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Is there or isn’t there a correlation between fuel volumes, fuel price, and in-store sales?

When analyzing the overall profitability of a c-store, there’s a fundamental question that needs to be answered: do increased fuel volumes correlate to increased in-store sales and therefore overall store profits? Some would argue the answer is “of course – more customers to the forecourt obviously equates to more customers in the store, so there’s a direct correlation”.

But is that true 100% of the time? Our PriceAdvantage team spent some time with industry experts at the recent 2013 Outlook Leadership Conference in Scottsdale, Arizona and the insight they provided may be surprising. Some of the folks we talked to said you can always count on the same percentage of forecourt customers coming into the store, and you can always count on the same per-dollar transaction average in the store; so therefore increasing traffic to the forecourt will directly correlate to increased store profits.

But others told us that as you modify your fuel pricing strategy, the buying profile of the forecourt customer changes too, and the percentage of these forecourt customers shopping inside the store changes. Further, the nature of what purchases this new customer makes in the store also changes. In other words, changing a fuel pricing strategy may mean you can’t count on the same percentage of converting forecourt customers to in-store customers, and you can’t count on the same per-dollar transaction average in the store.

What’s the right answer? We believe that it’s not “either / or”,  it’s “both / and”: with some stores the customer buying profile is static and one you can count on to predict in-store profits, while with other stores the customer profile is more dynamic based on your fuel pricing strategy.

PriceAdvantage now allows you to select an unlimited number of product categories from an imported set of data from PDI, and run a report showing the correlation between retail fuel volumes and retail fuel prices with the selected data. That means you can see how fuel promotions impact in-store product category sales, along with the number of in-store transactions. You can even see how promotions of one in-store product category impact sales of another in-store product category, along with fuel volumes and fuel prices.

This type of rich analysis comes out of the box with PriceAdvantage and its integration with PDI, allowing fuel managers to optimize the entire business at the c-store, both at the forecourt and inside the store.

PriceAdvantage first to market with Margin Percentage report

In October 2013, PetrolPlaza recorded an interview with me to discuss the unveiling of the new PriceAdvantage “Margin Percentage” report. The full interview can be found here.

This new report allows retail fuel managers to view retail fuel margins as a percentage of fuel price. Traditionally retail fuel margins have always been measured in terms of cents per gallon, with a generalized definition of success as being $0.15 – $0.20 per gallon. The problem with this thinking is that this number was defined back when retail fuel prices were in the sub-$2.00 per gallon range. Now that retail fuel prices are at $3.00 levels and above, these same cents per gallon ranges represent a much lower percentage of the retail price. Compared to other c-store product category margins, these are a very low percentage of price indeed, and that can be quite alarming to marketing managers who are less familiar with the fuels business.

In fact, marketing managers are often perplexed when fuels managers express fuels margins in terms of cents per gallon. That’s where this new report provides a nice bridge between retail fuels groups and marketing. The traditional cents per gallon way of measuring fuels margins is not going away any time soon, so this report displays side by side margins as cents per gallon, and as percentage of price. Thus the Margin Percentage report acts as both a translator between two divisions of the company, and as a new perspective into profits.

The September issue of CSP magazine included an article titled “Stop Making Cents?“. It was this issue that introduced the idea to the PriceAdvantage team, and we’re proud to say that between the time when the article was released in September, and the NACS show in October, we were able to develop and demonstrate the Margin Percentage report in our NACS exhibit booth. Customers and prospects loved it, with the feedback being that this report will make it so much easier to communicate with Marketing departments, and to ultimately optimize store profits.

 

When natural disasters strike

Fifteen months ago I wrote an article about natural disasters and fuel price management because the city of our home office was experiencing terrible forest fires. Since then another major section of the Colorado Springs metropolitan area suffered a forest fire, even larger than the fire of 2012.

I write this blog article to revisit the topic because the state of Colorado is now going through some of the worst flooding in its history, with many properties devastated, and lives lost.

From a fuels price management perspective, these Colorado floods are a significant disruption to the business of fuels management. Roads are difficult to travel, making it a problem to deliver fuel loads, and difficult for customers to travel. Demand for fuels in affected areas will unquestionably be low and possibly next to nothing. Some stores may even have to close temporarily.

In the future when we refer back to these days, it’s critical that your fuel software has the ability to annotate the special circumstances surrounding these business disruptions. PriceAdvantage provides an easy interface to add notes to the volume graphs for each day when the disruption can be recorded for future reference. Then in comparison analysis views, it’s easy to recall the reason why there are such glaring anomalies in fuels volumes.

AAA says to expect higher fuel volumes this Labor Day

According to AAA, there will be a 4.3% increase in Americans driving 50 miles or more from home this Labor Day holiday. That means between Thursday and Monday we can expect to see more travelers than any year since the recession. The number of Americans driving 50 miles or more is expected to reach 29.2 million, up from 28 million last year.

From a fuel price management perspective, when comparing this year’s numbers to last year’s, it’s important to monitor fuel volumes compared to the same days of week last year, not same date, in order to make sure you are getting your share of the increased pie this weekend. Strategies may including sitting with slightly higher margins in order to make the most of the weekend, in the face of increased traffic. Or they may include going for volume to make up for lost opportunities earlier in the year.

The key takeaway is to be prepared with best-in-class fuel pricing software to make quick pricing adjustments as needed, in order to maximize the great opportunity this weekend provides. Oh, and on a personal note, it’s best to have access to this fuel pricing software insight from a mobile device so you can have some fun this weekend, too.

Congratulations to Parker’s for opening two new stores

The PriceAdvantage team would like to congratulate Parker’s on their grand opening of two new c-stores. These new stores bring the total Parker’s count to 32.

Parker’s rolled out PriceAdvantage with an integration to GasBuddy OpenStore, their VeriFone POS system, and Skyline electronic price signs in January of this year. Since then Parker’s has opened three new stores in just seven short months.

Greg Parker, CEO of Parker Companies said, “Parker’s stores strive to be recognized for quality products at competitive prices and now we can communicate our fuel prices faster and easier in a matter of minutes through PriceAdvantage and OpenStore, both at the store and online.”

Parker’s operates their PriceAdvantage system in the cloud, allowing them to allocate IT resources to other areas.

Turn pennies into millions with fuel pricing automation

Everybody’s out there looking for pennies: Fuel customers are using mobile apps and will make challenging left turns for the promise of saving just a few pennies on a fill-up. Amid this, fuel retailers look for ways to wring a few pennies of profit from the sale. It’s a game won or lost on small increments, and folks on both sides of the counter know that those pennies add up.

In the past few years, discovering the “sweet spot” that brings customers off the street and grows fuel sale volume and profit has become easier. OPIS- and PDI-integrated tools let everybody from single-store operators to chains with hundreds of locations quickly access real-time competitive data. With a click, they can know which stores or regions are underperforming. They can easily see where they’re making the most or least money and where their pricing is getting beat by competitors down the street or miles away.

Real-time insight into volume, margin, and gallon performance gives leaders the ammunition they need to formulate an agile pricing strategy—on a laptop, tablet, or smartphone. But that’s only half the battle. That price now has to go to every POS, pump, and sign in every store. And the longer it takes the more money you lose.

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