by John Keller | Dec 6, 2013 | Fuel Pricing Strategy, Industry News, Retail Fuel Margins
The OPIS report today revealed that average retail fuel margins across the US jumped $0.081 per gallon this week, nearly restoring the fuel margin losses suffered since November 15. The average retail fuel margin across the US now stands at $0.210 per gallon. The year to date average is now $0.190 per gallon and the Q4 calendar average is $0.197 per gallon.
The jump this week means average retail fuel margins are now back above the 2012 level for same day last year, when average retail fuel margins stood at $0.198 per gallon. Last year, these weeks in December saw a retail fuel margin increase to $0.24 per gallon.
National news reports say oil prices are decreasing due to a glut in the US Gulf Coast. That may result in lower wholesale costs, and more opportunities for increased retail fuel margins in the coming weeks.
by John Keller | Nov 18, 2013 | Customer News, Fuel Price Optimization, Fuel Pricing Strategy, Fuel Pricing Technology, Fuel Software, Retail Fuel Margins
In the latest financial report from CST Brands, for the fiscal quarter ending September 30, 2013, there is an interesting note about how the company has shifted its fuel pricing strategy since the spin-off from Valero.
On page 37 of the report, there is a paragraph under the title “Motor Fuel Strategy”:
“Prior to the separation and distribution, our business existed as an outlet for our former parent’s products and the focus was on maximizing consolidated parent company profitability. Occasionally, we priced motor fuel with the overall objective of increasing motor fuel gallons sold with less emphasis on retail motor fuel gross margin. This resulted in a higher profit generated by our former parent’s refining segment, which was beneficial to their consolidated earnings performance. As a separate company, we generally manage our motor fuel pricing to maximize motor fuel gross margin. This strategy, from time to time, may result in different motor fuel gallons sold from historical levels as a result of our being separated from our former parent company.”
The change in the CST Brands motor fuel strategy is evident in these numbers:
Fuel volumes, in gallons per site per day: 5,003 in Q3 2013 vs. 5,131 in Q3 2012
Fuel margins, in cents per gallon before credit card fees: $0.20 in Q3 2013 vs. $0.13 in Q3 2012
Unlike with other c-store chains which announce changes in fuel pricing strategies and then deliver results that conflict with their goals, CST Brands delivered results completely in line with their new mission as a new company.
From a fuel price management perspective, corporate fuel strategies will change in emphasis from time to time. CST Brands has been successfully using PriceAdvantage as their exclusive fuel pricing software for all their company owned stores since 2012, first under the Valero parent which had one retail fuel objective focused on volumes, now as their own CST Brands entity with the new fuel objective focused on price and margin optimization.
As one of our customers told me after I congratulated him on the strong quarterly results of his company, “A great product yields great results.”
Do you have the fuel pricing software that allows you to deliver great results no matter what corporate objective, like CST Brands does?
by John Keller | Nov 14, 2013 | Fuel Price Management Solutions, Fuel Price Optimization, Fuel Pricing Software, Fuel Pricing Strategy, Fuel Pricing Technology, Fuel Software, Retail Fuel Margins
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.
by John Keller | Nov 8, 2013 | Fuel Price Management Solutions, Fuel Price Optimization, Fuel Pricing Software, Fuel Pricing Strategy, Industry News, PriceAdvantage, Retail Fuel Margins
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.
by John Keller | Nov 5, 2013 | Customer News, Fuel Price Optimization, Fuel Pricing Strategy, PriceAdvantage, Retail Fuel Margins
In the second quarterly financial report since spinning off from Valero, CST Brands reported a successful quarter of effectively implementing fuel pricing strategies that balanced fuel margins and fuel volumes. These strategies varied according to the market profile of the store and the corporate goals of that store, offering an ideal model of how to manage retail fuel pricing right.
Kim Bowers, CEO of CST Brands, explained that in this quarter CST brands used a fuel strategy that sacrificed fuel margins to build volume and traffic at their new stores (categorized as NTI, or New To Industry stores). CST Brands used an opposite fuel pricing strategy for their established stores to optimize margins, without the concern of potentially sacrificing fuel volumes. This is where the retail fuel pricing strategy gets even more interesting: this fuel margin optimization strategy at established stores did not seem to have an effect on in-store merchandise sales. That means CST Brands is earning more overall profits at these stores, which of course is the ultimate measure of success.
Kim Bowers said in the analyst call “At our new stores, we look at balance, pushing volume from time to time to generate traffic. For our legacy stores, we have to strike a balance between margin and volume. We need both. At those stores, we’re more focused on that optimal balance. It’s a corner-by corner-analysis.”
Under the Valero name, CST Brands selected PriceAdvantage as their sole retail fuel pricing software for all their stores in 2011. They completed the full implementation in 2012. The PriceAdvantage implementation is a complete closed loop process that includes OPIS Radius Reports for competitor surveys and competitive analysis, PDI volume and cost information for performance analysis, PriceAdvantage Optimization for retail pricing guidance, VeriFone POS and Skyline electronic price signs for seamless price change execution, and retail fuel price publishing to the web via GasBuddy OpenStore.
The PriceAdvantage team is proud to have CST Brands as a strong partner and customer and to share in our mutual success.
by John Keller | Oct 22, 2013 | Fuel Price Management Solutions, Fuel Pricing Strategy, Industry News
Colorado Governor John Hickenlooper and Oklahoma Governor Mary Fallin publicly thanked General Motors for bringing to market a 2014 Chevy Impala bi-fuel model that will operate on both CNG and gasoline.
Last year 15 governors solicited auto manufacturers for CNG vehicles as an effort to reduce dependence on foreign oil, protect the environment, and save money on state fleet costs. “By transitioning state fleets to CNG cars, Oklahoma taxpayers stand to save thousands of dollars per vehicle on fuel costs”, said Governor Fallin.
The 15 states involved in last year’s CNG vehicle solicitation now have more than 17,000 mid- and full-sized sedans in their fleets. The new bi-fuel Chevrolet Impala will offer 150 miles of natural gas range while providing full gasoline capability for an additional long distance range.
There is no question that CNG is poised for growth in the fuels US market. When and where to introduce CNG into your fuels management strategy requires close monitoring of your markets. The c-store offering CNG in the right markets will benefit from higher retail margins for this new product.
