Shell Divesting 1,000 Retail Locations as Convenience Stores Take a Hit

Shell is offloading retail locations in a shift to B2B, as across the convenience retail industry, key players are feeling the impacts of ongoing economic challenges. 

The London-based oil and gas company shared in its recent Shell Energy Transition Strategy 2024 publication that it plans to divest 500 of its owned and joint venture retail locations this year and another 500 next year. 

“In line with our shift to prioritizing value over volume in power, we are concentrating on select markets and segments,” the company stated. “One example is our focus on commercial customers more than retail customers.” 

This shift in focus comes as convenience retail chains feel the impact of years of economic challenges. Casey’s General Stores, for instance, shared in its most recent financial results that, for the quarter ended January 31, revenue was down by $3 million (or 0.1%) year over year, a dip that the company attributed to declining retail fuel sales.

Convenience retail giant 7-Eleven’s parent company Seven & i Holdings Co. shared on its most recent earnings call that the convenience retail sector in the United States has been facing more challenges than other retail categories. 

“The U.S. C-Store industry has been disproportionately impacted by historically high inflation, with industry direct store operating expenses having grown at approximately 2x the rate of CPI [consumer price index] in 2022,” Stan Reynolds, president of 7-Eleven, told analysts in January.

Reynolds noted that there remains significant opportunity for market share gains in the category, with the U.S. convenience retail landscape being “highly fragmented” compared to a country such as Japan, with more than 90,000 convenience stores belonging to banners with 10 or fewer locations.

Plus, shoppers have hardly been exorbitant in their spending in the face of ongoing financial challenges. The recent PYMNTS Intelligence study “New Reality Check: The Paycheck-to-Paycheck Report – Why One-Third of High Earners Live Paycheck to Paycheck,” which drew from a census-balanced survey of more than 4,200 U.S. consumers, found that 60% of shoppers are cutting back on nonessential purchasing.

Additionally, the latest installment of the PYMNTS Intelligence “Consumer Inflation Sentiment” series, “The Cautious Spender: US Consumers Now Think First, Spend Second,” revealed that, as of January, 57% of consumers expected higher retail prices in the next 12 months.

Notably, the number of convenience stores is on the rise, having grown by 1.5% year over year in 2023, per NACS data, and sales are up too. Additional findings from the trade association reveal that, at least for the first half of last year, in-store convenience retail sales were up 9.4% year over year.

Yet as Shell focuses on selling power to commercial customers, it makes sense that the company would choose to divest retail locations to concentrate on profitable operations. By shedding these locations, it may be able to streamline operations and allocate resources more efficiently. Retail operations require significant investment in infrastructure, maintenance and staffing. Letting go of some of these locations could help reduce overhead costs. 

As economic challenges persist, the company’s pivot toward prioritizing value in power and catering to commercial customers reflects broader challenges within the convenience retail sector. With the landscape characterized by declining retail fuel sales and cautious consumer spending, the move could ultimately prove positive for the company’s margins.