By Joe Petrowski

It does not take a Congressional investigation to figure out why private equity and Warren Buffet are enamored with the retail convenience and the fuel industry:

  1. Business greatly benefited by size and scale
  2. Excellent returns on incremental improvement capital
  3. Many firms desiring a liquidity event
  4. Performance enhanced by corporate infrastructure

A 5th reason can now be added:

  1. Convenience is the fastest growing brick and mortar and only secure channel in retail

The numbers are as follows:

US retail sales will exceed $5.4 trillion this year as measured by the Commerce Department (about 40% of the GDP), with most of the sales coming from six sectors: convenience, grocery, hardware/home improvement, on-line, pharmacy and department store. This $5.4 trillion in spending comes from 144 billion transactions (an average of $37/retail transaction). Here here is a breakdown of the various sectors:

To look more in depth at the retail convenience, it:

  • Enjoyed 20% of the US total of retail transactions
  • Has the greatest core of loyal and habitual customers (lottery, tobacco, coffee, fuel)
  • Not threatened by on-line purchases
  • Better sales/square foot than other formats ($300/sq. ft.)
  • Convenience growing faster than other channels (2% above core GDP)

With a 6% annual growth in online shopping and the foot traffic at traditional malls falling 5%/year, it’s likely that at least 25% of the 1,500 malls in the US shut down in the next five years. Investors are seeking a safe harbor and convenience retail and fueling represents that safe harbor