BONUS CONTENT: Gasoline Still an Attractive C-store Profit Center
NATIONAL REPORT — With fluctuating fuel prices and competitors like Costco and other big-box stores offering lower prices on gasoline, convenience stores are focusing on growing other profit centers to beef up their bottom lines. Some are even opening new stores that do not offer gasoline, including Sheetz Inc., QuikTrip Corp. and Kwik Trip Inc.
But gasoline is still an important piece of the c-store landscape, according to industry experts.
"Customers need gasoline and they need it each and every week," Mark Whitehead, first vice chairman of the Petroleum Marketers Association of America (PMAA), told CSNews Online.
For years, big-box stores, grocery stores and other industries have been adding gasoline sales to their stores, and while the trend ebbs and flows, it shows the importance of gasoline, he said. It is important as a traffic driver, an added profit center, and a way to offer customers something they all need, Whitehead explained.
"Big-box stores made a strong move into [gasoline] in the early mid-90’s and then backed off, and even Home Depot tried for a while," he said. "It comes and goes, but it’s enticing for companies to at least take a look because in the United States, the majority of adults drive and have a fixed schedule where they will need to buy gas somewhere."
There are also c-store companies that did not previously offer gas, but are now in the business. QuickChek Corp., based in Whitehouse Station, N.J., and operating more than 140 stores is one example of this.
It helps that refineries are offering retailers great incentives to get into the industry.
"The U.S. gasoline industry had more gasoline production from refineries than demand," noted Donald Strenk, president of Strenk Management Consulting LLC, based in California. "Consequently it’s very important for refiners who produce gasoline to have a constant domestic outlets for their fuel because the alternative is to cut back on production or export to different markets and get a lower rate."
Retailers with the real estate to consistently market a good volume of gasoline are very valuable to refiners and suppliers, Strenk said. Hence, refiners continually have to pay more in incentives and bonuses to get retailers to contract with them for the supply.
"Refiners and suppliers are looking to lock in contracts with retailers for 10 years or more, and are willing to pay dearly for them," he explained. "So, it’s in the retailer’s interest to be able to move gasoline for these refiners."
For an established store with the space, the investment in tanks and pumps are the main cost. Labor doesn’t really see any impact unless in New Jersey or Oregon where customers cannot pump their own gas by law, according to Strenk.
Editor’s note: Check out the November issue of Convenience Store News for our full report on the rise of fuel-free convenience stores. A digital edition of the issue can be accessed by clicking here.