by John Keller | Apr 8, 2013 | Fuel Price Management, Fuel Price Optimization, Fuel Pricing Strategy, Retail Fuel Margins
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.
by John Keller | Mar 29, 2013 | Fuel Pricing Strategy, Industry News
One of the most interesting trends we’re following on this site is the growth of natural gas as a viable product for c-stores to add to their fuels product portfolio. In December of 2012 we discussed when it may be time to add CNG to your fuels product line. And in January 2013 we reported on the independent fuel retailer IGS building a network of CNG fueling stations.
Now according to Reuters, ENN Group has announced plans to build a network of Liquified Natural Gas (LNG) stations across the US to target long-haul trucking companies. Almost half of the garbage trucks sold in the US last year run on Compressed Natural Gas (CNG), but the long-haul trucking market is significantly higher than that municipality market.
The typical LNG station costs $1m to build. Liquified Natural Gas stations cost less than CNG stations because LNG stations have the liquid fuel trucked in, and do not tap into natural gas lines.
The new stations are being built under the company BluLNG, a partnership created with the Salt Lake City company CH4 Energy Corp. The CH4 Energy Corp had already built one CNG and LNG station in Salt Lake City prior to the partnership, and now five stations are operating, with three more stations scheduled to be opened within the next few weeks.
Both Blu and Clean Energy (who already has 70 LNG stations) plan to build 50-60 new stations this year. Clean Energy has an arrangement with Pilot Flying J for these stations. Blu’s longterm strategy may be to build up to 500 stations, one source said. Shell has also said they are working toward an arrangement with TravelCenters of America, LLC to build natural gas stations at their truck stops.
Whether or not you choose to add natural gas to your fuels product portfolio, as the natural gas momentum continues to build, it will contribute to the overall shrinkage of the traditional petroleum market pie. And that makes it a trend that is too important to ignore.
by John Keller | Mar 22, 2013 | Fuel Price Management Solutions, Fuel Pricing Strategy, Industry News
The PriceAdvantage team would like to congratulate the GasBuddy OpenStore team on their announcement of E-Z Mart becoming a customer. E-Z Mart is the latest c-store chain to recognize the importance of social media in the fuel price management process.
The PriceAdvantage and OpenStore teams recognized the importance of integrating social media into fuel price management several years ago, and started working together in late 2010. It was then that we began developing an integration that allowed PriceAdvantage to post the latest fuel price changes to OpenStore, and then in turn to the GasBuddy sites. Rutter’s was our crucial partner as we built out to the requirements, and the initial implementation was completed by Rutter’s in 2012. In 2013 Parker’s completed their combined implementation as well. And PriceAdvantage customer Valero is also pushing fuel prices to GasBuddy.
More and more we’re seeing the marketing department saddling up with the fuel pricing team, as both groups are recognizing the importance of making sure customers see the most recent and accurate fuel prices on the map, using OpenStore to broadcast marketing promotions, all to drive more traffic and fuel volumes to the store.
by John Keller | Mar 18, 2013 | Fuel Price Management, Fuel Pricing Strategy, Fuel Pricing Technology
Advances in technology and fuel pricing software have made it much simpler for retail fuel managers to increase speed-with-the-street and react quickly to market changes; they need only take advantage of the myriad technology solutions available. The key to fuel pricing is the ability to make changes quickly. Any company which sees this and then enacts strategies to improve its on-site technology will see its business improve, along with customer satisfaction.
A PriceAdvantage customer, Kocolene Marketing, recently selected our fuel pricing software solution for implementation at all of its stores across Indiana and Kentucky. Automation of the fuel pricing process has given fuel managers the power to change prices, more often. This level of customization enables them to alter prices at stores directly from headquarters. This has transformed fuel operations for each of their stores, and lead to a new standard of internal pricing optimization.
Removing the store manager from the critical path doesn’t interrupt flow, it enhances it. With one click, those with access to up-to-the-minute data can alter prices and meet market conditions. Delays between fluctuations in the market and price changes are a thing of the past. Now managers can capitalize instantly on new conditions, and eliminate any and all execution delays. Technology has freed us from focusing on competitors for pricing data. Mobile access and advanced signage enable us to make decisions based on what’s going on halfway around the world, not just two blocks away anymore.
In fact, one of the more effective fuel pricing tactics today is a technology upgrade, especially in a region where the competition may be dragging its feet. Being the first to upgrade to a new system often creates a perception that your site is right out of the gate on any advances. Relying on outdated equipment to meet the customers’ needs is equivalent to leaving money on the table. Store-by-store protocols based on maintaining high margin-per-gallon won’t suffice to move the business forward. With modern fuel management services enhanced by top-of-the-line equipment, fuel managers can now isolate the connections between price changes and profitability. This lets them see how to shift their pricing strategy, along with enabling them to make changes the moment they wish to.
The function of any business is to make money, and driving revenue in the retail fuel business can often be a difficult game. Consumer behavior and environmental factors are shifting constantly, creating a volatile market where it can be difficult to get a solid foothold. Fortunately, technology is there to help. By reviewing their site’s existing equipment, identifying where upgrades can be made, and implementing new advances in fuel pricing software and technology, c-store retailers can be confident they’re remaining ahead of the curve.
by John Keller | Mar 12, 2013 | Fuel Price Management, Fuel Price Optimization, Fuel Pricing Strategy, Fuel Pricing Technology, Retail Fuel Margins
In their Short-Term Energy Outlook report released today, the US Energy Information Administration issued a revised lower forecast for US gasoline consumption over the next two years. The report includes predictions for US gasoline consumption across each quarter in 2013 and 2014, and in every quarter the revised forecast is .2% to .8% lower than the US EIA predictions from their previous Short-Term Energy Outlook report.
The US EIA reports that fuel volume totals for the years 2012, 2013 and 2014 will remain essentially unchanged, explaining that increased travel will be offset by increased fuel efficiency.
From a fuel price management perspective, the news is not as bad as it could be; while fuel volumes have been in a steady decline for the past eight years, at least total anticipated fuel volumes are not expected to decline over this year and next.
The fuel pricing strategy and fuel price optimization game intensifies each year as c-stores battle for an ever-shrinking fuel volume pie. PriceAdvantage fuel pricing software is the key to optimizing both volumes and margins in this battle.
by John Keller | Mar 11, 2013 | Fuel Pricing Strategy, Retail Fuel Margins
This week’s OPIS report showed a $0.097 per gallon jump in retail fuel margins across the US, the largest weekly fuel margin increase since October 2012. Retail fuel margin averages now stand at $0.261 per gallon. That’s almost a $0.16 per gallon increase in just two weeks.
Retail fuel margin averages for 2013 now stand at $0.144 per gallon. It looks like the calendar Q1 fuel margins for 2013 will recover from their abysmal start, and end up at the low end of annual averages.
