by John Keller | Jan 11, 2013 | Retail Fuel Margins
According to this week’s OPIS report, US national retail fuel margins reversed their two week trend and increased by $0.02 per gallon from last week. The national average retail fuel margin is now $0.146 per gallon.
So far the average 2013 retail fuel margin is $0.136 per gallon. According to the National Association of Convenience Stores, typical fuel margins are in the range of $0.18 per gallon over an annual period, so the c-store industry is bumping along the bottom of the fuel margin sea as we start off the new year.
From a gas pricing strategies perspective, this is the time of year when fuel managers need to simply hold on until the market improves and margins can return to more favorable conditions.
by John Keller | Jan 8, 2013 | Industry News
Today the US Energy Information Administration released their Short-Term Energy Outlook, and in the report they project US gasoline consumption to remain flat over the next two years.
In the report, the US EIA explains that while there will continue to be growth in the driving-age population and in highway travel, improvements in the average fuel economy of new vehicles and the retirement of older less fuel-efficient vehicles will net out a consumption value that is essentially unchanged through 2014.
From a gas pricing strategy perspective this would be welcome relief because US gasoline consumption has been on a steady decline since 2009. If the US EIA projections prove to be accurate, at least the size of the overall fuels volume pie will remain steady over the next two years.
by John Keller | Jan 8, 2013 | Fuel Price Management, Fuel Pricing Software
A closed loop system uses feedback from the output to affect the input. In modern fuel price management, the application of a “closed loop” system is a highly effective approach to maximizing fuel revenue margins.
Fuel Pricing Factors
There are many factors involved in calculating price changes for fuel. Survey information, changes in existing volume, margins, and environmental factors can all contribute toward price shifts. A lack of integration between fuel price management software and physical sites will lead to ineffective pricing. The practical way to make fuel price changes in the modern world is through application of a “closed loop” system, wherein all processes are handled within the same channel.
Given the volatility of gas prices over the past few years, installation of a single-channel pricing system has become vital. Coordinators should take care that the crucial steps involved in fuel price management can be coordinated easily. PriceAdvantage software makes this coordination simple. Managers can collect the aforementioned data such as surveys and margins which affect prices, analyze this information via real-time multi-source intelligence, change the prices offered and listed at all of their sites, and receive automatic confirmation that these pricing changes have completed.
A Fuel Price Management Example
A good example of the effectiveness of implementing practical fuel price management solutions is The Spinx Company. This company today uses a closed loop system which allows their employees to change fuel prices with just a few clicks at their personal kiosk, or from the corporate office. This eliminates interference from weather or high customer traffic and enables sites to update gas prices with a cost-effective and reliable system.
“We can move very quickly as costs change,” says Stewart Spinks, CEO of The Spinx Company, “some suppliers do multi-day changes. Central cost monitoring and speed of price changes can ‘signal the street’ of our desire to pass on increases or decreases to the market. If competitors don’t react within two hours, Spinx can react expediently. Furthermore, the staff does not have to stop serving customers to physically go ‘post the prices.'”
Customizable LED signage, when integrated with fuel pricing software, gives sites the ability to far exceed local competition with pricing that quickly reacts to changing market conditions. As consumers demand higher quality and green energy efficiency from their fuel providers, closed loop fuel price management solutions with LED signs enable companies to consistently meet customer expectations. This quality, integrated fuel management technology attracts more customers and drives revenue with increased visibility. The Spinx Company saw such success with their closed loop system that approximately 75 percent of their newly branded stores are shifting to this customizable LED signage as part of their fuel pricing strategy.
Looking Forward
Replacing outdated systems with electronic price signs and integrated message centers is the first, crucial step toward joining the world of tech-savvy fuel price management experts. These systems allow marketers to change prices with greater reliability and speed, increase customer attention at all of their locations, react quickly to all fuel market conditions, and most importantly, create greater revenue for their business.
by John Keller | Jan 2, 2013 | Retail Fuel Margins
According to the weekly OPIS retail fuel margin report, the weekly average fuels margin for the fourth quarter of 2012 ended at $0.23 per gallon. According to the average retail fuels margins reported by the National Association of Convenience Stores, this is up slightly from the five year average of $0.19 per gallon.
