fueling the country's cars and trucks.

93% of Americans live within 10 minutes of one.

They arguably comprise one of the most important retail businesses in the

country. There are 152,000 convenience stores in the US.

That's 30% of all stores in the country.

Put another way, one out of every three stores in the U.S.

is a convenience store.

It's a $654 billion industry.

But those who follow it say most Americans know very little about it.

And it's actually rather misunderstood.

While convenience store retailing has so far been spared the sometimes

catastrophic disruptions that have hit other segments of retail, the

fuel and convenience business is going through some profound changes of

its own. For much of their history, gas stations have been, and still

are today, small, locally owned businesses.

For their owners, they often represent a path toward the American dream.

One of the things that a lot of folks don't actually realize is that

almost two-thirds of the industry is still single-store owner operated.

Meaning that your local gas station may be owned by somebody who lives at

the end of your street. But in recent years, the industry has

increasingly gone corporate.

The smallest companies, those with anywhere from 100-200 stores, are

being bought up by bigger chains or are otherwise going out of business.

And it is getting harder for the little guy to survive.

The first commercial fuel pump in the United States was sold to an

Indiana grocery store in 1885.

The kerosene pump was invented by a man named Sylvanus

Freelove Bowser. He patented his design two years later.

The first dedicated gas station opened in Pittsburgh, Pennsylvania within

two decades. But it wasn't until the 1970s when modern fuel retailing as

we know it today began to emerge.

The first oil embargo in the 70s really set the stage for convenience

stores to sell fuel. There was technology to sell fuel, but people

didn't really consider 'I can pump my own gas and save a cent a gallon'

or something like that. But that first oil embargo really changed the

philosophy of people, 'I'll pump gas, I'll save a cent.

Take the cost out of the system, it goes to the customer.'

The second oil embargo in 1979 raised the price of fuel above one dollar

for the first time, a huge price hike for the era.

Up to that point, fuel stations had been more like service stations, but

convenience stores began using a self-serve model that is common in 48

out of 50 states today.

Only Oregon and New Jersey still require a gas station attendant to pump

a customer's gasoline.

That brings us to today.

There are basically three places a customer buys fuel.

80% of convenience stores have fuel pumps attached and 80% of the gas in

the country is sold at convenience stores.

The other 20% is sold at standalone gas stations.

These are often attached to a traditional service station that does

repairs and inspections.

The other channel is what is called the hypermarket, a term for big box

stores such as Costco, Wal-Mart and Sam's Club.

These outlets sell three times the volume of a typical convenience store,

but there are only a few of them, so they comprise only about 10-15% in

terms of overall fuel sales.

As of December 2019, there were 152,720 convenience stores

operating in the United States, down less than 1% from the 153,237

stores in 2018.

I'd say the landscape of ownership and fuel and convenience can be very

hard to understand at times, and it can actually get very complicated.

There's many different models here.

There are more than 100,000 distinct companies in the convenience and

fuel retailing industry across the U.S.,

more than in any other sector of retail.

62.1% of the market is made up of single-store owners.

That is, as it sounds, owners who own just one store.

It is somewhat difficult to see this since many, if not most fuel

stations often bear some kind of corporate logo, typically from a

petroleum company such as Shell or Chevron.

Despite the corporate logo, though, these are still independently owned

businesses. Owners of these stores often have some kind of franchise

deal with the fuel provider to share costs, but the stores are not owned

by the oil and gas companies.

The other 37.9%

of the convenience and gas station market is controlled by larger chains,

which includes familiar corporate brands such as 7-Eleven and Circle K.

But most of the chains in convenience and fuel retail are regional.

WaWa, Sheetz, Race Trac, and Casey's General Store are all brands

well-known in different regions of the country.

About 15% of the total market is controlled by chains that are 500 stores

or more, and most of those are regional chains with a few national

brands thrown in. But that share of the market is growing.

In 2019, the largest chains added 312 stores over the

previous year and the second largest tier of companies in terms of store

count added 134 stores.

Every other tier lost stores with the biggest losses among independently

owned stores.

Part of the reason for this change is what the stores are selling and how

they look is changing dramatically as well.

As these businesses move away from the “cokes, smokes, and gasoline”

model, and more into products like fresh prepared food, some independent

and smaller owners are having a hard time keeping up.

