Walmart Rolls Back Fuel Prices
Walmart wants consumers to shop in its stores more often so it offers cheap gas at many locations. It wants consumers to use its reloadable Walmart gift cards, MoneyCards or a company branded Discover credit card so it is now offering a perk for those who use the cards to buy gas.
As of yesterday, Walmart is taking 10 cents a gallon off of gas purchases at locations in 18 states when consumers use one of its cards. The offer is available through Sept. 30.
"Our customers have told us that high gas prices are a top budget concern, nearly as large an expense to their households as food and groceries," said Stephen Quinn, chief marketing officer for Walmart, in a press release. "We listen to our customers and because we know they are feeling squeezed by gas prices, we’re implementing this gas rollback to help them save, especially during high travel summer months."
Walmart believes its program has an advantage over various fuel perks offered elsewhere.
"It’s important to us that we extend this offer to everyone, not just Walmart customers shopping in our stores, without requiring any other type of purchase," said Mr. Quinn. "Our goal is to make it easy for everyone to save and live better, and we think this gas program is leading in the market because it doesn’t require any additional purchase, loyalty card or other restrictions."
One shopper, Wanda Keys of Beaumont, TX, told the Beaumont Enterprise, "We always get gas at Walmart because of the gift card. Before the 10-cent deal, we were already getting three cents off."
Discussion Questions
Discussion Questions: Will Walmart’s 10-cents off gas deal drive a significant increase in the use of its various cards? How much of an effect will it have on the company’s business at the pumps and in its stores?
Fuel-as-bait is one reason why Sam’s Club has performed so well. Fueling stations drive customers’ first value impressions, so pulling that strategy over to Walmart makes complete sense. In general, retailers are doing a better job of connecting satellite businesses to the store and they are once again leveraging outside real estate to lure shoppers into the store (thus the return of the parking lot garden center). Connect the dots!
It works at Costco, where there are almost always lines to buy gas. Why shouldn’t it work for Walmart? Consumers are looking for value, and if it’s easy to get to a Walmart with a gas station, they will. Not only will the discount drive use of the credit card at the WM pumps, it will get those folks into the stores more frequently.
Why wouldn’t this work? I see people line up down the block with their cars to save 10 cents on gas all the time. At the same time, it continues to reinforce Walmart’s image as a price leader. Plus, once you have the customer in your parking lot, it’s a lot easier to get them to come into your store. So, they’ll likely benefit from a boost in store traffic as well.
Hmmm … maybe I should put a gas pump outside my office?
As noted, gas prices have had a detrimental impact on consumer spending across the board, with particular impact on grocery shopping. Any efforts that lessen this impact that do not have a negative effect on profitability should be considered.
In addition, such actions reinforce Walmart’s positioning of helping everyone to save and live better. Plus, look at the positive public relations that this campaign has generated with zero advertising dollars spent.
Sure it’s a good idea. But Walmart is relatively late to this game. Costco has been offering holders of their Executive Member AMEX card 3% back on ANY gas purchase for quite a while. And that is now our “go-to” card for fuel since Shell and Citicard decided their 5% cash back rewards program for Shell gas purchases only “needed to be modified to fit today’s customer needs…” (read: essentially eliminated). A polite inquiry to someone in the know at Shell got to the real heart of the matter. Holders of the special card tended to only use it for Shell gas purchases and not as their “go-to” credit card. They also tended to pay the balance in full each month. Neither a good thing for the issuing financial institution.
Rising gas prices are causing “% cash back” offers to go the way of the dodo bird as retailers and card issuers go to the more predictable “cents per gallon” formula. And tying the fuel reward to other in-store purchases will also become more common as retailers try to get some return on these cards.
Gas is a non-emotional purchase–except for price. As gas has become more of a commodity in people minds, price has been an growing factor in the selection of a place to buy it. However, it is also a convenience good–it is something that people generally buy on their way to someplace else. The typical consumer has three places that they likely buy fuel–on the way to work, on the way home and on weekends. I doubt if people will go too far out of their way but the perception halo for Walmart will be very positive.
As one of the articles indicates, the typical savings for a customer might be $8 per month or an increased savings of about $5.60 above what Walmart offered previously. Is this enough to change a customers gas purchase habits? Perhaps. What it will likely do is ensure that Walmart gets increased share of the tank of its existing customers.
