Issue 1 The Total

We break down industry trends, the data that supports them, and how they’ll impact what’s next. Because in retail, every item adds up to The Total. 

Item No. 1: From hot-deal summer to “I-hope-they-forget-about-it” fall 

Kevin Hart, Chief Sales Officer, Upside

Fast food’s value meal resurgence was in full swing this summer as quick-service restaurants attempted to win more foot traffic. But as summer fades along with their revenue, how will restaurant operators recover?

+ The data: It’s not clear that retailers can make up in volume what they lose in margin. 

• Dining spend took a nosedive as year-over-year spend per visit declined. 

• Diners are trading down to protect budgets, moving from full-service restaurants to quick-service restaurants and from QSRs to their grocer’s hot food bar 

• Case in point: In Q2 McDonald’s reported their first decrease in global sales in over 3 years.

+ Why it matters: Value menus are a gamble. As operators attempt to wean consumers off of hot-deal summer, they’ll transition into item-level-deal fall with premium, item-specific offers (e.g., $2 Big Mac for a limited time). Only those with the most resources can afford to find out.

= The Total: Once we land in “I-hope-they-forgot-about-it” fall and discounts dwindle, it’s not likely that customers will stick around 

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📺 Watch: Roy Rogers EVP Adam Klaers chatted with Upside’s Kevin Hart about how restaurants can drive foot traffic without impacting margin.

Item No. 2: Consumers are putting themselves ahead of brand loyalty

Dr. Thomas Weinandy, Senior Research Economist, Upside

The economy is objectively showing signs of strength, but consumer buying behavior is not back to normal. Consumers are more uncommitted than ever— routinely shopping across different locations and formats, and prioritizing personal needs over brand loyalty.

+ The data

• As recently as August 2024, after-tax American incomes have grown by 5.4% over the past year, all while inflation cools. However…

• Average revenue per transaction is declining year-over-year when adjusted for inflation — down 2% at c-stores, 3% at grocery stores, and 5% at restaurants.

+ Why it matters: Consumers aren’t spending less overall, they’re spending less in one place. So retailers are left to rethink how they build “loyalty” among customers to win more of their shopping cart. 

= The Total: Retailers should expect continued cross-shopping as consumers focus on value and convenience… even as inflation cools. 

Item No. 3: Convenience store transactions are down, even as fuel retailers work to bring customers in store    

David Poulnot, VP Fuel, Upside

As operators look for more c-store transactions, loyalty programming isn’t driving the pump-to-store conversion they’re hoping for.  

+ The data

• As of September 2024, average daily c-store transactions are down 13% over the past two years.

• Shoppers blame costs for reducing their spending on most c-store items, with 72% saying c-store prices are too high.

• 90% of consumers say they consider a retailer’s loyalty program (or lack thereof) when deciding where to shop.

• Nearly 90% of fuel-only customers could be enticed to make an inside purchase with the right promotion amount. 

+ Why it matters: As demand for fuel continues to decline, it’s mission-critical for operators to find ways to more successfully move customers into profit centers like the c-store and car wash. 

= The Total: Seeing as transactions are down across the board, brand loyalty and rewards-based loyalty programming are not moving the needle. C-stores must now compete with the grocers and quick-serve restaurants that are winning traditional convenience shops, and the ones doing it best have moved away from generic programming and are hyper focused on each customer’s needs. 

Item No. 4: Digital shelf labels could backfire in the court of public opinion. Why? 

Kevin Hart, Chief Sales Officer at Upside

Consumers are so wary of surge pricing that the skepticism is bleeding into unrelated initiatives. A good example is Walmart’s plan to exchange paper price tags for digital ones — the company says it’s to help with inventory management but consumers are concerned about what will happen to their wallets. 

+ The data

• Customers are looking for ways to make the same buying decisions as this time last year without increasing their budgets.

• Retailers are looking to help with new pricing strategies but examples like the Wendy’s “surge pricing” debacle and the FTC’s recently announced probe into “surveillance pricing” are making that hard to do.

• At least 49% of consumers say they don’t understand dynamic pricing, and recent controversies haven’t helped its reputation.

+ Why it matters: Dynamic pricing actually has the potential to do a lot of good for consumers and retailers, but it’s a highly nuanced topic that has become a catch-all that includes strategies like surge pricing, personalized pricing, personalized promotions, and more — leaving shoppers confused.  

= The Total: Until the public discourse offers more clarity and sorts out the pros and cons of dynamic pricing, retailers will have to pay close attention to the way they message digital innovation related to inventory and revenue management. 

Item No. 5: Hurricanes reverse expected trends in fuel sign prices, margins, and demand

Sam Berkovitz, VP Account Management, Fuel & Convenience at Upside

Sign and rack prices are expected to fall this time of year, but disruptions brought about by inclement weather have changed the story. 

+ The data

• Rack prices saw regional shifts, with hurricanes driving up rack prices in the South (and the Northeast, to a lesser extent).

• Margins dropped month-over-month in hurricane-affected regions, but rose in the Midwest and West, where pricing and demand remained stable.

• Transaction numbers defied seasonal declines and actually rose in October — primarily due to evacuation-driven fuel demand spikes in the South. 

+ Why it matters: Fuel retailers experience regular high and low margin periods which usually balances out their business, but weather events like hurricanes reshape fuel pricing dynamics and transaction patterns, altering profit margins and requiring operators to respond to sudden demand shifts and recovery needs.

= The Total: Fuel retailers are already expecting a seasonal slow down in volume sold around Thanksgiving, but are starting out the season with lower revenue than usual. Our hope is that this above-average margin period will help recoup their losses from lower transaction period following hurricane season.