Big Box Retailers Gaining in Canada's Fuel Market

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Big Box Retailers Gaining in Canada's Fuel Market

VANCOUVER, B.C. -- They own less than five per cent of consumer gasoline sales, but there's nothing humble about the way big box retailers are rewriting the rules in one of Canada's most cutthroat retail markets.

Whether it's a bulk goods outlet such as Costco, a Save-On Foods grocery or a Home Depot hardware store, the big box appetite for high-volume gasoline sales is a palpable threat to traditional big-name gasoline retailers and regional independents, reports the Vancouver Sun

Five years ago the big boxes owned 219 gas bars in Canada, according to Richard Doyle, vice-president with Kent Marketing Services Ltd. of London, Ontario. Today, the big boxes own a 4.2 percent market share and operate about 320 gas bars.

Doyle said some of those outlets are at Canadian Tire, which has been selling gas for so long that it's almost considered a traditional. But in Western Canada, Save-On, Safeway and Costco are following The Real Canadian Superstore into the retail gas market. Safeway has 17 outlets and plans 20 more, saying customers are asking for them.

Jim Pattison's Overwaitea Food Group is also making inroads, with gas bars at 25 grocery stores in British Columbia and Alberta, including Save-On Foods' locations in Port Coquitlam and Mission. Wal-Mart has added Murphy Oil gas stations to seven Alberta stores and concedes an interest in expanding this sideline into other Canadian markets.

The idea behind all of this is simple -- given a choice, nobody wants to make a single-destination trip to gas up the car. Incorporate a fill-up with the weekly grocery run or a trip to the hardware store, and you've saved a bit of time, and perhaps some money as well.

"They sell an enormous amount of product at sites they've already paid for, so their operating costs are lower," said Dane Baily, vice president of communications, for the Canadian Petroleum Products Institute.

Baily said big boxes have quashed conventional wisdom that location is the main determinant in gasoline sales. "You had to be on a major intersection, people going home or going to work in the morning, that kind of stuff, you wanted to have your sites on the right intersection, he said. "The big box stores have rewritten that because they've said listen, everyone comes to us. So they enhance their offerings by providing gasoline. They're well-installed, they're competitive, and they have an impact on every market they go into."

They're also moving into a market that has been in a prolonged contraction. Consolidations and closures have been prominent features of the Canadian gasoline market for 14 years -- in 1989 there were 22,000 service stations, now there are less than 13,000 -- and the pattern continues.