In the world of retail blogs, we've all heard the resounding chorus: "Convenience stores drive massive traffic." It's a sentiment supported by mobile data providers, who report a staggering surge of over 60% in c-store visits over the past four and a half years. However, there are articles that begin with the phrase "Trips have been on the decline." So, we embarked on a quest to uncover the truth.
Being experts in data analytics, we consider that such a dramatic (60%) growth in c-stores visits can be explained by a surge in the usage of mobile phones, and especially through so called “loyalty applications”, rather than a customer boom. Let’s dive deeper into this topic and explore recent trends to check whether our expectations are true.
Exploring the Latest in C-store Market Trends
Following NACS reports, convenience store sales reached an astounding $906 billion in 2022, marking a record high. This remarkable achievement underscores the rapid pace of industry development, with c-store sales surging by a third over the past five years.
Considering the mentioned 60% surge in customer visits, a 28% growth may not appear quite as impressive. Now, let's dissect this remarkable growth. It's not just a single factor at play; rather, it's a result of several reasons that have contributed to this impressive feat.
At first, we've identified several key factors that have contributed to the upswing in in-store sales:
1. Inflation-Induced Surge: The year 2022 witnessed inflationary pressures that pushed prices high. The annual merchandise consumer price index soared by about 8%, while the foodservice CPI nearly hit the 10% mark. Over a five-year span, the CPI for all items has seen a 14% increase starting from 2018. These price hikes played a substantial role in the overall sales boost.
2. Meals are the Deal: Convenience stores boldly stepped into the food-service arena, intensifying the competition with quick-service restaurants. Preliminary data from the 2022 NACS State of the Industry survey tells the story—total foodservice sales in convenience stores soared by a staggering 14.3%. Convenience stores, once known for basic items, have expanded their culinary horizons to offer a broad array of fresh, grab-and-go, and ready-to-heat meals.
3. Transactions Growth: In-store transactions have seen a remarkable 13% increase since 2018. This uptick underscores the convenience store's evolving role in retail industry,
At the same time, fuel sales surged by a third (29%), defying the assumption that soaring gas prices would suppress convenience store sales. Contrary to expectations, elevated fuel costs actually played a role in driving sales growth. In our quest for understanding, we unearthed a compelling insight: despite the perception of high gas prices, 2022 saw only a marginal 0.9% dip in fuel consumption when compared to 2021.
As we delve into the factors driving the growth of convenience store sales and consider multiple variables, a 60% increase in customer traffic seems improbable. This skepticism arises given the context of a 28% total sales boost, a 13% surge in transactions (which, interestingly, aligns with 8.2% in-store sales increase, as shown in the diagram above), and a 14% spike in inflation over a 5-year period.
Navigating the Confusions of Cell Phone Data in Customer Predictions
Shifting our focus to traffic trends over the past five years, we observe a noteworthy growth in the penetration rate on comparable roads. Just as a reminder: penetration rate equals the ratio of travelers registered by mobile/GPS/LBS applications to the total number of travelers. For instance, on FRC 1 and 2 roads (mostly highways), the penetration rate increased from 11.47% to 21.4%. Likewise, on FRC 3-5 roads, often regarded as the primary business arteries, the penetration rate saw an uptick from 4.87% to 7.39%. Thus, the uptick of 40-50% in visits recorded through mobile applications primarily mirrors the advancement of mobile technologies, rather than a proportional increase in number of customers.
After all, relying solely on low-cost mobile data, as commonly practiced by most providers, fails in accurately measuring traffic volume or visit counts, whether for a specific area or an average across multiple locations. Moreover, it proves insufficient for making meaningful comparisons between different locations. In our upcoming blog, we will delve into the causes of this issue and provide a detailed explanation.
Taking a deeper dive into our analysis, we observed traffic data across 59 locations, comparing the third-party estimates of customer visits derived from mobile data (primarily sourced from loyalty apps and similar platforms) with actual trip generation numbers. The chart below vividly illustrates the results, revealing that in certain instances, the estimation error soared as high as 90%. On average, the estimation error stands at 66%. Our comprehensive study, titled "Exploring the Visitor Rate in the US Convenience Store & Gas Station Industry”, featuring a detailed presentation of these statistics, is now available on ResearchGate for you.
These discoveries underscore the critical role of precise analytics and information in making informed decisions. At Ticon, we diligently cross-verify a multitude of data sources, and use an algorithmic approach to make sure that small probe sizes will not affect our estimation and will not lead us to bias - or, in simple words, wrong - results. This allows us to provide our clients with invaluable insights that empower them to confidently back their most challenging decisions.
So, what's the real story here? Are C-stores experiencing an astonishing 60% surge in customer visits, or are we witnessing a decline in C-store foot traffic? Well, it turns out that neither extreme is accurate. According to our research, the number of C-store visitors has been steadily on the rise, with an average annual increase of 2.8%. This aligns seamlessly with industry data from trusted sources like NACS and Statista.
To gain truly actionable insights for your business, you need to zoom in on your specific location and area. That's precisely the kind of in-depth analysis we provide through our Ticon C-Site InsightTM reports. Stay tuned for more eye-opening revelations in our upcoming blog!