Wawa All Digital Store With No Shelves

[mjhale]

Wawa opened a non-fuel store on VA Route 123 in Vienna, VA. They took over the building of a long time upscale diner type place that closed in 2020.

Well that's definitely unique location (although Google shows Wawa as some kind of office building in the 2019 view, before construction. There looks like there was a pizza restaurant next door and another across the road that was demolished in that same timeframe.)

You are correct. The diner that I am thinking of was a couple of blocks north. Wawa does have a store with fuel on US 29 just west of Fairfax Circle. This store gets a good business too. It is located near that area's high school and probably gets a similar flow of business as the Vienna location.

[storewanderer]

In some ways not surprising--the continuing increase in EV ownership and the very low margins in gas, not to mention the issues with leaking tanks, fire hazards, etc. makes it worthwhile to consider alternatives to their typical suburban location. EV charging, especially during less than mild weather, will drive people into the store and generate impulse purchases. They also have decades of experience in urban areas that probably can be translated in different ways to suburban locations, like capitalizing on nearby sources of volume.

Gas margins for most chains are over 40 cents per gallon now. Gas is no longer "low margin" in many markets. This is why so many operators are building corporate operated gas stations like crazy. Quik Trip, Maverik, Pilot (Berkshire owned now), and various other chains. ROI on new gas stations properly located to run high volume is excellent now. The model has changed in the past few years.

EV Charging presents similar fire hazards to gas sales also.

It seems like Wawa is confident enough in its offer that it no longer feels it needs gas to draw customers in. This may be true. I think Sheetz will start to make more and more inroads against Wawa offering a better product, better price, and still offering fuel.

I also wonder if Wawa cannot properly handle the volume that stores with gas stations bring them. So doing new stores without fuel will eliminate footsteps. They can build smaller sites if the sites will have less traffic. It will eliminate things like restroom use by people who don't buy anything in the store and reduce wear and tear on their facilities if they are indeed still "low margin" on fuel somehow. Almost sounds like Wawa is trying to go into the business of being a Subway with c-store items. We will see how that works out.

[mjhale]

It seems like Wawa is confident enough in its offer that it no longer feels it needs gas to draw customers in. This may be true. I think Sheetz will start to make more and more inroads against Wawa offering a better product, better price, and still offering fuel.

I also wonder if Wawa cannot properly handle the volume that stores with gas stations bring them. So doing new stores without fuel will eliminate footsteps. They can build smaller sites if the sites will have less traffic. It will eliminate things like restroom use by people who don't buy anything in the store and reduce wear and tear on their facilities if they are indeed still "low margin" on fuel somehow. Almost sounds like Wawa is trying to go into the business of being a Subway with c-store items. We will see how that works out.

Sheetz has a broader variety of food. However, Wawa has far superior (in my opinion) subs and sandwiches as compared to Sheetz. If Wawa can use their subs and sandwiches as the base for a sandwich shop inside a convenience store model then it is going to allow them to get into more areas where there isn't space or regulatory approval for fuel operations. Sheetz still seems to be focused on the fuel and convenience store model they have always used. That does limit them in locations because of the space needed for fuel. Sheetz has experimented with non-fuel locations. I think they have one in State College, PA and one in Morgantown, WV. Both are near the respective universities in each town. However nothing in the quantities that Wawa has done in terms of non-fuel locations.

As EV charging becomes more prevalent, the interior offer of stores like Wawa and Sheetz is going to become more important. Until we have EVs that fully charge in 10 minutes or less, the driver is going to have to do something with their time. A group of people will just sit in the car doing whatever. And an equal group will be enticed by or select a specific store for charging due to the interior offer. Along the same lines, a non-fuel type store is going to be the only suburban growth vehicle in densely developed areas where there is not space for a full scale store, fuel and EV charging operation. I think the c-stores like Wawa and Sheetz are going to run into the same issue that Walmart has. They have developed the rural and exurb areas as much as they can with their standard model. Now how do you get heavily into suburban and urban areas by adapting but not so much that you have multiple, inconsistent locations like Target has ended up with in a lot of their urban development.

[storewanderer]

As EV charging becomes more prevalent, the interior offer of stores like Wawa and Sheetz is going to become more important. Until we have EVs that fully charge in 10 minutes or less, the driver is going to have to do something with their time. A group of people will just sit in the car doing whatever. And an equal group will be enticed by or select a specific store for charging due to the interior offer. Along the same lines, a non-fuel type store is going to be the only suburban growth vehicle in densely developed areas where there is not space for a full scale store, fuel and EV charging operation. I think the c-stores like Wawa and Sheetz are going to run into the same issue that Walmart has. They have developed the rural and exurb areas as much as they can with their standard model. Now how do you get heavily into suburban and urban areas by adapting but not so much that you have multiple, inconsistent locations like Target has ended up with in a lot of their urban development.

