Recession? It’s Here, Now What Are You Going to Do About It?

Recession? It’s Here, Now What Are You Going to Do About It?

An economic downturn requires a different business strategy

A COUPLE OF WEEKS AGO, the big question was whether the U.S. economy was heading into a recession. With inflation rising at the fastest pace in 40 years, convenience store retailers were already seeing customers cut back their spending. A survey by AAA found that almost two-thirds of U.S. adults have changed their driving habits or lifestyle since March. Nearly a quarter described those changes as “major.”

Besides driving less (cited by 83 percent of those surveyed), consumers are counteracting high pump prices by combining errands (74 percent), reducing shopping or dining out (56 percent), delaying major purchases (30 percent), postponing vacations (29 percent) and saving less (24 percent). Another study noted that those consumers who are still spending are trading down from premium brands to lower-priced alternatives and private label products.

The second consecutive quarterly decline in real gross domestic product (GDP) marked the start of the fourth official recession since 2000. The current administration, for obvious political reasons, doesn’t want to call this a recession, but semantic arguments aside, the U.S. economy is running on fumes. The Federal Reserve has already raised interest rates four times this year. The hikes increase consumers’ and businesses’ borrowing costs for such things as credit cards, mortgages, auto loans and business loans.

In addition to the drop in GDP, real consumer spending slowed from 1.8 percent to just 1 percent in the second quarter of 2022. Residential construction dropped at an annual 14 percent rate, and business spending on structures, equipment and technology collapsed from 10 percent in the first quarter to a 0.1 percent annual rate in the second quarter.

Facing this inevitable recession (or whatever term the administration wants to call it), retailers need to “pivot” once again. (Wow, that word is becoming a bit overused, eh?)

The knee-jerk reaction might be to cut spending across the board, but that would be wrong. According to the Harvard Business Review (HBR), retailers in a recession should go after “bad costs.” These costs add nothing to what customers are ultimately willing to pay for. Even the best-run companies incur a lot of bad costs, according to HBR. These might result from investments to meet changing consumer needs or to match competitors’ innovations. Costs can creep in through operational complexity resulting from growth. Examples could be too much seating in stores where takeout is the primary business, or unnecessarily extended operating hours in certain markets.

In a previous economic downturn, Wawa Inc. enjoyed great success employing what the retailer called a “Blue Ocean” strategy. Based on a book written in 2005 by professors W. Chan Kim and Renee Mauborne, the strategy involves focusing resources on competing in “blue oceans” or new, uncontested markets rather than “red oceans,” which are highly competitive markets. That thinking turned Wawa into a foodservice powerhouse.

I’ve been covering retailing for a long time, from the dot.com/9-11 crash in 2001, through the subprime mortgage crisis of 2008-2009, to the 2020 COVID contraction. Convenience channel retailers have always managed to fare a bit better than other retail channels and, indeed, most other businesses in the country. While not recessionproof, c-stores will continue to outperform other retailers if they react quickly to the market dynamics under which they are operating.

The knee-jerk reaction might be to cut spending across the board, but that would be wrong.

For comments, please contact Don Longo, Editorial Director Emeritus, at dlongo@ensembleiq.com.

COVER STORY PAGE 38 56

FEATURES

COVER STORY

38 Inflation Nation Although there’s no official designation of a recession yet, U.S. consumers increasingly feel like they’re in one.

FEATURE

56 Supply Chain Solutions Labor shortages continue to cause supply chain issues, but savvy c-store retailers are finding workarounds as experts predict struggles will continue past 2022.

TOP 100

66 Less Deals, More Money The pace of M&A activity has slowed as buyers find limited inventory available.

FEATURE

86 Travel Center Transformation Innovation abounds in the travel center and truck stop industry from both new and existing players.

66

DEPARTMENTS

EDITOR’S NOTE

3 Allies in Advancing Convenience Foodservice The Convenience Foodservice Alliance is recruiting new members.

VIEWPOINT

4 Recession? It’s Here, Now What Are You Going to Do About It? An economic downturn requires a different business strategy.

