The results from the Balvor/NACS Motor Fuels Retailer Survey, released exclusively for the first time here in NACS Magazine, provide deeper insights into the motor fuels landscape and how motor fuels retailers are relentlessly changing.

1. what
FUELS
REtaILERS’
DEcISIonS
In recent years, we tackled fuel perceptions
from the consumer side. This year, we see what
your peers — the retailers — think about the
current state, and future, of motor fuels.
34 nacsonline.com March 2010

2. We know consumers are price sensitive, Survey Says…
that they think retailers make — and should The Balvor/NACS Motor Fuels Retailer
Survey was fielded in January 2010
make — more money per gallon than they and promoted via several NACS Daily
announcements. A total of 114
really do. We also know that consumers retailers — representing more than
generally don’t blame their neighborhood 5,500 fueling locations — responded
to the online survey. Survey partici-
convenience store operator for high gas pants were remarkably similar to the
industry’s overall makeup.
prices (although they do blame “Big Oil”).
We know all this because that’s what con- average monthly
gallons sold:
sumers have told us in three previous NACS
Consumer Fuels Reports. Over
Under
75,000:
But what about the retailers? How are 125,000:
28%
26%
they reacting to consumers’ perceptions 75,000 to
and price sensitivity? And how do retailers 125,000:
46%
feel about future prospects?
The results from the Balvor/NACS Motor
company size:
Fuels Retailer Survey, released exclusively 201-500
51-200 stores: 9%
for the first time here in NACS Magazine, stores: 3%
provide deeper insights into the motor 500-plus
stores:
11-50
fuels landscape and how motor fuels retail- stores:
27%
2%
ers are relentlessly changing. Above all, the 1-10
survey revealed that despite today’s busi- stores:
60%
ness challenges, retailers remain optimistic
about the future.
all charts and data in this article are from the Balvor/
nacS Motor Fuels Survey unless otherwise noted.
(percentages rounding to nearest whole number)
March 2010 nacS Magazine 35

3. InsIght 1:
Discounts on gas are
NACS Gas Price Kit Answers Consumers’ the norm — if they are
‘Whys?’ and ‘Hows?’ offered in your area.
We know that motor fuels customers
“I wish they knew our tions about the industry. Phil’s prediction about are incredibly price sensitive. Last year,
actual margins.” Experts from NACS whether we will see a
70 percent of consumers told us that
“We are locally owned and the Oil Price Informa- long or short winter is
and operated.” tion Service (OPIS) considered more fun that they consider price the most important
“We are a small answered more than a factual, a colder winter factor when choosing where to fuel up,
business.” dozen common consumer could increase heating oil and 26 percent will drive 10 minutes out
“The facts about the questions, now available demand and complicate of their way just to save 3 cents per gal-
‘price-gouger’ laws at NACS Online via short existing challenges lon — a time, energy and money waster.
are destructive to videos at NACS TV. associated with the And nearly 4 in 10 customers said that
small businesses.” The searchable map seasonal transitional to
they would pay cash to save as little as 1
allows users to examine summer-blend fuel.
critical market conditions In addition, the first cent a gallon.
These are all retailer
related to their particular week of February So, what are retailers doing to man-
answers to the last
question on the Balvor/ state. “When events like traditionally marks the age this price sensitivity? The Balvor/
NACS Motor Fuels hurricanes or refinery beginning of the spring NACS survey found that one in five re-
Retailer Survey: “What do breakdowns occur in one transition to summer- tailers offers some sort of discount pro-
you wish customers knew region, there is a ripple blend fuels for the gram, but cautiously, and with good
about your business?” effect throughout the petroleum industry. This
reason. Nearly all retailers say that dis-
On February 2, NACS rest of the country,” said transition to producing
NACS Vice President of more than a dozen count programs invariably lead to mar-
released its 9th annual
Government Relations summer-specific fuels gin losses. While some retailers believe
online gas price kit
(nacsonline.com/ John Eichberger. “Where adds complexity to the that a discount provides a competitive
gaskit2010) to address fuel is produced and how system that typically leads advantage, most are likely to offer a pro-
common consumer it is distributed has a to seasonal price varia- gram because of the competitive disad-
questions — and provide significant influence on tions. Over the past vantage they would have without it.
answers — about the U.S. the price the consumer decade, gas prices have
“The results reinforce what most fuel
petroleum market. ultimately pays.” increased an average of 55
NACS traditionally cents between the first retailers already know: This business is
This year, two new
elements gave unique releases its annual gas week of February and
insight into the world of price kit on February 2 to their seasonal peak, which
gasoline retailing: a coincide with two is typically mid May. (In Do you currently
events: Groundhog Day 2009, gas prices rose 80
searchable map provid-
and the beginning of the cents between February 2
offer discounts
ing key state-by-state
metrics related to motor seasonal transition to and the seasonal peak on on fuel?
fuels and video respons- summer-blend fuels. June 22.)
es to consumers’ ques- While Punxsutawney NACS has shared the
kit with the hundreds of Yes: 18%
national reporters who
The 9th annual online gas price kit can be found at have contacted us to
nacsonline.com/gaskit2010. discuss motor fuels
issues, as well as with
key members of Con-
gress and other policy-
No: 82%
makers. You can reach
out to your own local
media or customers by
using the materials in the
kit, or provide a link to
the kit on your Web site.
(percentages rounding to nearest whole number)
36 nacsonline.com March 2010

