beverage aisle

Pricey Fuel, Cheap Excuses

  • fuel pricing
    February 14, 2019

    Pricey Fuel, Cheap Excuses

    The price of fuel has dropped from its all time highs of just a few weeks ago, but it has not reached the level that the news is talking about as cheap gas. In fact, just the opposite is true. The news continues to report that fuel will again approach historic levels by this summer.

    The media also reported on the impact that the higher fuel prices had on various industries including retail. Several c-store retailers immediately began blaming the cost of fuel for their declining sales (current and future). It makes for an easy out; fuel cost went up and my sales went down, but is it true?

    Unfortunately for some of you the answer is yes.

    The real question is should your inside sales have gone down and, if so, by how much? A national survey organization reported that there was a decline in the purchase frequency for c-stores. However, before you state that is the reason your sales are down, it should be pointed out that this is a trend that has been going on for some time and the recent spike in fuel prices did not appear to have any significant impact on the rate of decline.

    The rate at which fuel customers are inside c-store customers is around 25%. That is, on the average only 1 in 4 times does a customer who is buying gas make an inside purchase during the same buying occasion. Many c-store customers shop the store far more times a month than they buy fuel. This fact would certainly indicate that a decline in total site purchase occasions would negatively impact sales.

    The real issue is how much did your sales go down and why? If they actually went down (after adjusting for seasonality) then the question is did yours go down more than your competitor’s? When we get asked to conduct an Operational Assessment of a business we can usually determine the extent of any negative event on our client by looking at his business versus his competitor’s. How? By looking at how they operate.

    The better the operation (in comparison to its competitors), the smaller the impact of any negative event. Customers vote with their wallets. You win the election by beating the other c-stores. It’s that simple.

    You beat them by having a more attractive store (if you don’t have a bigger, better store, be cleaner); by having a friendlier store (if you can’t afford the staffing levels, make sure your people are friendlier); by providing a wider selection of key items (people change stores before they change their brand of cigarettes, beer, and in some cases soft drinks); and by having a better foodservice offer (if not a wider selection, then at least have a great coffee and fountain program).

    If the price of gas really hurt your inside sales, then treat it as a wake up call. Get going on improving your store, because if the forecasters are right we may never see fuel for less that $2.00 a gallon for any extended period of time in the future.