One-stop shopping increases with gas prices

Convenience stores in some parts of the Capital Region might be seeing an unexpected benefit to high
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Convenience stores in some parts of the Capital Region might be seeing an unexpected benefit to higher gasoline prices: greater sales of grocery items because consumers are cutting down on extra driving.

The average price of a gallon of regular unleaded gasoline in the Capital Region hit $3.45 Tuesday, up six cents from last week and 53 cents from last year, according to AAA Northway.

“That’s another new record. That’s becoming a daily trend,” AAA Northway spokesman Eric Stigberg said.

Jeff Lenard, the vice president for communications of National Association of Convenience Stores, said gasoline retailers may soon be seeing a silver lining to the higher prices, in defiance of conventional industry wisdom which says higher gas prices hurt retailers that use gas pumps to attract customers to higher margin products. He said an NACS survey of 1,200 convenience store customers in January showed a slight decrease from last year in the number of customers who said higher gas prices would likely encourage them to spend less at a convenience store and a slight uptick in shoppers who said they’d spend more in order to “bundle trips.”

Lenard said some NACS members have reported increased grocery sales in recent weeks and declining sales of gas.

“People are looking to bundle shopping experiences when gas prices are going up. There is actually a tipping point, and we weren’t sure there was one,” Lenard said.

Stigberg said the price spikes are mostly attributable to the weaker U.S. dollar and a brewing investment bubble in crude oil, because demand for gas is going down. He said lower gas demand suggests consumers are bundling shopping trips.

“People have finally hit that point, and I think it probably started as early as December, where they are like ‘now it’s too expensive, I need to start thinking about things here,’ ” Stigberg said.

Stewart’s Shop President Gary Dake said his company has seen increased grocery sales in its more rural stores but sales at city stores are flat.

“In the Albany and Schenectady stores there are far more supermarkets that are easy to get to, but as you get up into the Adirondacks [NACS survey data] is dead on. If you’re in Warrensburg or Indian Lake, you’re not going to make as many trips across as great a distance to a grocery store,” Dake said.

New York Association of Convenience Store President James Calvin said his members have not reported any trip bundling benefits from gas price increases. He said more expensive gasoline continues to hurt small retailers.

“What’s been happening in the last six months is that because people are spending so much at the pumps they have less money to spend inside the stores,” Calvin said. “We don’t have any research to site here, but at least my impression is over the last six months, sales inside stores would seem to be flat or down because gas prices are draining consumers’ wallets.”

According to NACS, revenues at convenience stores throughout the U.S. reached a new high of $577.4 billion in 2007, but profits dropped by $1.4 billion, largely because of higher credit card fees.

Dake said convenience stores would be wise to try to increase the sale of grocery items now because gas demand appears to be in decline and new taxes on cigarettes may curtail cigarette sales volume, another major revenue stream at most convenience stores. He said Stewart’s enjoys some advantages in the grocery space because it operates its own dairy.

Categories: Business

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