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03 November, 2008
How one US convenience chain is coping during these difficult trading times
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What US retailer John MacDougall doesn't know about running forecourts probably isn't worth knowing. For four decades the businessman has worked to build up his mini empire, weathering any economic storms as well as the harsh winters in upstate New York. After buying out his original two partners of Nice n Easy Grocery Shoppe, he pushed
ahead with expansion and now runs about 80 sites, all with forecourts, and has more than 1,500 staff at his highly successful Nice n Easy chain.The business is worth $160m (£92m) on the store side alone, and sells about 120m gallons of fuel per year.But like many other retailers in the US, John's business has been suffering in recent months due to high oil prices. And when the conversation turns to the subject of the volatility of petrol, or 'gas', prices, his easy smile soon disappears."It's hit us pretty hard. I'd say our fuel sales are down about 10-12% across the group," he says. "People just aren't driving the way they used to. With our current economic conditions, it's certainly a worry for a lot of people."Even though a gallon of fuel is still about half the price it is in theUK, the sudden price hike on the forecourts has been making Americans think twice about taking their cars out on the road.And just like in the UK, the price rises have given retailers an extra headache in the form of increased credit card charges.Credit card companies in the US charge retailers a percentage of the total sale, and according to John this averages at about 7-8%, or equal to 15-17c a gallon in the current climate.He says: "Credit card charges are the biggest factor affecting the industry. Over the past couple of years the fees have been slowly rising, and now it's an enormous amount of money because it's based on a percentage of the sale. Something needs to change."Speaking to Forecourt Trader while visiting this year's NACS (National Association of Convenience Stores) show in Chicago, John, like some other retailers in the US, has tried offering a discount at the pumps for customers who pay with cash. But while he says it has worked for some retailers, it didn't work at his sites. "We tested it at a couple of locations but it didn't catch on," he says. "It's an option for some people, but I don't think we had the right market."John's sites in upstate New York are mainly in affluent rural locations. He says he's aware of other retailers in different parts of the US offering the discount though, and advertising it on the pole signs in order to entice motorists to shop at their sites.Credit card charges was a hot topic at this year's NACS event. In his opening speech, NACS chairman Richard Oneslager said the industry paid $7.6bn in credit card fees in 2007, and that such charges were "destroying our industry". He urged everyone affected to take action and make their voices heard.Meanwhile, John says that as the Nice n Easy business has grown, he has seen the industry change immensely. His latest venture to keep ahead of the game is to expand the foodservice business at his sites. He says it is now the "main contributor of gross margin".He adds: "Our strength is that we've been able to adapt and change with the times. The problem in the industry now is how to differentiate your business. Foodservice is one way we do that. Over the past two years it's become a very important factor, plus everybody's going fresh."This is backed up by the 2008 Industry Report by US trade magazine Convenience Store News, which found that foodservice accounted for 21.6% of gross margin contribution during 2007, making it the top category. The second biggest category was cigarettes at 18.8% .Other issues for US retailers include the question of going green. But it's not simply about trying to help save the environment - according to John. It's also about saving money.He says: "Upstate New York is a green place to live, and we believe our stores should be green too. Upstate New York is also a cold place, and an expensive place to live and run a business because of all the extra costs for fuel."We've been trying to find ways of cutting back the energy we use in store. What's important to me is promoting the fact that we are a green company, and we've made major strides in this area."We've reduced our energy consumption by doing things like converting our lights to LED, or just turning them off when they're not in use, and so we've reduced our carbon footprint."There are a lot of new ideas about and I think in the next four to five years there are going to be lots of advancements to save some bucks, and reduce our carbon footprint further."The green issue was a major theme running through NACS, which took place last month.The show had its own 'Congrenience store' section which showcased products designed to be more sustainable and save money.This included appliances which claimed to be more energy efficient, such as fridges and LED pole sign displays.There were also ideas for simple changes such as reusable name badges. Forecourt manufacturers were promoting their petrol pumps which can dispense 'eco fuels'.Gadgets on show included the 'Hurricone' cordless floor dryer, which looks like a traffic cone but which pumps out air to dry the floor around it.The company behind the Hurricone, Beach Sales & Engineering, says the cordless product runs on a battery that takes three cents to fully charge - and gives up to 12 hours of continuous running time. Meanwhile, the Association for Convenience & Petroleum Retailing used the show to launch the NACS Green Toolkit. Described as "a global guide to implementing a green and sustainable c-store", it claims to offer eco-friendly ideas aimed at cutting costs and increasing efficiency.----=== The NACs green toolkit ===NACS has launched a set of guidelines aimed at businesses that want to go green but want to do so in a way that saves them money.Described as 'a global guide to implementing a green and sustainable convenience store', it includes examples of forecourts and c-stores which are already doing it including Tesco, Musgrave, BP, Budgens and M&S. The guide costs $95 for registered members and $995 for non-members. It is free to new international NACS members. For more information visit [http://www.nacsonline.com].Top tips from the toolkit:* Refrigeration: cut expenses and carbon emissions by using your compressors' waste heat to warm your store in cold weather.* Lighting: not only does low-energy lighting cut utility bills, it can extend the life of produce. Using reflective colours on your walls and ceilings maximises light.* In new construction, retailers have many opportunities to go green. But even an existing store can lower its cooling costs with a white roof coating that reflects sunlight.* Make sure your heating, ventilation and air conditioning units are working efficiently by keeping them clean and in the shade.* Energy management systems monitor the different areas of your store to control temperature and humidity levels. In the words of the guide, why spend money to heat areas that are already warm? Why have all your lights on when the sunlight is pouring in?* Forecourt canopies: bigger isn't always better, a smaller canopy can be used to maximise the use of natural light.----=== US Predictions ===Record fuel prices and food price inflation will cause consumers to do more of what they have been doing:* combine shopping trips* eat more meals at home* seek the right mix of value, variety and convenience- but all at accelerated levels.Meanwhile:* foodservice is the future of convenience* retailers outside the industry will jump into convenience.Source: Convenience Store News 2008 Industry Report