Big and Small Boxes Pumped Up for Gas Wars

Sep 04, 2002

The Wall Street Journal reports mass merchandisers and supermarkets account for 5.5% of retail gasoline sales nationally up from 3.9% at the beginning of the year. The research firm NPD Automotive Products Group and Energy Analysts International expect this share number to reach 15% by 2005 according to the same article.

Both independent and branded oil company stations are being affected as a growing number of stores owned by mass merchandisers, warehouse clubs and supermarkets begin pumping gasoline.

NPD reports that mass merchants and grocers rank second in gasoline sales in both the Dallas/Ft. Worth and Houston markets behind Exxon Mobil. These same outlets rank third in gasoline sales in Memphis and San Diego.

With price points often as much as 10 cents a gallon below branded gasoline sales, big box retailers have a significant upside potential. Seventy-five percent of consumers will switch retailers to save seven cents a gallon, according to John Eichberger, director of motor fuels for NACS (National Association of Convenience Stores).

Ralph Bombardiere, executive director, New York State Association of Service Stations and Repair Shops says dealers are responding with store remodels, additional services such as car washes and dry cleaning, as well as through increased food service offerings. Mr. Bombardiere says, “We just try to do a better job than they can.”

Moderator’s Comment: How can how can g/c-stores compete
with big box retailers that offer lower gasoline prices and are also conveniently
located? Are there any small box operators that have been successful in protecting
market share from this new competition?

The WSJ piece asserts that “Oil companies contend that
while some drivers will go miles to save a little money, most will pick a station
primarily because it is convenient.”

Supermarkets, warehouse clubs and mass merchandisers are
pretty much everywhere today. Collectively, this makes them a ubiquitous source
of gasoline for consumers, and the Wal-Marts, Costcos and Krogers of the world
are adding more gasoline pumps to their operations on a daily basis.

If NACS is correct and 75% of consumers will switch based
on a price differential of seven cents a gallon, then the oil company stores
and others selling unbranded gasoline have a lot to be concerned about. Special
gasoline blends and technology such as SpeedPass are all well and good, but
they will not be enough to fend off big box competition. [George
Anderson – Moderator

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