The EV charging has to speed up in order for it to be viable. There isn't going to be a large group of people stopping for 45 minute EV changes. There can't be. It just takes too long.

A "quick charge" takes 20 minutes-1 hour (so let's say 45 minutes).
A "full charge" takes 2 hours.

Let's just assume everyone stops for quick charges, and stays an average of 45 minutes.

So you have 10 EV charging units. Let's assume 2 people per vehicle. So in a 3 hour period you have 4 vehicles get charged per space, and all 10 spaces are always full, so that is for 3 hours from the EVs a customer count of 120 customers best case scenario (all vehicles have 2 customers, there is no delay between vehicles leaving and another coming into a spot) or a rate of 40 customers per hour from EV charging units. In this case since these people are stuck there for a long time they are more likely to actually buy something. Let's be real optimistic and say 100% of customers will buy something.

Now use the same metric with a gas pump. You have 10 fueling positions. 2 people per vehicle. Average fill up takes 5 minutes (accounting for people who go inside and people who don't). Let's assume at any given time only 67% of fueling positions are used. So this creates 160 customers per hour from gas pumps. Let's assume only half of them actually go inside and buy something. That is still 80 customers per hour.

And I think I am really doctoring the numbers here to make it look very "best case" for the EV scenario generating customers (assuming all will buy something), and making it look "bad" for the gas pump scenario (like saying only 67% of the 10 pumps are used and only 50% of customers will buy something).

This is why growing operators who don't have a tract record of store closures continue to build actual gas stations. It continues to be the format that generates the most traffic. And if and when EV industry figures out how to develop something that gives you 100% charge in less than 10 minutes, those smart operators will have the cash from their years of running high volume gas stations and be able to easily reconfigure/remove the gas pumps and convert those spaces into EV charging.

[ClownLoach]

As EV charging becomes more prevalent, the interior offer of stores like Wawa and Sheetz is going to become more important. Until we have EVs that fully charge in 10 minutes or less, the driver is going to have to do something with their time. A group of people will just sit in the car doing whatever. And an equal group will be enticed by or select a specific store for charging due to the interior offer. Along the same lines, a non-fuel type store is going to be the only suburban growth vehicle in densely developed areas where there is not space for a full scale store, fuel and EV charging operation. I think the c-stores like Wawa and Sheetz are going to run into the same issue that Walmart has. They have developed the rural and exurb areas as much as they can with their standard model. Now how do you get heavily into suburban and urban areas by adapting but not so much that you have multiple, inconsistent locations like Target has ended up with in a lot of their urban development.

The EV charging has to speed up in order for it to be viable. There isn't going to be a large group of people stopping for 45 minute EV changes. There can't be. It just takes too long.

A "quick charge" takes 20 minutes-1 hour (so let's say 45 minutes).
A "full charge" takes 2 hours.

Let's just assume everyone stops for quick charges, and stays an average of 45 minutes.

So you have 10 EV charging units. Let's assume 2 people per vehicle. So in a 3 hour period you have 4 vehicles get charged per space, and all 10 spaces are always full, so that is for 3 hours from the EVs a customer count of 120 customers best case scenario (all vehicles have 2 customers, there is no delay between vehicles leaving and another coming into a spot) or a rate of 40 customers per hour from EV charging units. In this case since these people are stuck there for a long time they are more likely to actually buy something. Let's be real optimistic and say 100% of customers will buy something.

Now use the same metric with a gas pump. You have 10 fueling positions. 2 people per vehicle. Average fill up takes 5 minutes (accounting for people who go inside and people who don't). Let's assume at any given time only 67% of fueling positions are used. So this creates 160 customers per hour from gas pumps. Let's assume only half of them actually go inside and buy something. That is still 80 customers per hour.

And I think I am really doctoring the numbers here to make it look very "best case" for the EV scenario generating customers (assuming all will buy something), and making it look "bad" for the gas pump scenario (like saying only 67% of the 10 pumps are used and only 50% of customers will buy something).

This is why growing operators who don't have a tract record of store closures continue to build actual gas stations. It continues to be the format that generates the most traffic. And if and when EV industry figures out how to develop something that gives you 100% charge in less than 10 minutes, those smart operators will have the cash from their years of running high volume gas stations and be able to easily reconfigure/remove the gas pumps and convert those spaces into EV charging.

