Keep on Working to Win

Dear Don,

Great editorial (Longo's Viewpoint, Oct. 19, "Government's Crippling Effect"). I've been in the industry 30 years. I have never seen it this bad or seen such opposition to business at the state and federal levels.

You mention NACS lobbying (and by inference state organizations lobbying) and customers lobbying their representatives. Lobbying is but one step in the process and it comes on the down stream side of the process.

What I would like to bring to your attention is a partnership with a grassroots group such as Americans For Prosperity. Lobbying the current group of representatives has not proven to be hugely successful.

Grassroots groups educate and mobilize the voters. The real strength of our system is "We the people."

Just consider the possibilities if we change the legislators.

Legislation that understands the needs of business, free markets, and real reform of health care and the credit card mess.

Better legislators = better legislation.

We need to think outside the box and form new and unique partnerships if the free enterprise system is to survive and prosper.

I would enjoy the opportunity to continue this discussion with you at your earliest convenience.

Jim Zeiler

To read Don Longo's October 19 Viewpoint, go to http://www.csnews.com/csn/print/article_display.jsp?vnu_content_id=1004019005

Channel Competition: Are Convenience Stores Feeling the Heat?

A recent blog on the Nielsen Wire, http://blog.nielsen.com/nielsenwire/consumer/channel-competition-convenience-stores-feeling-the-heat/ provides some insightful commentary about the state of the convenience industry:
“If, when walking or driving around town, you’ve thought to yourself that it seems like there are a lot of new convenience stores that have sprouted up over the last few years, you’d be right.  Since December 2001, more than 20,000 new locations have opened, bringing the total to almost 145,000 such stores in the U.S.  But facing high gas prices last year as well as competition from groceries and mass merchandisers and the effects of the economy, C-stores have actually been pulling back.  Since the end of 2007, more than 1,400 c-stores have closed.
“Chain stores, such as 7-Eleven and BP, account for more than 52 percent of c-stores, while independently owned stores make up the balance.  That said, only 14 percent of c-stores are from chains with more than 500 stores; the rest of the chain stores are part of local or regional companies such as WaWa, Get Go and Nice N Easy.
“So what makes one store more successful than another? Execution.  “According to Nielsen research, consumers want convenience, obviously, but they also want a clean, organized store and the ability to check-out quickly,” said Tom Pirovano, Director of Industry Insights at Nielsen.
“C-stores dominate a number of high-volume categories such as tobacco (85% share of all channels), ice (57%) and beer (56%) and they outsell food, drug and mass merchandisers (including Walmart) combined in these categories.  C-store sales of tobacco and beverages generate more than $90 billion annually.
“A Convenience Store News/Nielsen survey found that customers want their stores to offer gas, snacks and prepared food, a category that has shown growth as the quality of those food service items has improved.  Doughnuts and muffins are the top prepared food category, followed by sandwiches and hot dogs.
“Stores that offer prepared food that looks fresh and smells good and cross merchandise those with other items are likely to hit a homerun,” continued Pirovano.
“Despite their seeming ubiquity, the challenges facing the c-store channel are numerous: rising credit card fees, competition from small format groceries, a desire for healthier foods and competition from club and mass retailers selling gas are just a few of the issues c-store owners face.
“The key to success is innovation.  C-store retailers need to constantly fine-tune their offerings in the face of increased competition from other channels while never taking their eyes off the basics of cleanliness and efficiency,” said Pirovano.
“Other c-Store Facts:
• Texas leads the nation with more than 14,000 stores, followed by California and Florida
• Nevada showed the most growth in the last year, with 31 new stores coming online
• C-stores skew to African Americans, smaller households without kids, lower-income households and single males.
• Seattle, Dallas/Ft. Worth and San Francisco lead metro areas with the most c-store growth, while Miami, Houston and Tampa showed the steepest declines.”
I think Tom Pirovano is correct in pointing out the many challenges faced by convenience store retailers, particularly credit fees, as well as rising taxes on tobacco and a leveling off of growth in fuel consumption rates as Americans drive less. But, despite all that — and the recession, c-stores are doing better than most other forms of retailing. Low ticket products like candy and snacks, as well as other tobacco products drove c-store sales during the first half of this year, and I suspect foodservice sales at convenience are up as well. A recent story on csnews.com, based on Nielsen research, seems to bear this out. See “At ‘09 Halfway Point, Candy, Snacks and OTP Drive C-store Sales” at http://www.csnews.com/csn/search/article_display.jsp?vnu_content_id=1003998033.

