u.s. convenience stores: a market analysis

RNCOS U.S. Convenience Stores: A Market Analysis Online Business Research

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About the Report

RNCOS’ “U.S. Convenience Stores: A Market Analysis” provides extensive research and

rational analysis on the proliferating market of convenience stores in United States. This

report helps clients to analyze the opportunities and factors critical to the success of the

convenience stores market in US.

This report reviews the stores and industry practices across the globe in general and in US in

particular. It provides an insight into how convenience business is shaping up to address the

gamut of issues raised by this new standard-bearer of world retail.

In recent years, with convenience stores operators initiated on strategic moves to improve

operations, enhance performance and differentiate from the competitor to position

themselves—the changing nature of convenience retailing and the margin pressures brought

on by encroaching competitive formats is driving c-store industry consolidation.

Key Issues and Facts Analyzed

What is the market size of the US retail store industry?

How is the convenience stores growth state-wise?

What are the factors driving growth in this sector?

What are the technologies that can help convenience store markets to improve their

operations?

How these technologies are increasing operational efficiency in this industry?

Who are the major players of US Convenience Industry, their presence and strategies

being used by them to improve profitability?

Key Findings

C-store unit growth continues to outpace US’ population growth as average person per

store has declined by 0.72% in the year 2005 in comparison to 2004.

California provides a big opportunity market for the C-stores to grow. California is, by

far, the largest US state with a population of 36.13 Million in 2005 and accounts for

the second highest number of C-stores in US.


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Convenience stores sell three-quarters of all the gasoline purchased in the United

States through Convenience stores.

As the gasoline prices are increasing day-by-day, two states, New Jersey (30.1%), and

Oregon (51.7 %), had shown the lowest fuel sales in the year 2005.

Gasoline theft is a major problem for retailers in US. It is estimated that on an

average, one in every 1,100 fill-ups gasoline was theft in 2005.

Credit card fees in 2005 constituted more than 90% of a store's profits; totaling to US$

38,383 per store, and it is expected to grow in the coming years.

Key Players

This section covers the key facts about major players currently operating in the C-store

industry, such as 7-Eleven Inc., Kroger, Koninklijke Ahold N.V, Shell Oil Products US,

Exxonmobil Corporation, Alimentation Couche-Tard Inc. and Sunoco, Inc.

Research Methodology Used

Information Sources

Information has been sourced from books, newspapers, trade journals, and white papers,

industry portals, government agencies, trade associations, monitoring industry news and

developments, and through access to access to more than 3000 paid databases.

Analysis Methods

Ratio Analysis, Historical Trend Analysis, Linear Regression Analysis using software tools,

Judgmental Forecasting and Cause and Effect Analysis are the methods used to analyze the

facts and figures given in this report.


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Table of Contents 1. Analyst View 2. Research Overview 3. Industry Overview 3.1 Worldwide Development of C-Store 3.2 Worldwide Retail Sales 3.3 Retail Sales by Geographical Regions 3.4 Worldwide Top Retailers 4. US C-Stores Industry Market 4.1 Total Number of US C-Stores 4.1.1 US - Top Ten States by Maximum Number of C-Stores 4.2 C-Stores - Regional and State-Level Analysis 4.2.1 Southern Region 4.2.2 Northeast Region 4.2.3 Midwest Region 4.2.4 Western States 4.3 C-Store Sales in US 4.4 C-Stores selling Motor Fuels 4.5 In-Store Sales 4.6 Total Single Store and Chain Stores in Operation 4.7 C-Stores Closed in US 4.8 Growth and Sales Analysis of US C-Stores Companies 4.9 Employment Opportunities in US C-Stores 5. Industry Analysis 5.1 Driving Forces 5.1.1 Strong GDP Growth 5.1.2 Investment on the Part of Fuel Retailers 5.1.3 Increase in Disposable Income 5.1.4 Demand for Convenience Shopping 5.1.5 Convenient Location of C-Stores 5.1.6 Socio-demographic Shifts 5.1.7 Single Person Households 5.1.8 Increased Immigration 5.1.9 Increased Travel Time 5.1.10 Eating Patterns 5.1.11 Busy Lives 5.2 Opportunities 5.2.1 IT in C-Stores 5.2.2 Biometric Products for C-Stores 5.2.3 Local C-Stores

5.2.4 Online Presence 5.2.5 Out of Stock 5.2.6 Competition 5.3 Challenges 5.3.1 High Credit Card Fees 5.3.2 Same Customer Visit has to Pay Twice Fees 5.3.3 Shrinking Margins 5.3.4 Labor Challenges 5.3.5 Violence and Robbery 5.3.6 Increased Competition 5.3.7 Virtual Robbery 5.3.8 Gasoline Theft 5.4 Future Outlook 6. Key Players 6.1 7-Eleven Inc. 6.2 Kroger 6.3 Koninklijke Ahold N.V 6.4 Shell Oil Products US 6.5 ExxonMobil Corporation 6.6 Alimentation Couche-Tard Inc. 6.7 Sunoco, Inc.