Look up solid state EV batteries. They're ten years from mass market affordability and have some hurdles to overcome, but they're potentially light years better than the batteries being used now. 10 minute charge, 950+ miles per charge, and they're not a firebomb like the current ones in an accident. There are cost and recycling issues to work out but they've got a decade to get there. Solid state has enough potential to not only be a true gas vehicle replacement with zero compromises, but also will render this whole current generation of EVs completely worthless.

[buckguy]

In some ways not surprising--the continuing increase in EV ownership and the very low margins in gas, not to mention the issues with leaking tanks, fire hazards, etc. makes it worthwhile to consider alternatives to their typical suburban location. EV charging, especially during less than mild weather, will drive people into the store and generate impulse purchases. They also have decades of experience in urban areas that probably can be translated in different ways to suburban locations, like capitalizing on nearby sources of volume.

Gas margins for most chains are over 40 cents per gallon now. Gas is no longer "low margin" in many markets. This is why so many operators are building corporate operated gas stations like crazy. Quik Trip, Maverik, Pilot (Berkshire owned now), and various other chains. ROI on new gas stations properly located to run high volume is excellent now. The model has changed in the past few years.

I also wonder if Wawa cannot properly handle the volume that stores with gas stations bring them. So doing new stores without fuel will eliminate footsteps. They can build smaller sites if the sites will have less traffic. It will eliminate things like restroom use by people who don't buy anything in the store and reduce wear and tear on their facilities if they are indeed still "low margin" on fuel somehow. Almost sounds like Wawa is trying to go into the business of being a Subway with c-store items. We will see how that works out.

The only published information I could find was 30 cents/gal in 2021, which was less than 10% at that time. A margin of 40 cents/gallon still is only about 13%, if it's in a state with low gas prices like Ohio, where you can find gas close to $3/gallon outside of summer. This would be a low end estimate of the retail price and probably sacrifices profit. Virtually everything else c-stores sell has a higher gross margin: https://www.statista.com/statistics/887 ... -category/. This information is dated, but I doubt that anything has dipped below the margins for gas. The corporate chains you mention aren't part of the exploration sector, which is where the profit is---retail and refining provide reliable cashflow but are not as profitable. Marathon spun off its interest in several of these chains quite awhile ago.

The argument about Wawa suffers from a being a strawman. They've had non-gas locations for decades so this is less of a change for them, but Sheetz has been known for sandwiches for a quite a long time. Both have a lot of variation across the day/week.

[Romr123]

yeah, about the only things lower than 30% gross margin are giftcards (usually about 17% I read somewhere) and lottery; neither of which have any significant COGS.

[storewanderer]

The only published information I could find was 30 cents/gal in 2021, which was less than 10% at that time. A margin of 40 cents/gallon still is only about 13%, if it's in a state with low gas prices like Ohio, where you can find gas close to $3/gallon outside of summer. This would be a low end estimate of the retail price and probably sacrifices profit. Virtually everything else c-stores sell has a higher gross margin: https://www.statista.com/statistics/887 ... -category/. This information is dated, but I doubt that anything has dipped below the margins for gas. The corporate chains you mention aren't part of the exploration sector, which is where the profit is---retail and refining provide reliable cashflow but are not as profitable. Marathon spun off its interest in several of these chains quite awhile ago.

The argument about Wawa suffers from a being a strawman. They've had non-gas locations for decades so this is less of a change for them, but Sheetz has been known for sandwiches for a quite a long time. Both have a lot of variation across the day/week.

Fuel margins keep going up. I think a lot of this has to do with these c-store mergers; there are fewer players and they can price how they want to price. There are no longer a ton of little players slinging it out trying to make a few cents per gallon. These large corporations control the prices and price it how they want to price it. The media freaks out every time gas prices go up and the consumer accepts the price increase without asking questions is this the fault of OPEC or is this the fault of the c-store chains deciding it is time to increase margin.


If you go here: Circle K US
https://corpo.couche-tard.com/wp-conten ... -Q3-En.pdf
Page 13
You will see Circle K in the US got a fuel margin of 46.85 cents per gallon for the 16 week period that ended in January 2023.
That is up from 39.63 cents per gallon in the previous year/same period.

Another one: Caseys:
https://investor.caseys.com/press-relea ... fault.aspx
Same general time period as above- fuel margin 40.5 cents.