-- Don Longo

Best-seller at the Register?

An interesting article came out of the Wall Street Journal recently about several cashiers who have turned their experiences ringing up customers' purchases into best-selling books.

In "99 Faces in One Day," supermarket cashier Carmela Narcisi, of Neuss, Germany, recalls when she told a customer the bananas he was purchasing were overripe.

"Don't worry about it," the man replied. "They're just for my mother-in-law."

Other stories include shoppers pulling money from their socks, strangers confiding about the death of a spouse and irate customers intent on qualifying for the express lane, the Journal reported.

Narcisi's goal was to make readers laugh and to hold up a mirror to some customers.

"People behave as if they are in their own living room," she told the newspaper. "Outsiders can't imagine what we cashiers have to go through sometimes."

Another cashier memoir by Anna Sam called "The Tribulations of a Cashier" became a best seller in France and Germany, and has sold 160,000 copies along with the rights for translations into 16 languages, according to the report, which cited the publisher.

And a German flower-shop employee penned "Customer Rage," while a U.S. cashier from Kansas published two slim books called "Letters From Your Friendly Cashier." In it, her sarcastic notes include titles such as: "To the lady who spent $104 on pet food," according to the report.

"I wrote them almost as a way to deal with these people," the author, Carrie Evans, told the Journal. "It's a funny way of self-therapy."

NRF Says Stop Storing Data

he convenience store industry, along with many other retail segments, has had PCI compliance on the brain for a while now, and every time there is a breach somewhere, it sends shocks and fears into the heart of every organization -- especially when the company actually was PCI compliant at the time of the breach.

Now the National Retail Federation (NRF) is speaking out on behalf of retailers saying the standards set by the Payment Card Industry Standards Council are an “elaborate patch.”

"While PCI can reduce some fraud -- at extraordinary cost -- it is not nearly as effective as a redesign of the card processes themselves," David Hogan, CIO of NRF said. "Retailers have been required to take extraordinary steps to ensure that somewhere, somehow, data is not inadvertently being retained by software. However, what is ironic about this scenario is that the credit card companies’ rules require merchants to store for extended periods credit card data that many retailers do not want to keep."

Visa and MasterCard claim retailers aren’t required to keep card information, but Hogan said retailers are required to produce a card receipt when purchases are disputed. If the retailer can’t produce the receipt, the card companies issue a "chargeback" and the amount of money in question is deducted from the retailer’s account, even if the transaction was legitimate, the organization reported.

However, many retailers in the c-store industry already go by the mantra, “if you don’t need it, don’t store it,” and even the restaurant industry (which often takes payment via handheld devices tableside) is also choosing technology that does not store data.

I would think a retailer would rather risk a possible chargeback, and not store the data, then risk a breach where the consequences are a lot more detrimental to their business.

What are you doing with your data?

-- Tammy Mastroberte

To Comply or Not to Comply with PCI

Sheetz Inc., based in Altoona, Pa., just announced a rollout of upgrades to 2,000 pumps, and many other c-store retailers are choosing vendors to take on the project and upgrade their equipment.

In fact, it is estimated to cost as much as $1 billion for the convenience store and petroleum industry to meet the July 2010 compliance deadline and many are spending their entire technology budgets on various aspects of PCI, according to Convenience Store News' 2009 Technology Study, which will be
published in May 2009.

However, some retailers are choosing another route. We have heard a few say instead of spending the money to upgrade the PIN Pads at the pump so they can take debit cards for payment, they are simply shutting off debit at the pump, and only taking credit -- and without any effect on sales.