This $0.23 per gallon benchmark will be a crucial indicator for how c-stores performed in the quarter compared to the national average.
by John Keller | Dec 27, 2012 | Industry News, PriceAdvantage
Congratulations to Parker’s on the successful opening of their 30th store, this time in Rincon Georgia. Parker’s uses PriceAdvantage as their cloud solution to manage their fuel pricing strategy and monitor company-wide fuels performance down to the store level. After opening their 28th store in October, this is now their second new store opening in two months.
The PriceAdvantage team is proud to have Parker’s as a PriceAdvantage fuel pricing software customer and to contribute to Parker’s continued success as they expand.
by John Keller | Dec 26, 2012 | Industry News
More details regarding the future of the recently spun-off Murphy retail c-store chain were revealed today, as Murphy Oil announced plans to open another 200 retail locations at Wal-Mart properties over the next three years. With a current store count of over 1100, that represents a growth of 18%.
Murphy and Skyline Products have had a strong partnership for twelve years in both signs and the PriceAdvantage fuel pricing software solution.
by John Keller | Dec 21, 2012 | Industry News
OPIS reported today that average retail fuel margins increased for the third consecutive week, rising $0.007 per gallon across the US. Retail fuel margins are now at $0.247 per gallon.
Calendar year quarter to date, average retail fuel margins are now at $0.238 per gallon.
This will be a key benchmark as c-store retailers report their Q4 results.
by John Keller | Dec 19, 2012 | Industry News, PriceAdvantage
Congratulations to PriceAdvantage customer Sheetz, who opened their third new store this month, and raised their total store count to 433. Sheetz has been using PriceAdvantage as their fuel pricing software since 2009.
“We estimate Skyline’s PriceAdvantage™ software to drive $141,000 in annual cost savings, and give store managers up to 50 extra hours annually per store to spend with our customers.” says Mark Wilson, Director of Store Support, Sheetz. “Giving store managers more time with our customers is our overriding team goal, and a competitive advantage for Sheetz. PriceAdvantage software gives us that and more in a usable, understandable, teachable and trainable package.”
by John Keller | Dec 19, 2012 | Fuel Pricing Strategy
There is a terrific article published by the MIT Sloan School of Management titled “Is It Time to Rethink Your Pricing Strategy?” found here, and though it is based on research across a broad spectrum of companies, it has direct applicability to the specific business of setting fuel pricing strategies.
The paper explains that effective pricing is achieved not through luck, but through discipline. The MIT research finds that while few companies have functions dedicated to pricing, their research shows “…small variations in price can raise or lower profitability by as much as 20% or 50%.” Nowhere is this more true than in the fuel price management arena, where optimized prices executed quickly to the street can have a dramatic impact on the bottom line, sometimes simply $0.01 at a time.
This MIT paper calls out two components to effective pricing strategies: price orientation and price realization. Price orientation is defined as the methods companies use to determine prices. Price realization is defined as the ability for companies to get the prices they determine.
Price orientation, when applied to fuel pricing strategies, equates to the analysis of store performance, margins, and competitor pricing to determine what prices are best for each commodity at each store. Price realization, when applied to fuel pricing strategies, is the execution of price changes across the enterprise, confirming that every store has implemented the price changes and the proper prices are in place at the POS, sign and pump. Taken together, these two concepts affirm the four stage process of fuel price management: Collect, Analyze, Change, and Confirm.
The MIT researchers define three types of price orientation, also known as price setting,:
- Cost based pricing – in the world of fuel price management, this would be pricing based on margin targets, without paying attention to competitor pricing. This type of pricing is easy to calculate, but does not provide a complete picture of the environment in which the c-store operates, and is likely to be less than optimized.