This strategy should pay off very effectively for Walmart, both in terms of added shopping experiences and promotional good will. Walmart is demonstrating that they are listening to the complete consumer population–their own customers, as well as those they would like to invite into the store.
The BIGresearch May, 2011 Consumer Intentions & Actions (CIA) Survey asks the consumer, “How are fluctuating Gas Prices impacting your spending?” The responses, when compared to May, 2010 data, show that the consumer is holding back spend. For instance, Spending less on Clothing (35.2% in ’11 vs. 27.8% in ’10), Spending less on Groceries (24.9% in ’11 vs. 18.3% in ’10), Driving less often (51.7% in ’11 vs. 37.3% in ’10), Shop closer to home (43.7% in ’11 vs. 37.7% in ’10), and Taking fewer shopping trips (47.2% in ’11 vs. 38.4% in ’10).
The analytics provide a good deal of insight, but those insights without action are just entertainment. The analytics are there, and Walmart is listening, and then taking ACTION. Smart move on their part.
Hey, wait a minute! I need gas; but I don’t have any of the cards to get the discount? Guess I have to go to the local station that is at least ten miles closer than the nearest Walmart selling gas and pay $0.10 more. Now that I think of it that way, I realize I am saving money doing that.
The answer to this question is ALL about same-store sales–ALL about same-store sales. This promotion alone could turn the tide of their consecutive quarters of decline. It’s a huge weapon that hasn’t been tapped to its potential by Walmart. Their previous 3 cent program was likely stemming the tide of even lower same-store sales results.
This is HUGE and will have HUGE results.
Anyone in the industry that understands fuel knows that consumers will cross the street for a penny. There is very little loyalty and the business is all about cents per gallon and being one cent below your competitor.
With this promotion Walmart only has to have seemingly competitive street price and deliver its savings to the knowing consumer via the card.
Based on a rough count of 800-900 participating stations nationally, their impact to the market is substantial. Their fuel sales could increase easily as much as 20% based on ten cents and their store sales as a result could rebound 3-8%.
This is absolutely the most significant announcement by Walmart in a very long time. It’s a weapon that they have under utilized at 3 cents. It’s a weapon that they will find out quickly that will have as significant an impact as anything they’ve done to drive sales, loyalty, increased same-store sales and will have little impact on margins. It-s done without the rest of the non-connected stations having an answer. You will soon see them utilizing it at even higher values up to $1.00 or more per gallon for short promotions from time to time once they realize what the dime is going to do to turn them around.
They have likely stopped the bleeding of same-store sales and turned them into an increase in one move. It’s totally surprising that they haven’t unleashed this weapon sooner. They’ve had it all along and have been wasting it by not using it.
I would be nice if they just lowered the price 10 cents without the hassle of buying a gift card. But since some gift card dollars never get used, etc., they have to make up for the discount somewhere. I’m sure it will help sales some but when everyone has a fuel program, it could be a lateral move. My credit card gives me a 5% cash rebate so I’m getting about 17 cents off per gallon. So why would I bother buying Walmart gift cards?
Having looked at many gas pricing analyses for many retailers over 20 years, I can guarantee you that the answer is yes. Consumers would bark like a dog while standing on their head for 10 cents off at the pump. So yeah, they’ll use a different card.
Yes. This is clearly a price sensitive product, and consumers will drive to save the money for their gas (and get these cards). This will drive more “Walmart” purchases from the card purchases as well as just having people at the Walmart, will drive more incremental store visits. Great idea, Walmart!
Thanks, Wanda Keys, but I always get three cents off per gallon of gas at Safeway until I reach a $50 purchase threshold on approved items. Then I get ten cents off. Yes, it involves a Safeway frequent shopper card, but what’s the best deal?: Safeway’s nation-wide offer year-round or Walmart’s 18-state offer until the end of September? This is a non-event. Perhaps there’s no Safeway petroleum fill-em-up in Beaumont, TX.
Offering 10 cents off per gallon is another way to reinforce Walmart’s price image. And their timing is right. However, they do compete with a growing number of offers at other chains. Costco has already been mentioned. Giant and Stop & Shop offer up to 50 cents per gallon at all Shell stations based on store purchases. It, too, is a winner all the way around, for customers and store sales.
I have a credit card that gives me a 3% rebate on gas anywhere. So at $3.50 that is 10.5 cents. Why bother with the Walmart program?