Lucrative things are afoot at the Circle K: why we (still) pay for convenience

By now, we've heard all the advice about weathering the recession. And by many measures, the message seems to have sunk in: Americans are weaning themselves off their credit cards and increasing the amount of money they save. All this progress is well and good, but it also begs the question: Why on earth are we still hooked on convenience stores?

Convenience stores are known for marking up the products they sell; you're paying, after all, for a quick transaction as well as a product. One would think this would be enough to deter frugal-minded shoppers. But despite the recession, the exact opposite seems to be happening: convenience stores are going gangbusters.

Convenience store sales grew by 8% last year, according to a report released by RNCOS, a market-research firm. Part of that comes from the run-up in gas prices in the first half of 2008 -- convenience stores are often situated where we fill up our gas tanks, after all. But in-store sales also rose, even as other retail sectors suffered. What's more, we'll be spending a whopping $800 billion a year on our Slurpees and Slim Jims by 2013, the research company predicts.

7-Eleven just announced ambitious expansion plans. The global convenience-store chain added 170 stores last year; this year, it plans to open 200 more locations -- at shopping centers, in suburbs, in industrial neighborhoods -- throughout the U.S. But 7-Eleven is not alone in its good fortune. Canadian giant Couche-Tard, the corporate owner of Circle K and of ExxonMobil's On The Run chain, which it bought this month, had record profits for the quarter ending in October and is beating its 2008 numbers this year.

What's going on? Industry consolidation is playing a role, says Don Longo, editor-in-chief of Convenience Store News. Last year's gas prices of $4-per-gallon and up strengthened the chains while driving some mom-and-pop convenience stores out of business. Beyond that, though, American consumers seem to have a collective blind spot about convenience-store purchases. With so much cash disappearing into our gas tanks last year, we were less willing to indulge in a candy bar or coffee roll -- for a while. But the high gas prices dampened demand, which sent prices lower, and got us to treat ourselves again, for fuel and for snacks.

That trend continues unabated, our lousy economy notwithstanding. "Falling gas prices was the best stimulus," Longo says. "It was better than the bailout. That put a lot more money in people's pockets."

Perhaps it's the relatively small amounts we're spending each time we step up to the counter that keeps our "recession radar" turned off. Or perhaps we still haven't conquered the allure of instant gratification. (More than half of convenience-store purchases are consumed within five minutes after we buy them.) Either way, if your wallet is a little lighter at the end of the week than you'd like, it might pay to consider how much you're spending on convenience.
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