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List of Figures & Tables List of Figures:

Figure 3-1: Worldwide - Retail Sales (in Trillion US$), 2001-2006E Figure 3-2: Worldwide - Retail Sales by Geographical Regions (in Trillion US$), 2006 Figure 4-1: US - Growth in Various Retail Formats (%), 2005-06 Figure 4-2: US - Total Number of C-Stores (2003-04, 2004-05 & 2005-06) Figure 4-3: US - Number of C-Stores Share by Top 10 States (%), 2005-06 Figure 4-4: US - C-Stores Saturation Figures (Average Person per Store), 2004 & 2005 Figure 4-5: US - C-Store Industry Sales (in Billion US$), 1998-2002 & 2003-04 to 2005-06 Figure 4-6: US - Share of Motor Fuel and In-Store Sales in C-Store Sales (%), 2005-06 Figure 4-7: US - Motor Fuel Sales (in Billion US$), 2004-05 & 2005-06 Figure 4-8: US - Motor Fuel Sales by Product (%), 2005-06 Figure 4-9: US - States with Highest and Lowest Percentage of Motor Fuel Sales Figure 4-10: US - In-Store Sales Growth (in Billion US$), 2003-04 to 2005-06 Figure 4-11: US - In-Store Sales by Products (%), 2004-05 Figure 4-12: West Coast - Market Segmentation of Single Stores (%), 2005 Figure 5-1: US - Personal Disposable Income (in US$ per Head), 2001-2006E Figure 6-1: Kroger - Stock Performance Figure 6-2: Koninklijke Ahold N.V - Stock Performance Figure 6-3: Exxonmobil Corporation - Stock Performance Figure 6-4: Alimentation Couche-Tard Inc. - Stock Performance Figure 6-5: Sunoco, Inc. - Stock Performance

List of Tables: Table 3-1: Structure of Convenience Storefront by Size and Operation Table 3-2: Worldwide - Top 10 Retailers by Net Sales (in Billion US$), 2005 Table 4-1: US - Historical Growth of C-Stores (1973, 1983, 1993 & 2003) Table 4-2: US - Total Number of C-Stores in Southern States (2004 & 2005) Table 4-3: US - C-Stores Saturation Figure for Southern States (Average Person per Store), 2004 & 2005 Table 4-4: US - Total Number of C-Stores in Northeast States (2004 & 2005) Table 4-5: US - C-Stores Saturation Figure for Northeast States (Average Person per Store), 2004 & 2005 Table 4-6: US - Total Number of C-Stores in Midwest States (2004 & 2005) Table 4-7: US - C-Stores Saturation Figure for Midwest States (Average Person per Store), 2004 & 2005 Table 4-8: US - Total Number of C-Stores in Western States (2004 & 2005) Table 4-9: US - C-Stores Saturation Figure for Western States (Average Person per Store), 2004 & 2005 Table 4-10: US - Number of Single Stores and Chain Stores (2004-05 & 2005-06) Table 4-11: US - Number of C-Stores Closed, 2004 Table 4-12: US - Number of C-Stores Closed, 2005 Table 4-13: US - Top 50 C-Store Companies, 2005 Table 4-14: US - Average Wage Rates (in US$ per Hour), 2004-05 Table 5-1: US - GDP Growth (%), 2001-2006E Table 5-2: US - Population Break-up (%), 2001-2006E Table 6-1: 7-Eleven Inc. - Financial Overview (in Million US$), 2000-2004 Table 6-2: Kroger - Financial Overview (in Million US$), 2006 Table 6-3: Koninklijke Ahold N.V - Financial Overview (in Million Euro), Q3 2005 to Q3 2006 Table 6-4: ExxonMobil Corporation - Financial Overview (2003-2005) Table 6-5: Alimentation Couche-Tard Inc. -Financial Overview (in Million US$), 2005 &2006 Table 6-6: Sunoco, Inc. - Financial Overview (2003-2005)


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4.1 Total Number of US C-Stores

The number of convenience stores in the United States stands at 140,655 in the year 2005-06.

The new figure is a 1.77 % increase over the 138,205 stores in the year-end 2004.

