The Long Decline in Convenience/Motor Fuel Site Count is at an End.

Analysis by Joe Petrowski

Since 1976 we have had a 40-year decline in site counts, going from almost 400,000 sites to 154,000 sites today serving 320 million Americans

The decline was driven by consolidation, the growth of individual sites in inside sales and gallons, cross channel competition and real estate switching to higher and better use. Unlike other retailing businesses, convenience retailing has not been negatively affected by the internet nor will it be (in fact forwards thinking retailers are leveraging social media and the internet to increase sales through distribution services, fixed price fuel sales and pre-ordering services).

But the latest data indicates not only have we bottomed at 154,000 sites but we should gradually see an increase, and certain areas of the country have a pressing need to add stores.

Where should we expect expansion and opportunities?

For convenience retailing there are 6 factors that define the attractiveness of a market area:

• The number of existing stores.
• The growth rate of the area combined with income/capita.
• Demographics (blue collar, millennials, and dual income families.)
• Prevalence of QSR and cross channel competition (CVS, Walgreens, Starbucks, Dunkin Donuts.)
• Willingness of customers to rely on habitual convenience visits (stronger in rural communities than urban.)
• Transience of the population (strong in Florida, Arizona, California and college towns.)

Based on that analysis, the U.S. is now in need of 6,000 additional stores to bring the count to 160,000 stores, which is what we need to serve a mobile population of 320 million people. However, if we resume our historic population and economic growth through household formation and immigration, our population in 7 years will be 400 million people. We will need another 40,000 convenience stores, bringing the total count back to 200,000 sites.

But growth and economic development is not smooth over all geography (see the European community for validation) so we have states with great opportunity and states that will net shed sites.

States that need new sites are:

• California (probably difficult given regulatory climate)
• Arizona
• Indiana
• Iowa (great demographics, growing)
• Florida (though expansion there is already drawing competition
• Hawaii (real estate expense limits growth)
• Nebraska (good growth, great demographics and friendly toward business)
• Nevada
• Ohio
• Texas (too many stations but in need of stores)
• Montana
• Oregon
• Colorado
• Alaska
• Nebraska (great demographics good growth)

States that will still be shedding:

• North Carolina (good demographics and growth, just over-stored)
• Georgia (same as North Carolina)
• West Virginia (A mess, population shrinking)
• New Jersey (over stored and slow/no growth)
• Maine (West Virginia with an ocean)
• Pennsylvania (economic growth stagnant, more deaths than births)
• Alabama and Mississippi (growth stagnant and over stored, though demographics great)

The rest of the states fall in between, but the above should be taken as a guide only.

The latest rankings for top twenty states to do business in are:

• Georgia
• Texas
• Utah
• Nebraska
• Carolina
• Minnesota
• Washington
• Colorado
• Virginia
• Dakota
• Dakota
• Iowa
• Arizona
• Tennessee
• Kansas
• Idaho
• Wisconsin
• Ohio
• Indiana
• Florida
• Wyoming
• Oregon

With a U.S. population of 320 million people we have 163 million females and 157 million males (females live longer) but the states with more than 50% males are: Alaska, Colorado, Montana, Nevada, N. Dakota, Utah and Wyoming.

Further Demographic Guide, the oldest states in the nation are: New Hampshire, Maine, Vermont, Florida, and West Virginia

While the male customer 18-55 is a prime convenience store customer, exceptional retailers can reach across age and gender.

Understanding the macro currents is important, but convenience retailing, like politics, is local.

The cost of the real estate, capital required, excellent execution and knowing your competition can overcome any macro headwinds.

With a growing economy, higher individual net worth, low gasoline prices and a consumer finding better quality and prices along with convenience at their community convenience store the industry is poised for much better days.