Gas/Convenience Stores

Who would argue that the trend in today's culture is summed up in a single question: "How fast can I get it?" Convenience is what we are about, and gas stations supply convenience.

Historically, gas stations have occupied prime commercial property, on heavily traveled roads and at major intersections. In the 1950s and 1960s, they were two-bay buildings with office, lavatory, and storage space and pumps between the building and road. The trend in the latter half of the century has been toward a separation of the old gas station's historic functions (gas sales and repair). Major oil companies for the most part have not gone after repair and fast lube business. In 2002, majors like Shell and Mobil operated only 16.8% of these.

But the majors have gone after the convenience business. Nationwide, nine of the Top 20 convenience store operators, and 49.6% of the total stores, were run by major gasoline companies and in conjunction with their gas stations. And, while the national gas station count has actually decreased since 1994, down 17.5% by 2003, the number of traditional convenience stores increased to 132,424, nearly equaling the number of gas stations.

With these changes, a new market and new opportunities have been opened to the traditional gas station. This gives these stations the opportunity to operate convenience stores that maximize their inherent advantages of prime corner locations and brand recognition, with one-stop convenience - and that is the key word, "convenience."

In this age of "multi-tasking," the optimal waiting period for most customers seems to be "none." Most major toll roads offer a quick-pass service, allowing drivers to speed past others waiting in line. Fast food restaurants have begun to offer "call-ahead" take-out services for quicker turn around and greater customer ease, creating less chance prospective customers get frustrated and go elsewhere. In the end, ease and convenience in a customer's mind can equal higher profits.

The "no-wait" or "low-wait" trends can be seen in today's new gas station market. First is an increase in the number of fueling positions (the number of vehicles able to be fueled at one time). In 2002, the average number of positions per store was 8.7, up from 7.2 in 1998. Second is the addition of in-store secondary fast food franchises like donut, burger, or sandwich vendors, as well as other quick items like coffee or ice cream. In 2003, foodservice was 19.9% of total in-store sales, up from 19.2% in 2002. Individually, store profits averaged $115,400, up 10%. Along with in-store franchises, a few stations have begun to offer drive-thru windows for even "faster food" service. Some operators have further proposed that customers use these same windows to purchase convenience items like groceries. A third time saving device is the pay-at-the pump option. In 2002, 80% of all stations offered a similar service, up from 50% in 1998. Mobil operates a "SpeedPass" system, allowing the purchase of both pay-at-the-pump gasoline and in-store items using a small, key-chain style credit card.

In the analysis of highest and best use that is part of every appraisal, for the older station that is located on a heavily traveled strip, a strong possibility is redevelopment with a combined gas sales and convenience facility. The conclusion, however, is not an absolute. Some stations are better converted to repair or quick lube use.

All trends change to suit the needs and tastes of the public. Who knows, perhaps in five years we will be discussing the reduction in fueling positions and the increase in electrical outlets as traditional gas stations try to tap into the growing market of hybrid car owners. One thing is certain: the one trend that will never go out of style is "convenience."

Jeffrey S. Garner