Thursday, April 12, 2012 | Edited by Daniel Moores
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High Fuel Prices Propel Convenience Store Sales in 2011 Total convenience store sales set a record high in 2011, according to data released by the National Association of Convenience Stores. Convenience store sales in 2011 totaled $681.9 billion, or one out of every 22 dollars of the overall $15.04 trillion U.S. gross domestic product, NACS reported. Motor fuel sales, driven by higher fuel prices, rose 27.1 percent to $486.9 billion, while in-store sales grew 2.4 percent to a record $195 billion. In-store sales growth was driven primarily by gains in several beverage categories and foodservice. Alternative beverages (including energy drinks) were up 15.3 percent; sports drinks grew 13.9 percent; and cold dispensed beverage sales were up 12.3 percent. Several beer subcategories also saw strong growth, including super-premium beer, up 10.6 percent, and craft beer, up 13.9 percent. In foodservice, prepared food sales rose 13 percent. Although motor fuel revenues skyrocketed due to higher pump prices, fuel gallons sold last year declined 0.4 percent from 2010. Motor fuel gross margins increased from 15.8 cents to 18.4 cents per gallon before expenses, but dipped on a percentage basis from 5.64 percent to 5.23 percent. A smaller part of the industry's 2011 sales growth can be attributed to an increase in store count, according to NACS. The number of U.S. convenience stores grew 1.2 percent over the past year to a record 148,341 locations, according to the NACS/Nielsen TDLinx Convenience Industry Store Count, released this January. Convenience stores now account for 34.6 percent of all retail outlets, according to Nielsen's figures. NACS pointed out that convenience stores remain an important part of the economy, employing 1.88 million people and generating $162 billion in federal, state and local taxes last year. Between motor fuels and in-store operations, the average store had 1,130 transactions per day. Cumulatively, the industry conducted roughly 160 million transactions per day in 2011. As in past years, while motor fuels drove sales dollars, in-store sales drove profit dollars. Overall, 71.4 percent of total sales were motor fuels, but motor fuels only accounted for 35.9 percent of profit dollars. Convenience store pretax profits reached a record $7 billion in 2011, but taken as a percent of total sales, profits fell from 1.146 percent to 1.027 percent of total sales, largely because of a 23-percent increase in debit and credit card fees, which hit a record $11.1 billion. Total credit and debit card fees surpassed overall convenience store industry profits for the sixth straight year, and are now 87 percent higher than overall industry profits. As a percentage of overall sales, credit and debit card fees equaled 1.63 percent of total industry sales dollars, factoring in all forms of payment, including cash and check. Just looking at motor fuel sales, credit and debit card fees added 5.7 cents to every gallon of gasoline sold at c-stores in 2011. "Our strong performance in 2011 shows that our industry's core convenience offer -- especially one-stop shopping and speed of service for refreshments, food and fuel -- continues to resonate with our customers and attract shoppers to our stores," NACS Chairman Tom Robinson, president of Santa Clara, Calif.-based Robinson Oil Corp., said at last week's NACS State of the Industry Summit. More than 80 percent of in-store sales last year came from the top five categories:
The convenience retail industry continued to separate between the haves and have nots. Top-quartile performers had gross profit dollars that were at least double that of bottom-quartile performers across the board. Top performers also enjoyed hot dispensed (mostly coffee) profits that were seven times higher than bottom-quartile performers, cold dispensed profits four times higher, and salty snacks and prepared food profits that were each three times higher than the bottom-quartile performers. (Source: Convenience Store News, 04/05/12) |
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CE/Appliance Dealers Achieve Success Through Diversification When the going got tough in consumer electronics and appliances, the toughest dealers got going by broadening their assortments into new and varied product categories. Recalling their entrepreneurial spirit -- and leveraging the web and their buying groups -- retailers have ventured beyond their comfort zones to mine fresh profits from the prosaic (mattresses), the trendy (designer sunglasses), and just about everything in between. Indeed, some CE and majap dealers have strayed far afield in search of new margin-rich categories to mine. Abt Electronics, for one, last year added electric generators, sump pumps, fitness equipment and HVAC systems to a diversified mix that also includes fashion sunglasses and luggage. The moves followed successful forays into luxury wristwatches and gourmet cooking products -- both of which are backed by dedicated in-store boutiques -- and even a stab at audio importing and product marketing with the MK Speaker brand. "We're always looking for new ways to drive traffic and create new business," co-president Billy Abt recently told TWICE magazine. George Manlove, president/CEO of Montana-based Vann's, similarly hedged his CE and appliance bets with last year's launch of BigSkyCountry.com, a specialty ecommerce site for outdoor apparel, climbing and hiking equipment, and related