- Competition based pricing – this would be a fuel pricing strategy based exclusively on the price of the competition. This is another easy calculation, but is less than ideal because it can lead to a price war. We’ve all heard of real world scenarios where c-stores across the corner from one another get into a price drop spiral where each store is in a race to the bottom.
- Customer value based pricing – this would be the fuel pricing ideal because it takes into consideration data based on perceived customer value. As the article states, the question with this pricing strategy is “How can we create additional customer value and increase customer willingness to pay, despite intense competition?” The article continues, “Customer value based pricing approaches are driven by a deep understanding of customer needs, of customer perceptions of value, of price elasticity and of customers’ willingness to pay.” In the world of the c-store, this includes location including traffic patterns, fuel brands, cleanliness of restrooms, food service, and overall customer experience.
The research in this article goes on to say that customer value based pricing is especially relevant to competitive industries where managers believe they are competing in a commodity business, and these managers resign themselves to competing only on price. “…seeing your product as a commodity tends to be a self-fulfilling prophecy” the authors contend.
In the second half of the article, the authors list three key factors to achieving price realization, also known as price getting: pricing rules specifying maximum discounts, the extent to which these rules are followed, and systems with tools to monitor and control pricing. From a fuel price management perspective, these factors speak to the critical price change execution elements of a fuel pricing software system:
- Business rules that propose prices based on competitor movement, with strategies that provide discount guardrails. Guardrails include such conditions as “margins never less than $0.05 above cost”.
- Price execution to the street, including to the POS, sign and pump; removing the store manager from the process, so there is no conflict of interest or bottleneck in the fuel price change process.
- Price change confirmation allowing alerts and notifications when a price change is hung up so the right stakeholders can be notified, and a historical record of when the price change was completed.
The answer to the question posed in the title of this article is clear: if your pricing strategy is based on accounting rules such as cost plus, or if your pricing strategy is solely based on the price of the competition, you’re not optimizing your fuel pricing strategy; it’s worth analyzing a more holistic view of the markets in which you compete including pricing relative to other company stores, and overall price elasticity. There is only one way to effectively gain access to this holistic view: a robust fuel pricing solution that provides quick insight into store and market performance via a series of analysis views, including margin and volume history, competitor pricing relationships, and operational efficiency regarding the price change process.
by John Keller | Dec 17, 2012 | Fuel Pricing Software, Industry News
Convenience Store News Retail Technology published the following news story announcing Flyers Energy has selected PriceAdvantage for gas pricing strategies.
AUBURN, Calif. — Flyers Energy LLC has selected the hosted version of Skyline Products’ PriceAdvantage fuel price management solution for its Flyers-branded retail locations in California.
“PriceAdvantage allows us to automate our fuel pricing process while aligning our pricing strategy and improving communications across our network of sites,” stated Tom DiMercurio, director of accounting at Flyers Energy. “Our goal is to leverage technology to reduce operating expenses and to provide a means of tracking the implementation of price changes through the whole process. PriceAdvantage is allowing us to accomplish both of these objectives.”
PriceAdvantage’s SMART Fuel Pricing is a highly specialized retail fuel pricing solution for the convenience store industry. It is designed to maximize fuel profits by automating the entire fuel pricing process from the collection of competitive surveys, to sophisticated analysis for best price determination, to rapid speed-to-the-street price change execution with price change confirmation feedback, according to Skyline Products.
“Retailers are faced with many challenges in managing fuel price changes, including an inability to communicate or confirm price changes effectively and quickly between headquarters and the stores,” said Chip Stadjuhar, CEO of Skyline Products. “So, we are thrilled that Flyers Energy has chosen PriceAdvantage to manage their fuel pricing process as it eliminates execution delays with one-click fuel price changes.”
Flyers Energy franchises the Flyers fuel brand and distributes wholesale and branded retail fuel, commercial lubricants, renewable fuels and solar power in the United States. It is also the largest member of the Commercial Fueling Network and the marketer for more than 100 Chevron-, Shell-, Valero- and 76-branded stations.
