Placer Bytes: Wawa and Tesla

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In this Placer Bytes, we use foot traffic data to dive into two opposing sides of the driving landscape – Wawa and Tesla. 

Wawa’s Expansion 

Wawa recently announced plans to double its current store base over the next 10 years. At present, the convenience store and gas station chain operates 965 stores across Pennsylvania, New Jersey, Maryland, Virginia, Florida, D.C, but according to an interview by CEO Chris Gheysens in the Philadelphia Business Journal, the company aspires to operate 1,800 locations by 2030 with a focus on existing markets and filling in the gap between Florida and Virginia, including North Carolina. To carry out its aggressive expansion, Wawa will utilize a smaller format concept (under 3K square feet) including a pick-up window along with a new drive-thru only format

These are ambitious growth plans, but Wawa has a track record of successful expansions into new territories. Foot traffic to Wawa has increased consistently in recent years and monthly visits were up by 100% in January 2022 compared to January 2019. 

One of the best predictors of a retailer’s expansion potential is the company’s past performance as it moved past its home market. Typically, there is a drop-off in visits per location trends as a brand moves away from its first market and expands into new territories. However, that’s not the case with Wawa, which has posted higher visits per location figures in nearly every state outside its home state of Pennsylvania. This suggests that Wawa has the brand equity needed to reach these ambitious store targets.

And Wawa is not your typical convenience store – its visits per location have outperformed its peers every year for the past four years. In 2021, the average gas station/convenience store generated about 100K in visits per location (roughly in line with the average visits per QSR location), while Wawa approached the 450K visits per location mark. 

Some of this outperformance is a byproduct of legacy Wawa stores’ larger format (averaging 6K square feet) and expanded food selection. But even after adjusting for size, Wawa still leads its peers by a wide margin, which also bodes well for the company’s ambitious growth plans.

 Tesla’s Auto Production

The global semiconductor chip shortage is ongoing, and analysts expect the supply constraints to ease in the second half of 2022. But while US car production is still significantly below pre-pandemic levels, automotive output has already begun to pick up steam, with March marking the third straight month of increase in US factory activity. Should US auto production continue to grow, the economic implications will be felt beyond the dealerships. The low supply of new cars and subsequent high prices of used cars is one of the factors contributing to rising inflation throughout the country. 

Still, one car company does not seem to feel the pinch. Tesla produced a record 305K vehicles and delivered over 310K in Q1 2022 despite ongoing supply chain challenges and factory shutdowns. (For reference, 2021 production was 800K).  Production has commenced at its plants in Texas and Berlin, giving the company the capacity to produce 1.3M units globally in 2023. 

Tesla was able to offset inflationary cost pressures by raising its selling prices – but foot traffic data shows that the higher prices are not deterring customers from visiting Tesla dealerships. Since August 2021, visits to Tesla showrooms have been growing significantly more than foot traffic to competing dealerships, with March 2022 visits up 46.7% compared to January 2022.  It’s worth noting that Tesla makes 4.5X more per unit than Ford and 2.8X more per unit than BMW – demonstrating that Electric Vehicles (EVs) can have not only big revenue, but big margins.

According to the company’s Q1 2022 quarterly report, Tesla significantly increased both its total gross profits and total gross margins compared to Q1 2021 –  providing evidence that the major Original Equipment Manufacturers (OEMs) can reach higher margins and higher levels of profits once they transition to scaled EV production. Should they do so, EV showrooms and service stations are going to become a sizable and sustainable new category in commercial real estate. 

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