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Every year the National Association of Convenience Stores (NACS) hosts its State of the Industry Summit, where it shares its annual data summary for the fuel and convenience retail market in North America. This is always one of my favorite events thanks to the sheer amount of data and excellent analysis the NACS experts share.

Something that resonated with me this year was how so much success in this industry is still tied to fuel sales. That’s probably not a surprise when you factor in the way fuel margins have been steadily rising over the past 20 years. Even accounting for price inflation adjustments and higher volatility, this clearly indicates the industry is doing well on fuel margins.

The good news is that we experienced high margins even after seeing lower prices at the pump for much of 2025. Of course, the elephant in the forecourt is whether stores can continue to count on selling the same number of gallons. If overall fuel sales continue to decline, what’s going to replace those valuable margins?

Performance-wise, not all stores are created equal

That leads into my second big takeaway from the summit, which is the breakdown in store profitability. In a nutshell, profitability is a tale of the deciles—especially the bottom decile (the 10% worst-performing stores) compared to the top 10% of stores. I encourage you to get the numbers from NACS, but suffice to say we’re talking about a difference in tens of thousands of dollars each month per store.

Here’s how that shakes out. According to NACS, the average c-store basket increased 24 cents to $7.69 in 2025, but expenses rose faster. When you deduct the cost of goods (drinks, snacks, cigarettes, and so on), direct store operating expenses (such as labor costs), and facility expenses (such as rent and utilities), every transaction inside the store lost 7 cents in 2025.

I’ll repeat that for effect: The industry lost seven cents per transaction.

Industry headwinds present continued risk

Of course, we can’t view this data in a vacuum. We need to factor in macroeconomic trends. As widely known, one of the industry’s biggest headwinds is declining fuel volume. According to the EIA, volume is projected to decline throughout 2026 and 2027. Cigarette sales are also structurally declining, and it will be an ongoing challenge to replace such a significant portion of in-store sales.

Labor costs also continue to rise, and with an industry that has over 100% annual turnover, employee hiring and retention is a major challenge.

Lastly, the current economy isn’t great for consumers. Even if they still need to buy gas, high prices will impact how much they spend elsewhere, including in-store purchases. Even though our industry is recession-resilient, when money gets tight, consumers simply spend less.

We still have some strong tailwinds to help

It’s not all bad news. Historically high fuel margins remain the bright spot in the industry. Inside the store, merchandise sales minus cigarettes is still promising.

NACS cites the fact that foodservice continues to be a key profit driver, representing 28.5% of in-store sales—and 38.9% of in-store profits.

Another positive trend is outside-the-store income in areas such as car wash subscriptions, which can be high-margin opportunities.

We’ve also seen a decrease in merchandise shrink as a percentage of sales, something that has been trending down for the last two years.

So, where should you invest?

To counteract some of the headwinds and take advantage of the tailwinds, you might want to consider a few areas of opportunity:

Loyalty programs drive recency, frequency, and spend, including bringing more repeat visits to the store. They also increase basket size, whether that’s a fuel-related loyalty transaction or merchandise when you convert customers from pump to store.
Enterprise foodservice and production planning remains a high-growth category. But you really need to manage it efficiently and reduce waste to maintain profitability.
Converting your customers to a Private Label Debit payment program is a good way to counteract the continued battle of high credit card fees. And you can leverage ACH payments to enhance your loyalty offering.
Solutions like Human Capital Management (HCM) featuring a partnership with Paycor, can help you reduce labor costs related to onboarding, benefits, and training—all of which makes life better for your employees and improves retention.
Electronic Shelf Labels (ESLs) offer multiple benefits. They free up your store staff for more strategic work, they streamline your operations, and customers appreciate the modern look they bring to your stores.
AI is the thread that will increasingly connect all these opportunities. Solutions like PDIQ embedded into your daily workflows can help you reduce costs while providing the type of experience that keeps your customers coming back.