Take Note, Wal-Mart: Convenience Store Sales Hit $204B in 2013
Brick-and-mortar retail sales might currently be hurting, but convenience store sales are doing just fine, and that’s why some analysts have urged Wal-Mart Stores (NYSE:WMT) to focus more of its energy on small-format expansion. Fierce Retail reported Wednesday that U.S. convenience stores reached record in-store sales of $204 billion in 2013 while sales for the retail channel in general climbed 2.4 percent for the year. Overall convenience store sales were $695.5 billion, when combined with motor fuels sales of $491.5 billion, and those figures were reported Wednesday by the National Association of Convenience Stores at the NACS State of the Industry Summit, a two-day conference.
It is clear from the industry’s key economic figures that Fierce Retail highlighted that shoppers are now more interested than ever in food and beverages on the go, and that is evidenced by the fact that not only did in-store sales rise in 2013 — a lot of that growth was spurred by continued progress in foodservice (2.4 percent), driven by prepared food and commissary. While consumers still visit grocery stores and big box companies for their retail needs, it is now becoming more clear that they’re also interested in places where they can get in and out the door quickly.
In spite of impressive sales, store-operating costs for convenience stores were still high in 2013, as Fierce Retail reported Wednesday that costs grew at a faster rate than sales and led to a decrease in industry pretax profits, which fell from $7.2 billion in 2012 to $7.1 billion in 2013, but part of those costs also came from a dramatic 19.5 percent uptick in employees. The industry is seeing a demand to employ more workers, especially in food service.
In mid-March, we learned that Wal-Mart had opened a convenience store in Bentonville, Arkansas, the city where the company is headquartered. Many consumers scratched their heads, but now it’s more evident why executives moved as quickly as they did. One Wal-Mart spokeswoman explained last month that the new, convenience-style store, which is called “Walmart to Go” is a “one-off project” and “a convenience store test concept.” Though Wal-Mart is not planning any more across the country, it is evident that the retailer is working as quickly as it can to take advantage of the new demand for convenience-style retail, and if all goes well, Wal-Mart may end up opening more convenience stores down the line, especially as its current sales continue to slip. Like its competitors, Wal-Mart has been under increasing pressure recently to downsize as sales at supermarkets and hypermarkets continue to decline.
As of right now, Wal-Mart operates about twenty smaller-format stores, each of which is about 15,000 square feet in size, and it is also testing out several 2,500 square-foot stores based on college campuses that follow the convenience-store model, calling them “Walmart on Campus.” Onlookers have wondered why Wal-Mart would open its Walmart to Go convenience store so soon; however, considering that format accounts for 34.3 percent of all retail outlets in the U.S. — a reality highlighted by Fierce Retail — it’s not hard to see where the company’s logic comes from.