Elaine Watson The most comprehensive analysis of the US convenience store industry to date reveals an alarming drop in profitability during 2001. A new study from the National Association of Convenience Stores revealed pre-tax profit across the industry plunged 24.6% to $3.4bn in 2001, as margins were squeezed by companies with superior buying power. NACS communications director Jeff Lenard said instore gross profit margins across the nation's 125,000 c-stores continued to fall, dropping from 28.4% in 2000 to 27% in 2001. Gross margins on fuel ­ a major part of the US c-store business ­ shrank to 9.2%, the lowest figure in 10 years, said Lenard. However, sales grew by 5% to $283bn outpacing most retail sectors except drugstores, with most of this growth (3.9%) coming from new stores. "This is still a fairly robust industry, and the figures are not so bad, given the tough comparatives," said Lenard. "Remember, the economy is in a period of recession." However, things were becoming tougher for c-stores as more and more players moved into their market, said Lenard. "The margin erosion will continue so the smart operators are looking at other opportunities to redefine the way they are delivering convenience." Pennsylvania based Sheetz was a good example with a credible food to go offer with hi-tech instore touch screen ordering, said Lenard. Likewise, 7-Eleven is also trialling a series of initiatives such as drive-thrus and multipurpose kiosks enabling shoppers to withdraw cash, purchase and pick up tickets for events, and shop online. Although the number of independents with one or two stores was rising, the number of big operators with several hundred stores was also rising, leading to a polarisation in the market, said Lenard. Some 40% of stores earned less than $10,000 a week, while 40% earned more than $40,000, with the gap in the middle getting smaller. Industry consolidation was partly responsible for the growth in single store operators as the big chains disposed of unwanted stores in the M&A process. {{NEWS }}