In 2021 and looking ahead into 2022 the small-to-medium fuel retail market is facing many challenges. Driven to action by unpredictable volumes, volatile oil prices and extreme market consolidation, retailers are looking at new ways to keep their businesses profitable.
Recent surveys (in particular one in Convenience Store News recently) show that these issues are front of mind for all retailers. Those who act will have a profitable business for years to come. Those who do nothing may not be here in five to ten years. It’s a harsh reality, but it’s one retailers may need to accept.
Smart retailers have already started fighting back. A popular choice is a CAPEX investment in creating store differentiation, offering superb food offers (ever had a fish taco at a gas station?), facilities and EV capabilities.
These are all great ways to match consumer demand and stay alongside- or ahead of- the market. However, they come at a cost and the smartest retailers have also started to optimize their fuel operations by making better pricing decisions, leading to an increase in profits.
Traditionally retailers have felt they need to follow or match the big players in the market, but this is a dying trend as more consumers seek location, convenience and experience in preference of saving a few cents on the gallon.
A NACS study from 2020 tells us that almost half of consumers don’t see fuel price as the dominating factor to where they fill up their tank. For perspective in 2015, 72% said they did.
This isn’t to say you should suddenly sit 10cpg above the big players, but retailers are putting strategies in place just by getting a better handle on margin that are showing 16% increases in profit.
When it comes to margin, it’s all about cost price. Traditionally, most retailers will use today’s replacement cost from their supplier or the rack to price all the fuel in their tanks and this is causing them to ignore previous deliveries that have come at different prices.
The impact of this is that you may think you can afford to follow a competitor when you can’t, or- conversely- you may not follow because you think you can’t afford it. As markets have moved more recently, the difference between the replacement cost number and the real cost of fuel in your tanks expands, leading to some surprises when month end accounts come in.
The takeaway here is to make sure you are at least considering your previous deliveries when pricing your fuel, but that to really optimize, taking control of your fuel margins is what is going to get you there.
35% increase in weekend volumes, 20% increase in premium grade profits and 30x ROI are three examples where EdgePetrol’s live and accurate data insight has helped retailers to compete in this market.
If you want to combat the market challenges and take on the ever-growing competition, get in touch for a free pricing consultation.
