We know consumers are price sensitive, Survey Says…
that they think retailers make — and should The Balvor/NA...
InsIght 1:
Discounts on gas...
very sensitive to market forces,” said Bal- Retailers who “strongly agree”
vor Managing Partner David Bishop.
success with the first two areas.”
pricing tactics continue to evolve, which have been speaking on behalf of other president of The Parker Companie...
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What Fuels Retailers Decisions?

The results from the Balvor/NACS Motor Fuels Retailer Survey, released exclusively for the first time here in NACS Magazine, provide deeper insights into the motor fuels landscape and how motor fuels retailers are relentlessly changing.
Published on: Mar 3, 2016
Published in: Business      

Transcripts - What Fuels Retailers Decisions?

  • 1. what FUELS REtaILERS’ DEcISIonS In recent years, we tackled fuel perceptions from the consumer side. This year, we see what your peers — the retailers — think about the current state, and future, of motor fuels. 34 nacsonline.com March 2010
  • 2. We know consumers are price sensitive, Survey Says… that they think retailers make — and should The Balvor/NACS Motor Fuels Retailer Survey was fielded in January 2010 make — more money per gallon than they and promoted via several NACS Daily announcements. A total of 114 really do. We also know that consumers retailers — representing more than generally don’t blame their neighborhood 5,500 fueling locations — responded to the online survey. Survey partici- convenience store operator for high gas pants were remarkably similar to the industry’s overall makeup. prices (although they do blame “Big Oil”). We know all this because that’s what con- average monthly gallons sold: sumers have told us in three previous NACS Consumer Fuels Reports. Over Under 75,000: But what about the retailers? How are 125,000: 28% 26% they reacting to consumers’ perceptions 75,000 to and price sensitivity? And how do retailers 125,000: 46% feel about future prospects? The results from the Balvor/NACS Motor company size: Fuels Retailer Survey, released exclusively 201-500 51-200 stores: 9% for the first time here in NACS Magazine, stores: 3% provide deeper insights into the motor 500-plus stores: 11-50 fuels landscape and how motor fuels retail- stores: 27% 2% ers are relentlessly changing. Above all, the 1-10 survey revealed that despite today’s busi- stores: 60% ness challenges, retailers remain optimistic about the future. all charts and data in this article are from the Balvor/ nacS Motor Fuels Survey unless otherwise noted. (percentages rounding to nearest whole number) March 2010 nacS Magazine 35
  • 3. InsIght 1: Discounts on gas are NACS Gas Price Kit Answers Consumers’ the norm — if they are ‘Whys?’ and ‘Hows?’ offered in your area. We know that motor fuels customers “I wish they knew our tions about the industry. Phil’s prediction about are incredibly price sensitive. Last year, actual margins.” Experts from NACS whether we will see a 70 percent of consumers told us that “We are locally owned and the Oil Price Informa- long or short winter is and operated.” tion Service (OPIS) considered more fun that they consider price the most important “We are a small answered more than a factual, a colder winter factor when choosing where to fuel up, business.” dozen common consumer could increase heating oil and 26 percent will drive 10 minutes out “The facts about the questions, now available demand and complicate of their way just to save 3 cents per gal- ‘price-gouger’ laws at NACS Online via short existing challenges lon — a time, energy and money waster. are destructive to videos at NACS TV. associated with the And nearly 4 in 10 customers said that small businesses.” The searchable map seasonal transitional to they would pay cash to save as little as 1 allows users to examine summer-blend fuel. critical market conditions In addition, the first cent a gallon. These are all retailer related to their particular week of February So, what are retailers doing to man- answers to the last question on the Balvor/ state. “When events like traditionally marks the age this price sensitivity? The Balvor/ NACS Motor Fuels hurricanes or refinery beginning of the spring NACS survey found that one in five re- Retailer Survey: “What do breakdowns occur in one transition to summer- tailers offers some sort of discount pro- you wish customers knew region, there is a ripple blend fuels for the gram, but cautiously, and with good about your business?” effect throughout the petroleum industry. This reason. Nearly all retailers say that dis- On February 2, NACS rest of the country,” said transition to producing NACS Vice President of more than a dozen count programs invariably lead to mar- released its 9th annual Government Relations summer-specific fuels gin losses. While some retailers believe online gas price kit (nacsonline.com/ John Eichberger. “Where adds complexity to the that a discount provides a competitive gaskit2010) to address fuel is produced and how system that typically leads advantage, most are likely to offer a pro- common consumer it is distributed has a to seasonal price varia- gram because of the competitive disad- questions — and provide significant influence on tions. Over the past vantage they would have without it. answers — about the U.S. the price the consumer decade, gas prices have “The results reinforce what most fuel petroleum market. ultimately pays.” increased an average of 55 NACS traditionally cents between the first retailers already know: This business is This year, two new elements gave unique releases its annual gas week of February and insight into the world of price kit on February 2 to their seasonal peak, which gasoline retailing: a coincide with two is typically mid May. (In Do you currently events: Groundhog Day 2009, gas prices rose 80 searchable map provid- and the beginning of the cents between February 2 offer discounts ing key state-by-state metrics related to motor seasonal transition to and the seasonal peak on on fuel? fuels and video respons- summer-blend fuels. June 22.) es to consumers’ ques- While Punxsutawney NACS has shared the kit with the hundreds of Yes: 18% national reporters who The 9th annual online gas price kit can be found at have contacted us to nacsonline.com/gaskit2010. discuss motor fuels issues, as well as with key members of Con- gress and other policy- No: 82% makers. You can reach out to your own local media or customers by using the materials in the kit, or provide a link to the kit on your Web site. (percentages rounding to nearest whole number) 36 nacsonline.com March 2010
  • 4. very sensitive to market forces,” said Bal- Retailers who “strongly agree” vor Managing Partner David Bishop. “Offering fuel discounts only provides a temporary competitive advantage, be- cause the competition will likely match 84% 44% 23% 20% Giving up some Fuel discounts We offer Fuel discounts your offer to maintain competitiveness.” margin with your are becoming a fuels discounts provide a fuel discount cost of doing because our competitive To put it another way, the first to mar- will keep you business competitors do advantage ket will not be the last to market since competitive every other retailer eventually jumps in. Because the first to market is quickly matched, the discount ultimately be- comes another cost of doing business as Excluding gas price, what attracts customers? a fuel retailer. (Retailers who “strongly agree”) The results clearly show how market dynamics work: Less than 4 percent of operations Products Branding the retailers responding said they of- fered their own fuels discount when none of their competitors had one. How- ever, the percentage of retailers with 92% Friendly employees 46% Hot coffee program 25% Fuel brand fuel discount programs jumped to 40 74% 38% 23% percent when half of the competitors offered a discount, and reached 100 per- cent when all of their competitors of- Well-lit exterior Tobacco prices Store brand fered a discount program. InsIght 2: How you sell is more criti- 75% Clean store/bathrooms 33% Fresh foods 13% Fuel rewards/discounts cal than what you sell. Consumers were very clear in stating their preferences about stores in 2009’s NACS Consumer Fuels Report. While gas prices were deemed critical, equally What would most Who do you consider so was operations excellence. Consum- likely make you go your competition? ers said that your stores needed to be inside the store clean and well lit, with clean restroom after buying gas? Stores on immediate block/corner, same Stores on immediate facilities. They were much less interested side: 3% block/corner: 18% in what you actually sold. 5% Retailers agree. Operations-related Stores excellence is considered far more im- within a Store is clean and well lit half mile: portant than the brand. 12% “These results underscore the criti- Stores cal need to effectively execute the fun- damentals every day,” said Bishop. “Leading convenience retailers know 18% Restroom facilities available more than 1 mile away: Stores 43% that getting it right in these areas helps within (Source: 2009 nacS consumer Fuels Report) 1 mile: to drive improvements in other areas, 37% such as the product offering. The strength of their brands — especially the store — builds over time based on their March 2010 nacS Magazine 37
  • 5. success with the first two areas.” Furthermore, operations excellence What fuels will is particularly important because retail- you be selling ers also believe their competition is not in 10 years? coming from the immediate corner. (Retailers saying More than 80 percent of retailers be- “extremely likely” or lieve that their competition comes from “somewhat likely”) stores at least one half a mile away. “Competition for the consumer’s dollar doesn’t stop with getting them 71% High-blend ethanol Estimated conversion rate, fuel to in-store to the pump,” said Bishop. Nearly four in 10 retailers (38 percent) said that customers: they are going to focus on highlighting (responses grouped, more in-store price promotions at the 68% Biodiesel open-ended question) pump to help drive customer traffic into the store. 70-79%: 80% or higher: 20% or less: 4 percent 4 percent 4 percent InsIght 3: 41% Electric charge/ Retailers are looking at a future without liquid battery swap 21-39%: fuel — but still consider it 60-69%: 11 percent essential today. 