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Gasoline a Logical Extension of Wal-Mart's Reach

If Wal-Mart goes through with its plans to open as many as 1,000 Wal-Mart-branded gasoline stations at its stores nationwide it will find a receptive consumer, eager to save a few cents per gallon in the face of rising fuel prices.

A consumer study conducted in February by Leo J. Shapiro & Associates found that more than four out of 10 U.S. households said they would make most of their gasoline purchases at Wal-Mart if its stores sold gas. Of course, many Wal-Marts already sell gasoline - more than 800 Wal-Mart stores have gasoline pumps, most of them operated under a lease agreement with Arkansas-based Murphy Oil Corp. In addition, Tesoro Corp., San Antonio, and Sunoco, Philadelphia, also lease space from Wal-Mart for gas pumps under the Mirastar and Optima names, respectively.

But the recent announcement that the giant retailer would begin to open gas stations at its stores under the Wal-Mart brand raises the stakes significantly.

One oil industry newsletter estimated that there are approximately 1,000 Wal-Mart locations that have a parking lot large enough to accommodate gas pumps. Michael Bergdahl, an author, consultant and contributor to Smart Supplier, a VNU Web site that keeps tabs on Wal-Mart's activities for suppliers, cited a number of reasons why the world's largest retailer likes the gasoline business. “Wal-Mart has prime real estate and unrivaled buying power,” said Bergdahl, adding, “One of the most compelling reasons for Wal-Mart to enter the convenience store business may be the fact that the No. 2 retailer in the world, Carrefour, a major competitor to Wal-Mart's Supercenters internationally, is already in the convenience store business.”

The ability to underprice rivals by tying discounts on gasoline to product purchases in its stores also makes the business alluring to the Bentonville, Ark.-based retailer.

The survey also found that consumers are much less enthusiastic about Wal-Mart's potential expansion in a number of other new business ventures, such as banking services or insurance coverage. In February, Wal-Mart launched a new credit card, Wal-Mart Discover, as part of its plan to offer more money-saving financial products for customers with and without credit cards and checking accounts.

But, the Shapiro research cautions Wal-Mart against spreading its wings too wide. Consumers are not ready to blindly follow Wal-Mart into every new venture the retailer explores, according to telephone interviews conducted with a national sample of 450 households.
The study examined eight services that command a substantial share of consumer expenditures, including gasoline, health insurance, life insurance, dental service, air travel, banking services, car rental and credit. Although more than 85 percent of U.S. households have shopped at a Wal-Mart during the course of the year, relatively few expressed interest in the services.

Despite Wal-Mart's considerable role in cash forwarding and check cashing, only 11 percent of households said there is any chance that they would open an account with a Wal-Mart bank. Chances of buying Wal-Mart life insurance, health insurance or using a Wal-Mart dentist get similarly low ratings. Acceptance of a Wal-Mart rent-a-car or Wal-Mart charge card co-branded with MasterCard is below 25 percent.
Wal-Mart gas stations, it appears, were seen as a more logical extension of its retail stores than financial services.

(For more information on the Wal-Mart research, interested persons may contact George Rosenbaum, chairman, Leo J. Shapiro & Associates at [email protected] or call 312-321-8187.)

Don Longo is editorial director of the Retail Group of VNU Business Publications, including Convenience Store News, Progressive Grocer and six other retail trade titles. Longo is a recognized authority on Wal-Mart and has covered the retailer for almost 20 years.

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