electronics, including digital imaging, GPS devices and headphones. Leveraging his home state's outdoor heritage and an e-tail skill set gleaned from 15-year-old Vanns.com, Manlove created an online store that goes "beyond the routine e-commerce experience by offering an engaging, educational customer experience," the company said. On the brick-and-mortar side, Manlove moved beyond Vann's five-store footprint and put his Apple authorization to good use by opening his own version of an Apple store in Missoula, Mont.'s Southgate Mall. The two-year-old On Store, self-described as "the Missoula Apple store," offers "anything Apple," as well as a tightly edited offering of non-Apple A/V and PC products and connected services including streaming media and home networking. The 4,500-square-foot shop is also an authorized Verizon wireless retailer and, taking another cue from Apple Stores, offers a litany of in-store PC services, including computer repairs and tune-ups, data transfer and backup, tablet setup and private IT tutoring sessions. Custom installers are also finding alternative channels to help them ride the housing downturn. Despite mixed results from a recent certification program in photovoltaic (PV) solar-energy system design, integration and installation, the Home Technology Specialists of America (HTSA) is still finding fresh opportunities in energy management. Bob Hana, managing director of the buying group for installers, integrators and A/V specialty dealers, noted that many members are also "balancing their portfolios" by turning to the light commercial market, where "a large percentage of businesses is being done." Vance Pflanz, principal of Home Entertainment Source (HES) member Pflanz Electronics, concurred. "We do quite a bit of commercial work," which helps smooth any bumps in his core premium A/V business. "It's been pretty steady," he said. Besides commercial automation, HES executive VP Jim Ristow advises his group's specialty A/V and custom install members to tap into potential profits from LED lighting; headphones, wireless powered speakers and ultra-premium soundbars; Elite's receiver, TV, and client eco-system; Zvox's single-cabinet home-theater systems; and the emerging mainstream control and integration market. More traditional CE and majap dealers should also consider lighting control, which, argued Jeannette Howe, executive director of Specialty Electronics Nationwide (SEN), a division of the Nationwide Marketing Group, is no longer exclusive to integrators and custom installers. "The lighting category can be highly profitable and is not challenging to implement," she noted. Housewares, long a shelf presence at Best Buy, are also serving as a high-margin adjunct for independent CE and appliance dealers. Leveraging its Kathy Ireland licensing agreement, the BrandSource buying group has developed branded cutlery, food storage and countertop cooking products that are exclusive to its members. CEO Bob Lawrence also pointed to PureWash, a $399 water-treatment laundry attachment shown at the group's recent spring show, as an easy "no-brainer" that helps improve both the wash and dealer margins with it 45-point markup. Also expanding into housewares is New York-based Data- Vision, the Fifth Avenue CE and IT emporium. Its new home line, which includes cookers, toasters, blenders and other countertop appliances by such brands as Sunbeam, Crock- Pot, Krupp's and Hamilton Beach/Proctor Silex, represents a fresh vein of online revenue, president Albert Liniado noted. In particular, Keurig's coffee brewing systems and Dyson's premium floor-care products are generating "tremendous numbers," Liniado said. More recently, DataVision broadened its virtual boundaries further still by introducing 250,000 SKUs of hand tools to its main Datavis.com e-commerce site under such top brands as Black & Decker, DeWalt and Stanley, and may soon add toys to its burgeoning online mix. Playthings are already a growing business for fellow Manhattanite J&R Music & Computer World, which recently announced its own new arrival: J&R Jr., a new 15,000-square-foot "super boutique" boasting a tightly edited assortment of parenting essentials including cribs, car seats, strollers, furniture, musical instruments, crafts and books. The new shop, located in the retailer's former computer software section, also features dedicated walls and displays for electronic toys, gaming consoles, kids' media players, tablets, A/V baby monitors and other small electronics and housewares. J&R Jr. was conceived and merchandised by executive VP Jason Friedman and his wife Danielle based on their experiences as parents and the company's recent forays into educational toys by VTech and Leapfrog. Indeed, the latter's LeapPad Explorer learning tablet was "our hottest seller at Christmastime," he told TWICE at the shop's grand opening. CE dealers looking for less esoteric adjuncts have also found succor in major appliances, a mainstay of many a merchandise mix. Despite a mushrooming furniture business, Conn's said majaps will remain its core category, and Rick Bellows, group president and chief appliance merchant of the Mega Group USA buying organization, argued that white goods' quick turns, greater sales-per-square-foot and high-traffic draw make for a productive investment on the sales floor. To that end, Mega has worked with Whirlpool to develop a turnkey "Appliance Gallery" in-store shop that provides members an easy entrée to the category with training, signage, delivery and pre-arranged terms for a tightly merchandised assortment. (Source: TWICE, 04/09/12) |
