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As 2006 comes to a close, it appears the c-store industry is wrapping up another extremely good year. Results from Convenience Store News' exclusive 2007 Forecast Study — revealed to a group of elite retailers last month — verified what we've known to be true for a while: the c-store channel is on quite a run — it has been the most successful segment in retailing over the past several years — and it keeps getting better.
Gasoline prices are forecasted to be more stable — relative to 2006. OTP will continue to grow next year; malt beverages will rebound; and packaged beverages will see double digit per store sales gains next year. (Watch for the complete findings from the 2007 CSNews' Forecast Study in our January issue.)
Nevertheless, the industry faces numerous challenges in the year ahead. Squeezing out profit gains in an increasingly competitive market where more and more retailers are seeking to serve consumers' convenience needs gets harder every year. We'd like to see the new Congress and the President formulate a sensible national energy policy that takes into consideration the concerns of both environmentalists and business interests, doesn't shove increased spending down retailers' throats, and makes us less dependent on volatile, foreign sources of energy.
In fact, as long as we're making out our Christmas list, we'd also like to see the New Year bring a solution to retailers' biggest financial headache — the soaring costs of interchange fees assessed by credit card companies. The convenience store industry paid $5.4 billion in credit card fees in 2005, a 46 percent increase over the year before. In comparison, total industry sales, including motor fuels, rose 18 percent that year, according to the CSNews Industry Report 2006. This trend of credit card costs outpacing sales gains cannot continue.
A white paper from a Chicago-based consulting firm does offer some holiday cheer for retailers on the credit card front. Aimed at the card issuing banks and card associations such as Visa and MasterCard, the report advises them that the current fee structures are unsustainable. One of the most damning statistics from the report: processing fees — the reason for interchange fees in the first place — account for only 13 percent of the costs assessed to retailers; 44 percent goes to support reward programs that are competitive tools for the card issuers but do nothing for the retailers.
The days of merchant-subsidized credit-card rewards programs, rapid increases in interchange fees, and confusing fee structures for credit-card purchases are numbered, according to the Diamond Management and Technology Consultants' white paper.
Let's hope they are right. "Once transparency comes to credit-card pricing models as it ultimately does to virtually every industry, merchants will use the information to force an unbundling of interchange fee structures, and the interchange structure as we know it will disappear," predicts Carl Hugener, a partner in Diamond's financial services practice.
An end to skyrocketing interchange fees would certainly be a welcome Christmas present for all retailers.
The holiday season is also a time to give thanks. We are especially thankful to our loyal readers, who supported us throughout the year by reading our print and electronic products, attending our events and providing us with the constant feedback and advice that helps us maintain our position as the most authoritative, most preferred and most trusted publication in the industry. That's according to the independently conducted 2006 Convenience Industry Media Usage Study, which you will read more about in the coming months.
The entire staff of Convenience Store News thanks you all, and promises to live up to your lofty expectations of us. We also offer our best wishes to you and your families for a happy, healthy and prosperous holiday season. n