its own. For much of their history,
gas stations have been, and still are today, small,
locally owned businesses. For their owners, they often represent
a path toward the American dream. One of the things that a lot
of folks don't actually realize is that almost two-thirds of the industry
is still single-store owner operated. Meaning that your local gas station may
be owned by somebody who lives at the end of your street. But
in recent years, the industry has increasingly gone corporate. The smallest companies, those with
anywhere from 100-200 stores, are being bought up by bigger chains or
are otherwise going out of business. And it is getting harder for
the little guy to survive. The first commercial fuel pump in the
United States was sold to an Indiana grocery store in 1885. The kerosene pump was invented
by a man named Sylvanus Freelove Bowser. He patented his
design two years later. The first dedicated gas station
opened in Pittsburgh, Pennsylvania within two decades. But it wasn't until the
1970s when modern fuel retailing as we know it today began to emerge. The first oil embargo in the 70s
really set the stage for convenience stores to sell fuel. There was
technology to sell fuel, but people didn't really consider 'I can pump my own
gas and save a cent a gallon' or something like that. But that
first oil embargo really changed the philosophy of people, 'I'll pump
gas, I'll save a cent. Take the cost out of the
system, it goes to the customer.' The second oil embargo in 1979 raised
the price of fuel above one dollar for the first time, a huge
price hike for the era. Up to that point, fuel stations had
been more like service stations, but convenience stores began using a self-serve
model that is common in 48 out of 50 states today. Only Oregon and New Jersey still require
a gas station attendant to pump a customer's gasoline. That brings us to today. There are basically three places
a customer buys fuel. 80% of convenience stores have fuel pumps
attached and 80% of the gas in the country is sold
at convenience stores. The other 20% is sold
at standalone gas stations. These are often attached to a
traditional service station that does repairs and inspections. The other channel is what is called
the hypermarket, a term for big box stores such as Costco,
Wal-Mart and Sam's Club. These outlets sell three times the
volume of a typical convenience store, but there are only a few of them,
so they comprise only about 10-15% in terms of overall fuel sales. As of December 2019, there
were 152,720 convenience stores operating in the United States, down
less than 1% from the 153,237 stores in 2018. I'd say the landscape of ownership and
fuel and convenience can be very hard to understand at times, and
it can actually get very complicated. There's many different models here. There are more than 100,000 distinct
companies in the convenience and fuel retailing industry
across the U.S., more than in any
other sector of retail. 62.1% of the market is
made up of single-store owners. That is, as it sounds, owners
who own just one store. It is somewhat difficult to see this
since many, if not most fuel stations often bear some kind of
corporate logo, typically from a petroleum company such as
Shell or Chevron. Despite the corporate logo, though,
these are still independently owned businesses. Owners of these stores often
have some kind of franchise deal with the fuel provider to share
costs, but the stores are not owned by the oil and gas companies. The other 37.9% of the convenience and gas station
market is controlled by larger chains, which includes familiar corporate brands such
as 7-Eleven and Circle K. But most of the chains in
convenience and fuel retail are regional. WaWa, Sheetz, Race Trac, and Casey's
General Store are all brands well-known in different regions
of the country. About 15% of the total market is
controlled by chains that are 500 stores or more, and most of those are
regional chains with a few national brands thrown in. But that share
of the market is growing. In 2019, the largest chains
added 312 stores over the previous year and the second largest tier
of companies in terms of store count added 134 stores. Every other tier lost stores with
the biggest losses among independently owned stores. Part of the reason for this change is
what the stores are selling and how they look is changing
dramatically as well. As these businesses move away from
the “cokes, smokes, and gasoline” model, and more into products like
fresh prepared food, some independent and smaller owners are having
a hard time keeping up. Right now what we're seeing is
some of these one-store operators are finding it a little bit harder to
stay in business with some of these companies that are continuing to up the
ante on food, because people are time starved. When they come to buy
gas, they're often looking to solve other problems. 'Can I
get a sandwich? Can I get a drink? Can I get all these other things?' And the the one-store, and
the one-stop shopping v alue is just increasing more
and more and more. And that puts pressure on the
smaller operators that maybe focus more on, 'hey, I have a gas
price and a good location.' Convenience stores now also have
to worry about competition from retailers in adjacent segments of retail,
especially those who might be getting pelted with
their own competition. Convenience stores are so named because
they offer convenience and they are built around getting customers in
and out of the store. The typical visit to a convenience store
lasts about three minutes and 30 seconds. But the rise of e-commerce,
store apps and other technological innovations have left consumers accustomed to
a whole new level of convenience that challenges the relevance
of the traditional convenience store. Convenience channel is really
being influenced by companies outside the convenience channel that are
providing more easier ways for consumers to be ordering in advance, to
allow them to to walk in and pick-up a product, pre ordered. And so when people think of
convenience, that's their new level of convenience. So they're
expecting that now. So the convenience channel has
to adjust to do that. Amazon Go opened stores in certain
cities around the country that you use your app to log in, pick
products off a shelf and you leave. The internet and smartphones have also
gobbled up whole categories of merchandise that convenience stores
once depended on. When you look at stores 20 years ago,
some of the top selling items that you saw were film, maps, and
a substantial amount of foot traffic, as we all know, with somebody
walking in and saying, hey, how do I get to here? And those directions, somebody would also say,
hey, let me get a drink while I'm in here. All that's gone. What's the next thing
that could be replaced? There are other changes taking place
that stand to further alter the landscape. One such switch is the move
away from fuel and toward cars with electric power trains. Tesla's CEO, Elon Musk has spoken
about the kinds of experiences he envisions for Tesla's Supercharger stations
where just mostly filling the battery on a car can take
at least 20 to 30 minutes. That stands to change how stores think
about how they draw people in and hold their attention. It might
require redesigning stores, offering more in-store experiences and so on. So the question is: how does a
store survive in this changing landscape? Some are doing it by trying to
outwork the problem, by, for example, hiring family to keep the store
running, keeping their labor costs low. But whereas convenience stores used to
survive by being pretty standard in what they offered. Fuel, of course, is a commodity. But the store offer was almost a
commodity and the way it was experienced. The same the same snacks,
the same beverages, the same experience, really. It was the same
from one store to the other. We're entering an era now, though,
where the leading brands are differentiating themselves
very strongly. And you see this at the corporate level,
but you also see this with the successful independent retailers. Brands that are thriving now are
differentiating themselves and many are starting to look
more like restaurants. Historically, there is a bit of a
bias against food bought at gas stations. Many now well-known regional chains
grew out of that initial complex environment where some stores began
selling gas and some gas stations began selling food. For example, Wawa has built a
reputation for its sandwiches and coffee. Independent stores are carving out
their own niches as well. High Country Market and Gastropub
is one such business. Located in Round Rock, Texas, the store
is a destination for food, craft beer and high-end wine. And it is attached to a gas station. Before it was a gas station,
regular convenience store, and people would come in just buy like
chocolates and buy little things; if they wanted any medicine, if
there weren't any bread, milk, bandages or Band-Aids or whatever. It was...it started as a proper convenience store
with a restaurant, a diner and a small beer bar/wine bar. But he found it difficult to
distinguish himself from the competition, so he diversified. If you want
various kinds of good waters, Kombuchas, at least 10 types of
organic sodas, or regular sodas, I will have those. Walji said many other convenience store
owners who have sought him out for advice on transforming their
own businesses sometimes seem intimidated by the investments
and the work involved. Others lack the knowledge
for making the transition. Many businesses also simply don't have
the space High country has. Maybe I'm maybe a jack-of-all-trades, but
it separates me from the guy who's just going in to buy either a
lottery ticket, cash a check or buy a Coca-Cola walking out. In a market that is crowded, changing,
and like the rest of retail, more than a bit uncertain, it
helps to be creative.
