Convenience store profitability stands on twin pillars: expanding the top line and controlling expenses.
According to CSX numbers released at the NACS State of the Industry Summit this year, direct store operating
expenses (DSOE) grew faster (regrettably) than inside gross profit dollars in every month of 2015. Factors such
as wages, health-care expenses, repairs and maintenance costs, and facility expenses were the primary culprits.
Health insurance costs for the convenience store industry exploded by 14.4% in 2015, and remain an ongoing
concern (the Affordable Care Act is often cited as contributing to the increases).
Wages are another concern for retailers as the pool of qualified workers diminishes and the call for higher minimum
wages heats up. Seattle and San Francisco have already adopted higher minimum wage laws while other cities, counties
and states have moved to enact a $15 minimum wage through local laws or executive
orders. Some companies also raised wages voluntarily to $15 or higher in 2015. Wage
costs measured by NACS show an increase of 8.5% in 2015.
The risk for retailers in not controlling labor costs means a fall-off in profitability
if gross profit dollars don't increase at the same rate—or faster. For employees,
this could mean a reduction in hours or even layoffs as employers can no
longer afford prior staffing levels. Longer term, retailers may find that
more technology and fewer employees is the answer.
BY THE NUMBERS
DSOE INSIDE GP$ DSOE $s grew faster than inside GP$s for every month in 2015.
(Source: CSX, csxllc.com)
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC