- 08 Apr
Optimize fuel prices by focusing on “other” grades
The retail fuel price management game is one of balancing volumes and margins. As we watch the retail fuels volume market size shrink, or at best remain steady year over year, competition for that shrinking pie continues to intensify. If you’re not careful, the race for volume market share can be a race to the bottom for retail prices, and profits.
According to a report from the National Association of Convenience Stores, the average fuel retailer breakeven point is 12 cents per gallon, taking into consideration store operating expenses, amortization of equipment, inventory shrink, and credit card fees. So when we see the average Q1 retail fuel margins for 2013 are at $0.159 per gallon, that means fuel retailers are making very little net profit from fuel sales.
How do savvy retail fuel analysts optimize volumes and margins? By focusing on the margins of the commodities other than unleaded, like mid-grade, premium, and diesel. They analyze the strength of their product offering compared to the competition, and identify stores of opportunity where they may have exclusivity. They may discover “mid-grade stores” that can tap into that market because the competition doesn’t offer mid-grade. Or there may be “diesel stores” that have a superior offering because of pump layout and ease of access.
PriceAdvantage aids with this optimization and analysis by providing easy to use views and reports showing product volume sales, profits, margins, and competitor product offerings, by commodity. And in order to make sure you are optimizing the pricing spreads between commodities, PriceAdvantage offers a built-in cost report showing the replacement cost differential between commodities, listed by supplier.
As the fuel price management landscape continues to be more competitive, only fuel pricing software like PriceAdvantage provides the rich optimization analytics to make the best pricing decisions that lead to maximum profits.