With all the volatility surrounding the fuel business, a more effective strategy may be found in focusing on in-store volume.
Any rookie baseball player knows you can’t win if you don’t score and that you can’t score if you don’t get on base. In business, this veteran player feels strongly that you can’t win if you don’t keep your base—your critical customer base.
All over this country—indeed the world—we who are in the convenience store and petroleum business are facing unprecedented challenges. How we handle those challenges will determine whether or not we get to stay in the game, an absolute must if you plan on winning.
While I have never worked for a major oil company or one of the well-known independents, I am nonetheless a huge proponent of a “protect your fuel volume at all costs” theory. My thinking until recently was that fuel margins come and go, and if you stick to your game plan through good times and bad—for example, staying even with the cheapest retailer or posting 1 to 2 cents above—you could keep your fuel volume and likely end up with more fuel margin dollars. The theory is that retained volume would pay big dividends for you during good margin times.
While I have not at all changed my mind on the proper course to pursue, consistently challenged fuel margins have impacted the upside of this theory, while at the same time making the protection of fuel volumes more critical than ever.
What we are left with are the well-known, but hard-to-face choices of getting paid now or getting paid later. The easy choice is trying to “squeeze” a little extra fuel margin now and hope it continues until stronger margins return. The cost of this method is, most assuredly, slowly, but steadily eroding fuel and in-store volumes that you fought to maintain over the years.
Give and Take
My reasoning is that eventually this method has you reaching a point of no return. I’ve seen it so many times. The alternative I recommend is to take only the fuel margin that the market allows (a big ouch for many of you), hold your fuel volume and fine tune your inside offering to the tastes of the demographics surrounding each store.
There is much upside to this tactic. While enjoying increased inside sales and the profitability that goes along with it, you will automatically attract customers from those who choose the higher fuel margin strategy. What you need to remember is that for every 1,000 gallons of fuel volume you lose, there will be some resulting loss in inside business. The better the convenience store operation is, the less the loss will be. But it’s still a loss nonetheless.
Certainly there are no guarantees in business or in life, but I have found that customers are much more willing to overlook you charging 10 to 20 cents more on juice, water, candy, coffee, fountain and even tobacco than they are willing to overlook a failure to keep pump prices competitive on gasoline and diesel.
And here’s one more thing I’ve learned over the years: The cleaner and friendlier you keep your stores, the more customers will be willing to overlook slightly increased merchandise prices. I know that sounds obvious, but marketers constantly need to be reminded that no matter how well their corporate plans are laid out for marketing, merchandising and operating convenience stores, they need to make sure employees are properly executing the strategy. All it takes is for a couple of employees to drop the ball and the customers will be seeking out the competition.
Send a clear-cut message to your team that you’re in the game to win, that you’re the team manager and that you fully expect them to come ready to execute your game plan each day. You really need to work hard and smart and always keep your eye on the ball to be a member of a winning team.
Jim Callahan has more than 40 years experience as a convenience store and petroleum marketer. His Convenience Store Solutions blog appears regularly on CSDecisions.com. He can be reached at (678) 485-4773 or via e-mail at [email protected].