Going the Extra Mile Although total 2016 fuel sales at US convenience stores decreased 9.2%, or $549.9 billion, compared to $574.8 billion for 2015, the number of gallons sold per store increased 2.6% and fuel gross profits per store increased 1.6%. In its 2017 Business Forecast (January 2017 issue), Convenience Store News predicted the average price of a regular gallon of gas during 2017 would be $2.49, which would have resulted in American drivers spending a total of $52 billion more. By June 2017, however, the average gallon of regular gas was $2.35, the lowest price of any June since 2005. By Thanksgiving, the national average price had increased to $2.53, but then Christmas Day’s average price was $2.39.

Fuel Fill-up Facts As has been the case for a number of years, approximately 80% of all motor fuels are sold at convenience stores, or more than 123,000 locations, and 59% of those locations are single- store operations, or more than 70,000 stores. What often confuses consumers is many of these single-store operations sell a major brand of gasoline, with its logo prominently displayed. As of June 2016, however, just 1% of all convenience stores selling fuel were owned by a top-5 oil company. As of May 2016, another 14.5% of all motor fuel were sold at big-box grocery stores and mass merchandising stores, and their sales volumes were approximately twice that of traditional retailers.

Fuel’s Complexity at Convenience Stores A fuel paradox for convenience stores is as consumers pump more gallons of motor fuel, they typically spend more inside the store; however, motor fuel revenues decreased during 2016, as inside sales established a new record of $233 billion. Another fuel paradox is lower motor fuel prices decrease convenience stores’ sales and profits, but has also been the driver of recent record sales of new light-vehicles, especially trucks and SUVs; however, the newer models have much better gas mileage. The major transportation technology disruptions on the horizon – electric and autonomous vehicles, which will significantly decrease the demand for motor fuels – will have a significant effect on convenience stores as the primary motor fuel merchants.

Fueling Your Fuel Knowledge Base Taxes are one of three factors that affect the price of motor fuels. All stores must add 18.4- cent federal excise tax; however, there are also state excise taxes, which averaged 49.44 cents per gallon at the beginning of 2017. Fuel blend is the second factor. Typically, prices increase during the spring because refineries switch to summer blends, resulting in production disruption. In addition, some states, such as California, require special fuel blends for environmental regulations. The third major factor is margins. During 2015, convenience stores in the Northeast generated 36% of their profits from fuel while California stores generated 68%, primarily because food sales in the Northeast were much greater than in California.

Pump Habits The January 2017 motor fuel consumer survey from The Association for Convenience & Fuel Retailing (NACS) found the largest percentage of consumers, or 36%, purchased fuel during afternoon rush hour (3–7 pm), followed by 32% from 10 am to 3 pm. Similar 2017 research from Convenience Store News revealed during an average month, 49.7% of survey participants purchased motor fuel at a convenience store; followed by other, 33.3%; standalone gas station, 29.7%, and supermarket, 24.9%. Not surprising, price was the most important factor in both surveys: 61% in the NACS survey and a ranking of 1.9 in the Convenience Store News survey.

Advertising Strategies Because fuel pricing is so competitive, there is very little opportunity to advertise a better price, but convenience stores could differentiate themselves by highlighting their installation of new pump technologies that make it easier and quicker for consumers to purchase fuel. As the number of electric vehicles continues to increase, the convenience stores that are the first to add charging stations have a competitive advantage that could be the basis of advertising messages in various media. Suggest that convenience stores test the offer of a per-cents discount when customers pay with a debit card and/or cash, as the table on page 3 of the Profiler clearly shows this would attract consumers.

New Media Strategies Create and post a series of videos, featuring store employees, explaining how fuel prices are determined, the taxes applied, fuel blends and other “insider information” that would improve consumers’ understanding of the retail fuel industry. Although mobile commerce/marketing was #9 of the biggest impacts on convenience stores’ sales and profitability during 2017, now is the time for store operators to learn how to use mobile as a primary marketing channel to appeal to Millennials and Gen Z members. One of the mobile marketing tools that should be at the top of c-store operators’ list is creating and promoting a loyalty program app, since this was the #1 type of discount that consumers used during 2017.