Figure 4-2: US - Total Number of C-Stores (2003-04, 2004-05 & 2005-06)

140655

138205

131000

124000

128000

132000

136000

140000

144000

2003-04 2004-05 2005-06

in N

um

ber

s

Source: NACS, 2006

Historical Growth of C-stores

C-Stores growth in US saw a boom during the period 1973 to 1983. The CAGR during the

period was around 12.11% and the number of C-stores increased by 51,900. But the CAGR

slowed down during the period 1983 to 1993 (2.84%) and 1993 to 2003 (2.66%), although the

overall number of C-store increased and touched the new height of 131,000 by 2003.

Table 4-1: US - Historical Growth of C-Stores (1973, 1983, 1993 & 2003)

Year No. of Stores CAGR

1973 24,300 -

1983 76,200 12.11%

1993 100,800 2.84% 2003 131,000 2.66%

Source: NACS

Total C-store industry sales increased from US$ 186 Billion to US$ 394.7 Billion from 1998 to

2004.


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4.2.3 Midwest Region

The Midwest’s population growth since 2004 has only been 0.38%, but C-store development

did not show any significant growth from 2004 to 2005. Ohio, Kansas, Michigan, Illinois and

Missouri lead the way.

Out of twelve states, six states showed negative growth as the number of c-store have

declined in the year 2005 in comparison to 2004 in these states.

Table 4-6: US - Total Number of C-Stores in Midwest States (2004 & 2005)

State 2004 2005 % Growth

Minnesota 3,974 3,820 -3.88

Nebraska 1,638 1,600 -2.32

Iowa 2,788 2,732 -2.01

Michigan 5,176 5,089 -1.68

South Dakota 1,100 1,085 -1.36

North Dakota 835 830 -0.60

Indiana 3,300 3,300 0.00

Wisconsin 4,253 4,253 0.00

Illinois 4,900 5,100 4.08

Ohio 4,923 5,125 4.10

Kansas 2,200 2,500 13.64

Missouri 3,825 4,410 15.29 Source: NACS, 2005 Note: Store

Four states have shown the declined saturation figure in the year 2005 where the average

person per stores has decreased.

Table 4-7: US - C-Stores Saturation Figure for Midwest States (Average Person per Store), 2004 & 2005

States Saturation Figure (2004) Saturation Figure (2005) % Change

Missouri 1678 1451 -13.51%

Kansas 1243 1098 -11.70%

Ohio 2328 2237 -3.90%

Illinois 2595 2503 -3.55%

Wisconsin 1295 1302 0.49%


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Indiana 1890 1901 0.55%

North Dakota 760 767 0.97%

Michigan 1954 1989 1.79%

South Dakota 701 715 2.05%

Iowa 1060 1086 2.46%

Nebraska 1067 1099 3.05%

Minnesota 1284 1344 4.68% Source: NACS, 2005 Note: Store


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5. Industry Analysis

5.1 Driving Forces

5.1.2 Investment on the Part of Fuel Retailers

Retail margins have fallen significantly in the past two decades, as rising oil prices and

taxation levels led to increased price-sensitivity among motorists and more aggressive price

competition between retailers, spurring a complete transformation of the forecourt. Where

once their sole business was the retail of fuel and car-related products, it has now become

imperative for service stations to sell other goods and services in order to survive.

Increasing non-fuel sales has become a strategic priority and oil companies have been

investing especially heavily in the forecourt shop in recent years, extending these to cover a

greater proportion of the network, whilst expanding existing shops and increasing the range

of products to attract 'on-the-go' consumers and top-up shoppers as well as motorists.

5.1.4 Demand for Convenience Shopping

Strong consumer demand for convenience shopping has made the convenience store (C-store)

sector as one of the most dynamic sectors in the whole retail market. C-stores have

established an important niche for themselves in the grocery supply chain, essentially serving

top-up shopping requirements to supplement the supermarket shop.

5.2 Opportunities

5.2.3 Local C-Stores

There is an opportunity for local C-stores to develop their potential as community stores and

‘lifestyle assistants’, as they are better placed to know the particular needs of a town or

village more intimately than the larger supermarkets. They could create solutions for the

increasingly time-pressured element in the community, by offering anything that will give the

consumer extra time, e.g. home deliveries of high-quality frozen food, whether it is lunch for

the home worker, or the evening meal for a busy family.


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5.2.4 Online Presence

Finding space has always been an issue for an average C-store. Offering any product beyond

the traditional boundaries is generally rendered impossible, simply as a result of size

constraints. However, the development of the computerized kiosk is seen by some as one way

to revolutionize the world of convenience retailing, making it possible to buy cars, book

holidays or select sports gear from these outlets.


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u.s. convenience stores: a market analysis

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