1) Higher Margins & Sales (and Happy Customers)

Achieving all three – regardless of the number of retail sites

Retail gasoline and diesel fuel margins are volatile, unreliable, and sometimes unprofitable.  All fuel retailers know that, but most are unaware (or unwilling) to take advantage of opportunities in the wholesale markets to improve fuel margins.  They focus instead on increasing sales of profitable merchandise from C-stores; i.e. they take a “Costco-lite” approach to their fuel margin challenge.
 
Why are fuel margins so tight?  Competition, of course, but equally (or maybe, more) important is the fact that fuel retailers react to the market (rack and delivered prices, competitor prices, existing sales volumes) when setting pump prices.  In such a reactive mode, fuel margins are a hope-for-the-best proposition.  Fuel retailers are at continual risk of fuel sales being marginally profitable, and sometimes unprofitable.  (Statistics show gasoline fuel gross margins are below net operating costs roughly 25% of the time).

What to do about fuel margins?  Raise pump prices?  No, that drives sales down and customers away.  Focus on merchandise and food sales?  Ok, but that masks the problem and forces C-store owners onto big-box retailers’ and grocery store chains’ turf.  Hope you outlast the competition and then raise pump prices?  Everyone else is doing that, and how long is that going to take — assuming you make it to the “promised land” of less competition?
In order for fuel retailers to capture higher fuel margins (and achieve other benefits) they must go on offense.  The best defense is a good offense.  Offense against what?  The futures market where gasoline and diesel prices (among other commodity prices) are set.  Evidence is overwhelming — statistical and behavioral — that the futures market sets spot prices which set rack prices that, lastly, set retail prices.  In short, the futures market is the driver.  And it’s going to stay that way.  The good news is tools are available that enable retailers to control their “margin destination” and, at the same time, the “price destination” of their customers.  Friendly tools.  Today.