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Gas prices put pinch on convenience stores
By RACHAEL HANLEY
TIMES STAFF WRITER
THURSDAY, MAY 15, 2008

When he realized his customers had stopped purchasing mid-grade and premium gasoline, Wesley J. "Jim" Simpson Jr. decided there was no point in carrying the higher-priced fuels any longer.

Earlier this year, he put tape over all but the regular unleaded pumps at Nu-Bren-Way, a small convenience store and gas station he owns along Route 3 in Natural Bridge.

"The last super I bought was in November and it took until February to use 1,100 gallons," Mr. Simpson said. "18,000 to 20,000 gallons of regular unleaded went out the door in that time frame."

Mr. Simpson's decision to mothball all but two of his six pumps is not an unusual one. All across the north country, gasoline station owners are searching for ways to react to rising gasoline prices and the resulting changes in consumer habits.

Responses have run the gamut; Stewart's Shops started adding deli counters to stores in an effort to attract more customers, while White's Quality Meats in Black River and White's Quality Meats Plus in Adams Center appear to have given up gasoline sales altogether.

"Everybody's struggling, all the convenience store operators," said James S. Calvin, president of the New York Association of Convenience Stores. "We have begun to see independent stores close in the first quarter of this year. I'm very worried about this second quarter."

As pump prices climb steadily to $4 and beyond, Mr. Calvin said, convenience store operators face a triple threat of pressures: rising wholesale prices, the constant drain of credit card processing fees and increased competition for every consumer dollar.

"Consumers have become hypersensitive to the slightest variation in the pump price in any given market or neighborhood," Mr. Calvin said. "If you're as little as a penny or two higher than the competition down the street, consumers turn their back on you, and understandably so."

On June 3, the state will implement a $1.25 increase in the state tobacco tax, a move Mr. Calvin said was likely to make things worse for local operators.

"Independent operators are getting squeezed from all directions," he said.

The result of such pressures already has been felt among local gasoline stations. When retail prices passed $3.34, White's Quality Meats and White's Quality Meats Plus stopped offering gasoline. The Black River station cleared off its Sunoco sign and put handwritten notes on the pump reading "Out of gas."

An employee at White's Quality Meats said the owner had asked for a three-week grace period to pay for gasoline deliveries. He was not sure if, or when, gasoline services would return.

The man he named as owner did not return repeated requests for comment.

The decision to stop offering gasoline is one that store owners across the state have been making in the past six months, Mr. Calvin said. In most cases, owners decide either that the pumps weren't profitable enough or that they can't afford the next gasoline delivery, he said.

According to the Association for Convenience and Petroleum Retailing, motor fuel sales accounted for just over 70 percent of convenience store industry sales in 2006. Citing the two-thirds figure, Mr. Calvin said that was a difficult percentage for any one store to make up.

"If that's the case, and you drop motor fuel, then you've got a big challenge to sustain the level of sales in order to make the location viable," he said.

In the increasingly competitive environment, not all convenience stores are struggling. At Stewart's Shops, an increase in convenience store purchases has more than made up for losses at the pump, District Manager Casey C. Kanclerz said.

Over the past year, sales of super-grade gasoline have fallen from 10 percent to 6 percent of total sales. But high gas prices mean that consumers tend to buy food from local convenience stores instead of heading farther away to a grocery store, he said.

"It's worked as a benefit to us," he said. "A lot of customers have realized how low some of our prices are."

Stewart's, which prides itself on being more about milk and ice cream than motor fuel, has worked to take advantage of the trend. Plans to remodel a store along Route 3 in Great Bend were modified to include a full deli with a 6-foot case and a range of meats and cheeses to attract more customers.

"This is something new we're just starting," Mr. Kanclerz said. "We tried some down South and they were extremely successful."

The renovation of the Great Bend location, part of a multiyear effort to modify former Bonfare stores, started this week and is expected to conclude in a month.

At Nu-Bren-Way, high gasoline prices also have resulted in a boost in the grocery side of the business.

Whether the convenience store sales will remain strong as fuel prices continue to climb is still unclear. Mr. Simpson, who also owns Simpson Fuels in Carthage, worries about the trend in prices. Over the course of three days in early May, he said, he watched the wholesale price of regular unleaded jump by 21 cents.

Such increases mean that Mr. Simpson is unlikely to take the tape off his mid-grade and premium fuel pumps any time soon.

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