Grocers Gear Up to Wage Gas War

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Grocers Gear Up to Wage Gas War

With a tumultuous season in gas prices underway, convenience stores now have to compete with grocers looking to earn profits in the gas market with customer loyalty programs offering discounts on gas sales.

Grocers are taking the idea of "one stop shopping" to the next level, according to a report by Business First of Columbus. Take, for example, central Ohio, where Giant Eagle will open its ninth gas station in the area and GetGo fuel will open its 10th store. In addition, two Wal-Mart supercenters and eight Meijer Inc. stores offer gasoline sales.

Meijer spokeswoman Stacie Behler told Business First of Columbus, "Clearly, we do it for our customers, it's more of our one-stop-shopping concept."

This year one third of the members of the Food Marketing Institute in Washington D.C. indicated they sold gasoline, according to spokesman Bill Greer. Three years earlier, only 6 percent of members sold fuel.

But grocers thinking about selling gas have to maintain their standards in customer service and competitive pricing, according to Bob Gorland, vice president of supermarket consultant Matthew P. Casey & Associates. Otherwise consumers will pick one grocer with the best prices, and another with cheaper gas. "I've seen some situations where the supermarket sales are poor, but the gas sales have increased, sometimes tripling and quadrupling, but the store hasn't," he told Business First of Columbus.

Gorland believes supermarkets are using gas as a sales-building device. However, there are many pitfalls when opening a gas station at a supermarket location. "If there's a lot of fuel competition [nearby] or it's a low-traffic location, you could get into a price war," Gorland said. Also, gas sales might only be a break-even strategy, because of the cost of property and operation.

The increase in grocery store fueling is making convenience stores change the way they operate. Roger Dreyer, president of the Ohio Petroleum Marketers and Convenience Store Association told Business First of Columbus, "Discounts are all over the place, depending on your marketplace. If you're right next door to a Wal-Mart, [a customer will] probably be offered a better deal."