12 percent Convenience retailers, who today sell 34% Compressed 50-59%: 30-39%: approximately 80 percent of the motor fuels purchased in the United States, natural gas 16 percent 25 percent are keeping an eye on a future beyond petroleum. 22% Retailers think that electric charge/ 40-49%: battery swap will be the biggest change 25 percent Hydrogen in fueling a decade from now, and thank- fully, that belief seems to match the 9% change in green car technologies. At the January 2010 Washington Auto Show, Biobutanol electric vehicle technology was at the forefront, a sea change from last year when electric vehicles vied with hydro- gen, compressed natural gas and pro- pane in a much smaller space. The 2010 auto show featured the newest collec- How big a threat to your fueling business are...? tion of alternative-fuel vehicles ever (Retailers saying “significant” or “very significant”) displayed — 65,000 square feet, 13 times larger than last year’s 5,000-square-foot 77% 66% 65% 37% 14% alternative vehicle pavilion. Other Non-traditional Regulations Supply Alternative That said, retailers don’t consider convenience fueling outlets challenges fuel vehicles electric vehicles one of their biggest stores challenges today — in fact, only one in seven believed that alternative (or flex) fuels vehicles are a significant threat to their operations. Competition — wheth- (percentages rounding to nearest whole number) er from other convenience stores or non- traditional fuel outlets — tops the list as 38 nacsonline.com March 2010
  • 6. pricing tactics continue to evolve, which have been speaking on behalf of other president of The Parker Companies in ultimately influences how to drive incre- retailers who share similar thoughts. Savannah, Georgia. “But the underpin- mental business inside the store. More than three-quarters of retailers ning to everything is the general mood Much more emphasis will be placed are optimistic about the future outlook of our industry and our customers, and on promotions and foodservice in 2010, of their company — nearly three times this optimism can go a long way in over- according to retailers. The Balvor/ more than that of the overall economy. coming our challenges.” NACS survey found that 85 percent of This reveals, like Durling, that conve- “The big message to me from these respondents feel they will offer more in- nience retailers do not believe they have results is that you better be good at store promotions and 80 percent say to participate in recessions. something if you expect to continue to they will strengthen their foodservice Not one retailer felt that the compa- compete at the highest level,” said offers. In comparison, 66 percent of the ny’s prospects were “extremely pessi- Parker. “And you better focus on the in- retailers are focusing on optimizing the mistic,” compared to 6 percent who felt side of the box, and you need to really tobacco category this year. that way about the U.S. economy. understand where you are making your “Given the economic times, it’s not “The reality is that our industry is money.” surprising that value-driven strategies challenged,” through increasing com- are increasing,” said Bishop. “Price pro- petition, the commoditization of fuels Contact Jeff Lenard at jlenard@ motions — whether they are two-for and the continuing onslaught of new nacsonline.com or (703) 518-4272 deals, temporary reductions or a multi- regulations and taxes, said NACS Vice with questions or comments on how pack offer — are a well-documented way Chairman of Research Greg Parker, NACS can improve this resource. to drive short-term results. However, an increasing number of retailers are now investing resources into foodservice — a How do you feel about your longer-term strategy that can have a sig- prospects this year for…? nificant return for the business, if exe- cuted effectively.” Your c-store U.S. Retailers also are putting a greater company industry economy focus on increasing their conversion rates between fuel and in-store custom- ers. Whichever is the case, the challenge 25% Extremely 7% Extremely 2% Extremely optimistic optimistic optimistic is two-fold: getting consumers to the lot 53% 60% 29% to buy fuel and moving a greater per- centage of all site traffic into the store. Interestingly, some retailers are looking Somewhat Somewhat Somewhat at how they can drive more store traffic optimistic optimistic optimistic to the pump, as many loyal customers frequent some stores many times a week if not a couple of times each day. The mean conversion rate was 42 How do you feel about your percent among all responses, but when prospects this year for…? weighting for store size, the conversion rate improved to 44 percent. In-store merchandise Foodservice Motor fuels InsIght 4: The industry’s positives make retailers optimistic. 21% Extremely 26% Extremely 12% Extremely optimistic optimistic optimistic “We don’t participate in recessions,” 51% 39% 45% said Dean Durling, president and CEO of Quick Chek Corp., during the “A Tale of Two Retailers” panel discussion at Somewhat Somewhat Somewhat last year’s NACS Show. He was speaking optimistic optimistic optimistic about his company’s future, but may March 2010 nacS Magazine 39

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