Right now what we're seeing is some of these one-store operators are

finding it a little bit harder to stay in business with some of these

companies that are continuing to up the ante on food, because people are

time starved. When they come to buy gas, they're often looking to solve

other problems. 'Can I get a sandwich?

Can I get a drink?

Can I get all these other things?'

And the the one-store, and the one-stop shopping v

alue is just increasing more and more and more.

And that puts pressure on the smaller operators that maybe focus more

on, 'hey, I have a gas price and a good location.'

Convenience stores now also have to worry about competition from

retailers in adjacent segments of retail, especially those who might be

getting pelted with their own competition.

Convenience stores are so named because they offer convenience and they

are built around getting customers in and out of the store.

The typical visit to a convenience store lasts about three minutes and 30

seconds. But the rise of e-commerce, store apps and other technological

innovations have left consumers accustomed to a whole new level of

convenience that challenges the relevance of the traditional convenience

store. Convenience channel is really being influenced by companies

outside the convenience channel that are providing more easier ways for

consumers to be ordering in advance, to allow them to to walk in and

pick-up a product, pre ordered.

And so when people think of convenience, that's their new level of

convenience. So they're expecting that now.

So the convenience channel has to adjust to do that.

Amazon Go opened stores in certain cities around the country that you

use your app to log in, pick products off a shelf and you leave.

The internet and smartphones have also gobbled up whole categories of

merchandise that convenience stores once depended on.

When you look at stores 20 years ago, some of the top selling items that

you saw were film, maps, and a substantial amount of foot

traffic, as we all know, with somebody walking in and saying, hey, how

do I get to here?

And those directions, somebody would also say, hey, let me get a drink

while I'm in here. All that's gone.

What's the next thing that could be replaced?

There are other changes taking place that stand to further alter the

landscape. One such switch is the move away from fuel and toward cars

with electric power trains.

Tesla's CEO, Elon Musk has spoken about the kinds of experiences he

envisions for Tesla's Supercharger stations where just mostly filling

the battery on a car can take at least 20 to 30 minutes.

That stands to change how stores think about how they draw people in and

hold their attention. It might require redesigning stores, offering more

in-store experiences and so on.

So the question is: how does a store survive in this changing landscape?

Some are doing it by trying to outwork the problem, by, for example,

hiring family to keep the store running, keeping their labor costs low.

But whereas convenience stores used to survive by being pretty standard

in what they offered.

Fuel, of course, is a commodity.

But the store offer was almost a commodity and the way it was

experienced. The same the same snacks, the same beverages, the same

experience, really. It was the same from one store to the other.

We're entering an era now, though, where the leading brands are

differentiating themselves very strongly.

And you see this at the corporate level, but you also see this with the

successful independent retailers.

Brands that are thriving now are differentiating themselves and many are

starting to look more like restaurants.

Historically, there is a bit of a bias against food bought at gas

stations. Many now well-known regional chains grew out of that initial

complex environment where some stores began selling gas and some gas

stations began selling food.

For example, Wawa has built a reputation for its sandwiches and coffee.

Independent stores are carving out their own niches as well.

High Country Market and Gastropub is one such business.

Located in Round Rock, Texas, the store is a destination for food, craft

beer and high-end wine.

And it is attached to a gas station.

Before it was a gas station, regular convenience store, and people would

come in just buy like chocolates and buy little things;

if they wanted any medicine, if there weren't any bread, milk, bandages

or Band-Aids or whatever.

It was...it

started as a proper convenience store with a restaurant, a diner and

a small beer bar/wine bar.

But he found it difficult to distinguish himself from the competition, so

he diversified. If you want various kinds of good waters,

Kombuchas, at least 10 types of organic sodas, or regular sodas,

I will have those.

Walji said many other convenience store owners who have sought him out

for advice on transforming their own businesses sometimes seem

intimidated by the investments and the work involved.

Others lack the knowledge for making the transition.

Many businesses also simply don't have the space High country has.

Maybe I'm maybe a jack-of-all-trades, but it separates me from the guy

who's just going in to buy either a lottery ticket, cash a check or buy

a Coca-Cola walking out.

In a market that is crowded, changing, and like the rest of retail, more

than a bit uncertain, it helps to be creative.