10 CSNews Online

26 New Products

SMALL OPERATOR

34 Back to the Future The retailers who meet the needs of their local market and customers will survive.

WHAT’S NEXT

146 Flipping the Script NextUp’s Kat Ortiz talks changing cultures and feeding hope.

STORE SPOTLIGHT

148 Between a Hard Rock & a Casino Rocktane Gas + Smoke arrives on the West Coast boasting an iconic music vibe.

INSIDE THE CONSUMER MIND

174 Keeping Customers Close Convenience store loyalty programs are expanding and enhancing.

26

8550 W. Bryn Mawr Ave., Ste. 200, Chicago, IL 60631 (773) 992-4450 Fax: (773) 992-4455 www.csnews.com

INDUSTRY ROUNDUP

12 BP Brings ampm Brand to the East Coast

14 Sheetz Targets Western Pennsylvania for Expansion Push

16 Eye on Growth 16 Fast Facts

18 Retailer Tidbits

20 Supplier Tidbits

TECHNOLOGY

132 The New Bedrock of Success C-store operators view new and improved technology as critical to their future.

118 12

CATEGORY MANAGEMENT

FOODSERVICE

94 Building a Bigger & Better Future for Foodservice The 2022 Convenience Foodservice Exchange highlighted evolving best practices, ways to cope with challenges, and actionable suggestions to stand out from the crowd.

FOODSERVICE STUDY

104 A Balancing Act Convenience foodservice retailers are carefully weighing innovative plans for the future against maintaining longtime customer favorites.

TOBACCO

112 The Ramifications of Reduced Nicotine The FDA’s plan to establish a nicotine standard has industry insiders speculating about the future of c-store tobacco.

ALCOHOLIC BEVERAGES

118 Keeping Spirits High Retailers are redesigning their stores to accommodate expanded wine and liquor sections.

SERVICES

124 Getting Some Polish Technology and new equipment are driving sales in the underutilized, high-profit business of convenience store car washes.

BRAND MANAGEMENT Vice President/Group Brand Director Paula Lashinsky (917) 446-4117 plashinsky@ensembleiq.com EDITORIAL Editor-in-Chief Linda Lisanti llisanti@ensembleiq.com Executive Editor Melissa Kress mkress@ensembleiq.com Senior Editor Angela Hanson ahanson@ensembleiq.com Managing Editor Danielle Romano dromano@ensembleiq.com Associate Editor Sanestina Hunter shunter@ensembleiq.com Editorial Director Emeritus Don Longo dlongo@ensembleiq.com Contributing Editor Renée M. Covino reneek@aol.com Contributing Editor Tammy Mastroberte tmastroberte@gmail.com ADVERTISING SALES & BUSINESS Associate Brand Director & Northeast Sales Manager Rachel McGaffigan (774) 212-6455 rmcgaffigan@ensembleiq.com Associate Brand Director & Western Sales Manager Ron Lowy (330) 840-9557 rlowy@ensembleiq.com Associate Publisher & Midwest Sales Manager Kelly Fischer (773) 992-4464 kfischer@ensembleiq.com Account Executive & Classified Advertising Terry Kanganis (201) 855-7615 tkanganis@ensembleiq.com Classified Production Manager Mary Beth Medley (856) 809-0050 marybeth@marybethmedley.com AUDIENCE List Rental MeritDirect (914) 309-3378 Marie Briganti Subscriber Services/Customer Care contact@csnews.com Toll-Free: (877) 687-7321 Fax: (888) 520-3608 PROJECT MANAGEMENT/PRODUCTION/ART Creative Director Colette Magliaro (973) 607-1320 cmagliaro@ensembleiq.com Advertising/Production Manager Ed Ward (773) 992-4418 eward@ensembleiq.com Art Director Lauren DiMeo (973) 607-1321 ldimeo@ensembleiq.com

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