Operators have struggled to maintain sales in light of low disposable income and rising unemployment
Los Angeles, CA (PRWEB) August 28, 2013
The Convenience Stores industry has been held up by the economic recession over the past five years. “Industry operators in urban, suburban and rural areas all struggled to maintain sales volumes in its traditional merchandise segments, such as dispensed beverages and packaged food items,” according to IBISWorld industry analyst Natalie Everett. Meanwhile, industry firms experienced declining profit from cigarette sales as tax hikes weighed on revenue generated by this large product segment. Industry revenue is expected to total $6.5 billion in 2013, representing an annualized decline of 3.7% in the five years to 2013.
Rising unemployment, decreased per capita disposable income and a declining smoking rate presented the Convenience Stores industry with significant challenges. “Employment affects the number of visits consumers make to convenience stores because workers often make regular trips to their convenience store a part of their daily workday routine,” says Everett. Further, lowered disposable income and higher leisure time availability, as was the case during recession years, meant that Canadians had more time to shop for bargains, which are often found outside this industry. Convenience stores do not compete on price to the same extent that other retail industries do; warehouse clubs, supercentres and grocery stores can compete more effectively on this point when consumers have the time to make trips to these larger stores, and this competition has undermined this industry's operators. As a result of these trends, revenue is expected to decline 4.5% in 2013.
Due to the ubiquitous nature of convenience stores, this industry has a low market share concentration. The top four industry players combined account for less than 25% of the industry's revenue, but the industry’s top two players, 7-Eleven and Alimentation Couche-Tard, generate the majority of this percentage of revenue. The remaining operators in this industry are mostly single establishment, mom-and-pop stores with five employees or fewer. Increasing competition will continue to challenge the Convenience Stores industry through 2018. Large players in the Warehouse Clubs and Supercentres industry will dabble in convenience store operations of their own. The growing threat from these new entrants into the industry will plague existing operators, particularly the small, single-location firms that make up the bulk of the industry. Furthermore, acquisition activity will likely continue over the next five years: The industry is highly saturated, with convenience stores on most urban and suburban street corners, so larger players have long adopted a strategy of growth through acquisition. Meanwhile, employment and disposable incomes will improve some, albeit at a slow rate, and as a result, industry revenue is expected to improve. These factors are expected to cause industry revenue to rise at a modest rate during the five years to 2018.
For more information, visit IBISWorld’s Convenience Stores in Canada industry report page.
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IBISWorld industry Report Key Topics
This industry consists of retail businesses that primarily sell basic food, beverage and tobacco merchandise in convenient locations during extended hours of operation. This report excludes gas stations, gas stations with convenience stores, grocery stores and small kiosks. See IBISWorld report 44711CA for information on gas stations with convenience stores and IBISWorld report 44719 for information on standalone gas stations.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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