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Landscape Maintenance, Lawn Care Poised for Growth in 2012 Following a modest resurgence in 2011, the landscape maintenance and lawn care business is poised for more growth this year. Both residential and commercial clients are showing signs of loosening up, and contractors are deploying strategies to make 2012 their best showing in several years. Just look at what some of the industry's giants are saying. TruGreen, the Green Industry's largest service provider with annual sales in excess of $1 billion, had a relatively flat 2011. This was primarily due to a reduction in full service-program accounts. However, the company's new president, Tom Brackett, is feeling optimistic about growth this year. Several changes have been implemented recently that are already working to reverse some of the negative trends that hindered growth in 2011. "We are pleased with our customers' response to the TruGreen Healthy Lawn Plan," Brackett says. "We created this service based on customer feedback combined with individual agronomic programs based on climate zones in our service areas. The Healthy Lawn Plan is a more comprehensive service than we've offered in the past, and customer response has been powerful. As we continue to systemically improve our service delivery standards, feedback from our customers has been great." ValleyCrest's sales grew 1.7% last year to $850 million. Things could improve even more this year. Sources at the company say that, as a result of several "market changes," there is quite a bit of additional work it plans to bid on in 2012. Chapel Valley Landscape has a similar view. "We're certainly seeing more interest in buying as there are a lot more jobs and projects on the market," says Landon Reeve, founder and chairman. "So while this isn't going to be a knock-your-socks-off year, it's definitely going to be a big improvement over what we've been going through." With annual sales near $30 million, Chapel Valley Landscape serves Maryland, Virginia and Washington, D.C. 'Average-size' companies also faring well It's not just the big boys that are more optimistic about business conditions. According to a fall survey of Green Industry PRO readers, 58% expect maintenance sales to grow this year while 49% expect lawn care sales to grow. On the other hand, less than 10% expect maintenance and/or lawn care sales to dip. Since 90% of landscape companies employ fewer than 20 people, we're talking about a lot of average-size companies that are feeling pretty good about their chances of remaining competitive. One example is lawn care contractor Mark Schlossberg. His company, Pro-Lawn-Plus in Baltimore, MD, grew sales 6% in 2010 and another 5% last year. Schlossberg is calling for 7% growth this year. As of late-February, "Our prepayments are more than 14% ahead of last year," Schlossberg points out. "That is a good sign." Most of Pro-Lawn-Plus' growth has been organic (advertising and referrals). The company also made an acquisition in 2010, and continues to look for other small to mid-sized companies to acquire in the Maryland/D.C. area. Nebraska contractor Larry Burklund has also been holding his own. “We're planning to grow a little this year, but not a lot," says Burklund, general manager of World of Green in Lincoln. "We've probably weathered this thing better than a lot of companies. But we're still going to have some issues with fuel and fertilizer costs, just like everybody is." Down in Mississippi, Harry Collins of Landscape Services & Total Lawn Care has been fighting an uphill battle since his company posted record sales in 2007-8. Sales then dropped 20% in 2009 and remained flat the following year. Mild growth ensued in 2011. Collins is again calling for mild growth this year. "Things might start growing a bit faster now," Collins optimistically predicts. "About 20 miles from our facility in Tupelo is a Toyota plant that just opened up in the fall. We had our best January ever, and February also proved to be very strong." The fact that Tupelo-area residents knew the Toyota plant would be opening did a lot to bolster consumer confidence over the past year, according to Collins. In Cincinnati, OH, an anomaly exists in the form of Oasis Turf & Tree. After a relatively flat 2010, sales grew a whopping 45% last year -- without the need to open an additional branch or acquire another company. Rob Reindl, founder and president, is predicting similar growth this year. Some contractors are growing as a result of customers resuming services that were previously cut, such as fall overseeding. "Customers had cut back on services over the past few years," Schlossberg relates. "We're still seeing some of that this year, but it has definitely slowed down. We also saw many customers add services last year -- so we think the net change is going to remain positive." Burklund is seeing a slightly more dramatic spike in aeration services. "People are starting to realize how valuable aerating is," Burklund says. "Nebraska being Nebraska, it's all clay out here." Collins says his market is showing more interest in organic-based lawn care. "It seems to mainly be younger people who are also more affluent," he explains. "But they also want immediate results, and the two don't always go hand-in-hand. That requires education on our part." Pricing pressure letting up? How contractors are growing varies as widely as the market conditions in which they operate. One thing everybody seems