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CEO Corner

Fuel Traffic is Important to Store Traffic (whatever margins are)!

By Bob Stein

In the June 2009 issue of NACS Magazine, the publication ran a story titled "Running Out of Gas," quoting several industry experts who are urging convenience retailers to readjust their focus from fuel sales to store sales to boost margins and profits.

At KSS, we feel these articles may have understated how key Fuel is to the overall performance of a c-store. Despite the undisputable facts that fuel margins can be squeezed and costs are more volatile, fuel is significantly important to store traffic. It’s simply an integral part of the convenience store and grocery store business model. The biggest proof is that the consumer chooses to fuel up at convenience stores, grocery stores and big box retail stores as well as shop inside the store (they prefer and desire the “one stop shop”). Fuel traffic is a huge contributor to store traffic and overall site performance. Even with cost volatility and squeezed retail margins, Fuel remains important to the Store. “Consumers need Fuel, so Fuel is Well and Alive”. There should be “MORE” emphasis on Fuel as a key category to the overall site "NOT" less in the future.

We feel that fuel pricing and store pricing can and should be looked at together. It’s a concept we call the Fuel-Store Link, which eliminates silos between the two operations and takes a more holistic, integrated pricing approach to increase profit and volume for the entire store – and ultimately the entire chain.

When the relationship of fuel traffic to store is understood, the optimal fuel price can:

1. Increase store traffic and revenue.
2. Create incremental traffic, which can possibly reduce in-store promotions and discounting.
3. Increase fuel gross margins without a loss of traffic to store.
4. Create a consistent price image and reputation to benefit your total site performance.

In the same June issue of NACS Magazine, I outline the Fuel-Store Link concept in a "10 Minutes with" article on page 23. It is also accessible online by clicking here.

 

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Bob Stein, CEO and President of KSS, is a veteran of the convenience store sector. His eighteen years experience at Dairy Mart Convenience Stores Inc. as Chairman, President and CEO., combined with his knowledge of fuel pricing practices gained at KSS, uniquely positions him to provide commentary and insight into the events affecting fuels wholesalers and retailers.