The industry's appeal to time-strapped consumers will support steady growth.
Los Angeles, CA (PRWEB) October 26, 2013
Despite the tough economy and rising costs and competition, convenience stores have maintained growth and profitability by offering convenience, value and a greater variety of fresh and healthy products. The small size and accessibility of convenience stores allow operators to adapt to changing environments and consumer preferences, making them more resilient than supermarkets and other retailers. Convenience stores are also increasingly shifting their product mix to offer more food service items that have higher margins and satisfy demand for quick and easy food options. During the past five years, revenue for the Convenience Stores industry has grown at an annualized 1.9% to $40.1 billion in 2013, indicating the resilience of the industry.
According to IBISWorld Industry Analyst Hester Jeon, “As a growing number of consumers become more pressed for time, the speed of convenience stores is proving to be increasingly valuable to busy customers.” As a result, other retailers have begun competing with the industry for the convenience-seeking customer.
“The ability of larger stores to maintain lower costs has forced operators to consolidate to remain competitive,” says Jeon. In particular, credit card use and interchange fees have gone up in recent years, putting downward pressure on profitability for this industry. Wages have also increased as stores have extended their operating hours to satisfy consumers' needs at all times of the day. Despite growing costs, profit margins have increased marginally to account for 1.4% of revenue in 2013 due to consolidation and the sale of higher-margin goods.
As the economy recovers and disposable income levels rise, industry revenue is expected to increase 2.8% in 2013. In the five years leading to 2018, IBISWorld anticipates cigarette unit sales to decline further, as health concerns and higher prices deter consumers from using cigarettes. Despite declining cigarette sales, smokeless tobacco use is growing and will aid revenue growth in the coming years. While sales of the leading product segment is expected to decline, greater focus on food service, snacks and fresh food will help boost revenue and profitability.
Due to the dominance of single-store operators, this industry exhibits a low level of market share concentration. The dominance of independent operators goes back to the historical beginnings of the industry and continues because smaller companies are can quickly adapt to opportunities better than larger players. Small companies can also compete effectively by acquiring superior locations or offering specialized merchandise and services.
The industry has been consolidating, however, with many of the large operators acquiring smaller players. Some smaller chains have also achieved organic growth by expanding into new markets. The larger companies' market share is expected to rise over the next five years, however, as larger companies seek to acquire smaller chains to enter new regions and lower costs. Despite this move, the industry will maintain a low concentration.
For more information, visit IBISWorld’s Convenience Stores in the US industry report page.
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IBISWorld industry Report Key Topics
Firms in the Convenience Stores industry are retail businesses that primarily sell basic food, beverage and tobacco merchandise in convenient locations that are generally open during extended hours. This report excludes gas stations, grocery stores and small kiosks. See IBISWorld report 44711 for information on gas stations with convenience stores and IBISWorld report 44719 for information on gas stations.
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