What approach are you taking at your stores? Is is worth the investment to allow debit transactions -- especially since the fees are less than credit?

---Tammy Mastroberte

Of Gas Prices and Convenience Stores

I made my cable television debut Friday morning on Fox Business Network’s “Money for Breakfast” program.

 

A producer for the program called me the day before to ask about the impact of falling oil prices on convenience store and gas station owners. The segment was designed to coincide with the release of Exxon Mobil’s record-breaking earnings (see story, “Largest U.S. Oil Companies Report Strong Yearly Profit Growth” on www.csnews.com).

 

So, I prepared my thoughts around the impact of volatile oil price on convenience and petroleum marketers, after reaching out to some knowledgeable friends in the c-store industry.

 

I arrived at Fox Studios on Avenue of the Americas in Manhattan at 7:15 a.m., and 45 minutes later I was in the studio with host Charles Payne and a mutual funds expert. An oil industry analyst was on a remote feed.

 

A news reporter announced Exxon’s record 2008 results, and noted the sharp decline in profits in the fourth quarter as oil prices slid from historic highs. Then, the two other commentators discussed the impact of the results (good for oil stocks; even better for mutual funds that have invested heavily in ExxonMobil).

Then, Charles Payne turned to me: “So, why is Exxon selling off its convenience stores?” he asked.

Hmm. That wasn’t exactly the question I was expecting, but I don’t think I dropped the ball, explaining that oil companies have been divesting their retail operations for more than a decade because the oil business is more lucrative than the retail business. I pointed out that of the industry’s more than 140,000 stores, oil companies own less than 2 percent. Despite all the oil company logos you see along the road, the rest are either independently-owned, part of a retail chain or franchised/licensed operations. Indeed, 62 percent of the industry’s stores are run by single-store owners.

In answer to a follow up question more in line with what I was expecting, I pointed out that even though oil prices have dropped dramatically from their highs of last summer, convenience stores are still facing difficult market conditions due to the current economic recession, a drop in consumer spending, and a decrease in fuel volume as Americans are driving less.

In all, I was on air for about 2 minutes. I really didn’t expect to get more time than that, but if I had more time, I would have liked to have pointed out the following:

• Last summer, when gas was $4 per gallon, c-stores were getting hammered in the store as consumers spent all their money at the pump.
• The higher price on each fill-up meant credit card transactions at the stations increased, as did credit card fees -- rising to more than $7 billion for the c-store industry (twice the industry’s total net profit).
• Inventory costs were higher too. If a c-store retailer had 8,000 gallons in its tanks, that was $32,000 tied up in inventory -- and when that was sold off, the c-store retailer had to write another check for $32,000 to refill those tanks.
• In the fourth quarter, as gas prices dropped, some c-store did have a small window to make a little more profit on fuel as wholesale prices fell faster than retail prices.
• However, so far this year, with the economy reeling, consumers have continued to reduce spending both at the pump and inside the stores. So, although gas prices are down, so is customer and vehicle traffic.
• On top of all that, you have the media noise about the state of the economy that has contributed to flagging consumer confidence and scaring businesses to freeze investments and make more layoffs. And credit card usage is still high because consumers have leveraged themselves so much over the past year.

Well, I guess I’ll save all that for my next TV appearance. Better yet, let’s hope economic conditions for convenience stores improve before I get near another TV studio.

 

-- Don Longo

Credit Card Cos. Reduce Direct Mail, But No Relief for C-stores

A leading international media monitoring service claims the nation’s credit crisis has caused credit card companies to cut back significantly on the number of direct mail credit card offers they send to consumers. However, this expense savings has had little impact on the card transaction fees being paid by gas stations and convenience stores.

The $26.3 Million Solution

That's the amount of money the c-store industry could raise to lobby Congress to rein in credit card transaction fees if every company contributed $180 per store.

Credit Cards Give Double Rewards for Gas Purchases

As if they are not taking enough money out of the pockets of retailers, credit-card companies are offering consumers double rewards for purchases at gas stations and more!