This one, Murphy USA, only got a fuel margin of 29.5 cents per gallon. It looks like they are playing catch up on margin to others in the industry.
https://s22.q4cdn.com/506259022/files/d ... al-pdf.pdf

[storewanderer]

yeah, about the only things lower than 30% gross margin are giftcards (usually about 17% I read somewhere) and lottery; neither of which have any significant COGS.

Yeah, you get 30% gross margin on the $3 soda then the customer pays with a credit card and there goes another .16 or so of that transaction so you make well under $1.

You only get 10% (but they're working on moving that up to 12%... another couple years they'll have it at 15%....) on the fuel transaction but that fuel transaction was for 15 gallons at $4+ per gallon so on $60+ transaction okay the customer pays with a credit card but there is a cap on the fee for fuel somewhere in the $1 range so you get close to $6 of profit... and no labor involved.

This is why we now have giant publicly traded c-store chains who can build hundreds of new stores a year and acquire stores too. They have figured out how to literally print money with these higher fuel margins plus higher in-store sales. While this isn't yet happening on the west coast, it is happening in much of the rest of the US.

[buckguy]

The only published information I could find was 30 cents/gal in 2021, which was less than 10% at that time. A margin of 40 cents/gallon still is only about 13%, if it's in a state with low gas prices like Ohio, where you can find gas close to $3/gallon outside of summer. This would be a low end estimate of the retail price and probably sacrifices profit. Virtually everything else c-stores sell has a higher gross margin: https://www.statista.com/statistics/887 ... -category/. This information is dated, but I doubt that anything has dipped below the margins for gas. The corporate chains you mention aren't part of the exploration sector, which is where the profit is---retail and refining provide reliable cashflow but are not as profitable. Marathon spun off its interest in several of these chains quite awhile ago.

The argument about Wawa suffers from a being a strawman. They've had non-gas locations for decades so this is less of a change for them, but Sheetz has been known for sandwiches for a quite a long time. Both have a lot of variation across the day/week.

Fuel margins keep going up. I think a lot of this has to do with these c-store mergers; there are fewer players and they can price how they want to price. There are no longer a ton of little players slinging it out trying to make a few cents per gallon. These large corporations control the prices and price it how they want to price it. The media freaks out every time gas prices go up and the consumer accepts the price increase without asking questions is this the fault of OPEC or is this the fault of the c-store chains deciding it is time to increase margin.


If you go here: Circle K US
https://corpo.couche-tard.com/wp-conten ... -Q3-En.pdf
Page 13
You will see Circle K in the US got a fuel margin of 46.85 cents per gallon for the 16 week period that ended in January 2023.
That is up from 39.63 cents per gallon in the previous year/same period.

Another one: Caseys:
https://investor.caseys.com/press-relea ... fault.aspx
Same general time period as above- fuel margin 40.5 cents.

This one, Murphy USA, only got a fuel margin of 29.5 cents per gallon. It looks like they are playing catch up on margin to others in the industry.
https://s22.q4cdn.com/506259022/files/d ... al-pdf.pdf

You're just showing differences between chains at one point in time and the margin is still low. Beyond perhaps a bit of price gouging under cover of general inflation, the margin has always been low. Historically, the margins haven't changed much and were returning to historical averages: https://fortune.com/2022/08/09/energy-p ... x-kinnier/ even last year. Note also that demand dropped even though prices are lower than last year: https://www.yardeni.com/pub/gasoline.pdf. Gas stations used to make profit from repairs and retail sales of a few things like oil and lube products and soft drinks---the c-store model is not baked-in and there have always been chains that tries to capitalize on volume sales of fuel alone--there used to be chains like GasTown and Clarks in the Midwest that did this---GasTown was bought by Marathon, while Clarks was bought and sold numerous times and was the nucleus for OntheGo. Whatever gas retailers do now is destined to be different in the future.

You seem pretty hung up on c-stores as gas stations. That's actually a pretty recent phenom. For a long time, they sold a much wider range of goods--the turnpike 7-11s are a reminder of that, with small bits of GM like travel sizes of HBA and groceries beyond the usual junk food, coffee, and soft drinks. Foreign 7-11s are still like that. Many of the early chains began as retail stores for dairies or franchises to dairies as lower density suburban development made home delivery of milk less lucrative and they needed to change their business model. Those stores sold a wider range of dairy products than c-stores do now. The Lawson chain in Japan, which was modeled on an Ohio chain, is still like that--they now have a US store in Hawaii. C-stores used to be something different and smart operators have always evolved; the business has been evolving toward sandwiches for a long time. Some chains have other niches like Stewarts in upstate New York which has non-horrible baked goods. Others are trying to figure out how to incorporate fresh, non-junk food.