to agree on is that pricing pressure has been a problem. However, that too could be improving -- at least in some markets. "We've had success in renewing maintenance contracts early this year," says Chapel Valley's Reeve. "Some clients have even been willing to accept a slight price increase. That hasn't happened for four years. Particularly in 2008, we were told that if we raised our price, the customer was going to bid the job out. So you had to work with them." ValleyCrest isn't seeing much change. Sources at the company say there has been no uptick in pricing this year, making it all the more important to continue producing high-quality work while focusing on efficiency. Both Schlossberg and Reindl have also had a hard time raising prices -- though they have also been able to resist lowering them. They've kept the increases minimal. "We've raised our prices a few percent each year since 2007," Reindl says. "I think that's better than holding your prices in place until you simply can't sustain it any longer, and then you nail your customers with a big increase all at once." "We are already at the high end of the price scale compared to our competitors," Schlossberg says. "So we've had very small price increases of 1% each of the past two years." Schlossberg says consumers remain sensitive to price increases, so he typically tries to work around it. "We do not match competitors' pricing. We have generally tried to eliminate a service in order to keep a customer. We've been fairly successful with that." Big challenges still lie ahead This year might be a different story, though. "We are attempting to make our routes more efficient," Schlossberg tells. "We are asking customers to be a little more patient with follow-up services to help us achieve this goal. Unfortunately -- with fuel, fertilizer, chemical, postage and health insurance costs all going up -- it is going to be impossible to not increase prices." The challenge of trying to raise employee pay has created additional business strain. "Our employees were very understanding through the worst of the recession when sales were down," Schlossberg relates. "But now that the economy is improving and our sales are above pre-recession levels, employees expect to see more money. We've attempted to do that by offering incentives and allowing overtime. But this year, other than the employees that are at the very top of the pay scale, we'll have to increase pay rates somewhat." One more strain Schlossberg has been coping with is the effects of using DuPont's Imprelis herbicide last season. He has several dozen customers that are waiting for DuPont to make offers to prune or replace dying or dead plant material. Also on the "product" front, Maryland has passed a new lawn care fertilizer law. It won't take effect until 2013, but Schlossberg says contractors will have to start readjusting programs and obtain state certification. "We'll have to start preparing this fall," Schlossberg says. (Maryland’s Lawn Fertilizer Use Act of 2011 bans the use of phosphorus except when establishing a new lawn or when a soil test indicates deficiencies. The act also restricts the amount of nitrogen that can be applied.) In Ohio, Reindl also has his eyes on the regulatory environment. He's seen phosphorus-banning legislation take place just north of him in Michigan. Reindl believes that any legislation should, at the very least, include provisions for soil tests, as is the case in both Michigan and Maryland. "If you let a lawn go for a while, it's probably going to need it (phosphorus)," he says. Finally, rising fuel costs have just about everyone concerned. "If $5 gas happens this year, it will really squeeze profits," Schlossberg says. "It's very difficult for us to add a fuel surcharge since so many of our customers prepay." Back in Nebraska, Burklund has built gas-price clauses into his contracts. If the price of gas climbs above a certain point (he has it set at $3.50), he raises the monthly contract price by 2%. So far there hasn't been much blowback from customers. "We do get a little bit of pressure from apartment buildings, but that's normal because they usually want to go with whoever can provide the cheapest price," Burklund says. In Mississippi, Collins has also instituted a fuel surcharge. If the price of gas rises above $3, he adds $5 per month to a contract; or $2 per visit for those who aren't on a fixed contract. "I've only had one customer who quit me cold turkey over this," Collins points out. That alone has helped reinforce Collins' confidence in the landscape maintenance and lawn care business. Consumers seem to be a little more understanding -- and willing to invest in more services. "Last year I bought into the doom and gloom," Collins recalls. "We didn't buy any new mowers or anything...we were just holding on. But then April hit and we were overcome; we had to buy two new mowers in the middle of the season. This year I'm not listening to it. We're staying focused. We bought two mowers early in the year and will also be rotating a truck off of our fleet. Our gun is loaded this year." Reeve is fired up too, saying, "We're pretty confident about our maintenance business. It's been stable and we expect that to continue. Our goal is to take care of our customers and maintain the quality level. Though the last few years have been tough, we've been careful not to compromise on things that would negatively affect the customer." (Source: GreenIndustryPros.com, 04/04/12) |
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