Updating the State of the Industry

NACS Chairman Jeff Miller discusses card fees, fuel and the future of convenience stores.

By John Lofstock, Editor.

Jeff Miller, president of Miller Oil Co. in Virginia, wears many hats. He is an oilman, an industry advocate and a leader.  

For the past year, he has also been the chairman of NACS, which could very well be his most challenging task to date. Under his one-year term, which comes to an end next month at the NACS Show in Chicago, NACS has battled the federal government on a wide range of issues from card swipe fees and tobacco to ethanol subsidies and the future of fuels in the U.S. Miller is passionate when it comes to advocacy and the strides the industry can make when it presents a unified front be it against the federal government, the credit card companies or the banking industry.
“We do things that other industries can’t because we share so much. This culture of sharing means that when we need to, we can mobilize and speak as one,” Miller said. “Overcoming obstacles and coming together to control our destinies, speaking with one voice and getting the job done is what this industry is all about.”

Miller sat down with Convenience Store Decisions for a wide-ranging interview that examines the current state of the convenience store and petroleum industry, the evolution of alternative fuels and controversial subjects like swipe fees and tobacco. While he is proud of the work NACS has accomplished on his watch, he is firm in his belief that there is still a lot of work to done.

CSD: In June, the U.S. Federal Reserve issued its final rules on debit card swipe fees. The final rules set a per-transaction debit swipe fee of 21 cents, which is significantly higher than the Federal Reserve’s originally proposed rate of seven cents. How much of a disappointment is this for retailers?
JM: Final rules should look like proposed rules. This should have been a clear victory for consumers. We are left to believe that the credibility of the Federal Reserve is in question because it’s obvious that political pressure from the big banks has impacted the outcome of the final rules. A cap of 21 cents per transaction is better than the current average of 44 cents per transaction, but it is more than 400% more than the four cents per transaction that the a Fed-sponsored survey of banks found to be the real cost of processing a debit transaction.

CSD: Fuel prices have been fluctuating wildly over the past year. What are your thoughts on current fuel prices and how should retailers communicate the cause of these higher prices to their customers, many of whom are already price sensitive?
JM: I think the lesson learned from the BP oil spill is that while convenience store and petroleum retailers have always been very close to their customers, they have gotten much better at communicating. The dialogue that was opened up between customers and retailers during the BP spill was very constructive compared to when the Exxon Valdez event happened. A lot of that had to do with the ongoing efforts by retailers, by NACS and by other associations of educating the public about what drives gasoline prices. As a result, we’re in a much better position today to talk to our customers and for our customers to understand how events on the other side of the world can impact the price of fuel in their backyards.

CSD: Convenience store retailers currently sell 80% of the country’s motor fuels, but the fuel industry is changing. What is the next step for industry retailers? Should they be investing in renewable fuels, electric charging stations, etc.?
JM: Part of the problem with renewable fuels like E85 is that they are not compatible with the equipment we have today. If NACS and industry retailers don’t get involved in discussions about alternative fuels early on we could end up in a situation where a new product is mandated and we don’t have equipment that can handle it. This is one of the reasons why NACS is getting involved earlier on in these discussions. Right now it’s a little too soon to tell what the next step will be. I think the best advice for any retailer is to stay educated on this issue because changes are coming.  

CSD: Now that the FDA has control of tobacco they are trying to position themselves as a “partner” with convenience store retailers. How would you rate this partnership to date?
JM: Tobacco products are a big part of our sales and a big part of the profitability of our industry, but to ignore the changes that are on the horizon would be foolish. NACS has an event every year called the NACS Global Forum and it was recently held in Vancouver where we saw some startling numbers. In Canada, 30% of the cigarettes sold in convenience stores are contraband. What’s also interesting is that in Ireland, 25% of cigarette sales are contraband. What’s driving this? It’s the high tax rate. The FDA has to remember that there is a huge amount of taxes collected on cigarettes that contribute greatly to the economies of the localities that collect them all across the U.S. When you start pouring so much money into interdiction it eventually counters what you’re doing and tax generation falls, but the number of adult smokers does not. We’re already starting to see that in states like New Jersey and New Hampshire. So is the FDA a good partner? I’ll leave that for your readers to decide.   

CSD: Do you expect the industry to see a drop in tobacco sales going forward or can the category continue to persevere in convenience stores?
JM: What’s going to change is where customers buy their tobacco. What we are going to see is someone taking a day to drive out to an Indian reservation and loading up his trunk with cigarettes and then distributing them in the office every Monday morning. These are things that are headed our way and we need to prepare for it.

CSD: Can you discuss the role suppliers and manufacturers play in today’s convenience store industry and how the retailer-supplier relationship has evolved over the past few years?
JM: Our supplier partners really stepped up this year to help us send a message to Congress about how swipe fees are affecting our industry. It sends a much more powerful message to lawmakers when their local retailer shows up with the support of Coca-Cola, Pepsi, Altria, etc. Their support really made a difference and helped add credibility to our fight. I think this will prove to be a turning point in how suppliers and retailers work together going forward. It is unfortunate that advocacy is taking on more and more importance in how we run our businesses, which is a shame because in our country we should be able to live the American dream. Start a business, work hard, treat your customers right, price your products fairly and you should be left alone to make a good living. You shouldn’t have to spend all your spare time fending off the government. But we had good support from our supplier members this year and it made a big difference. I’d like to think this is the beginning of a new chapter in our mutually beneficial relationship.

 

 

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