4. very sensitive to market forces,” said Bal- Retailers who “strongly agree”
vor Managing Partner David Bishop.
“Offering fuel discounts only provides a
temporary competitive advantage, be-
cause the competition will likely match
84% 44% 23% 20%
Giving up some Fuel discounts We offer Fuel discounts
your offer to maintain competitiveness.” margin with your are becoming a fuels discounts provide a
fuel discount cost of doing because our competitive
To put it another way, the first to mar-
will keep you business competitors do advantage
ket will not be the last to market since competitive
every other retailer eventually jumps in.
Because the first to market is quickly
matched, the discount ultimately be-
comes another cost of doing business as Excluding gas price, what attracts customers?
a fuel retailer.
(Retailers who “strongly agree”)
The results clearly show how market
dynamics work: Less than 4 percent of
operations Products Branding
the retailers responding said they of-
fered their own fuels discount when
none of their competitors had one. How-
ever, the percentage of retailers with
92%
Friendly employees
46%
Hot coffee program
25% Fuel brand
fuel discount programs jumped to 40
74% 38% 23%
percent when half of the competitors
offered a discount, and reached 100 per-
cent when all of their competitors of- Well-lit exterior Tobacco prices Store brand
fered a discount program.
InsIght 2:
How you sell is more criti- 75%
Clean store/bathrooms
33%
Fresh foods
13%
Fuel rewards/discounts
cal than what you sell.
Consumers were very clear in stating
their preferences about stores in 2009’s
NACS Consumer Fuels Report. While
gas prices were deemed critical, equally What would most Who do you consider
so was operations excellence. Consum- likely make you go your competition?
ers said that your stores needed to be inside the store
clean and well lit, with clean restroom after buying gas? Stores on immediate
block/corner, same
Stores on
immediate
facilities. They were much less interested side: 3% block/corner:
18%
in what you actually sold. 5%
Retailers agree. Operations-related Stores
excellence is considered far more im- within a
Store is clean and well lit half mile:
portant than the brand. 12%
“These results underscore the criti- Stores
cal need to effectively execute the fun-
damentals every day,” said Bishop.
“Leading convenience retailers know
18%
Restroom facilities available
more than
1 mile
away:
Stores
43%
that getting it right in these areas helps within
(Source: 2009 nacS consumer Fuels Report) 1 mile:
to drive improvements in other areas,
37%
such as the product offering. The
strength of their brands — especially the
store — builds over time based on their
March 2010 nacS Magazine 37

5. success with the first two areas.”
Furthermore, operations excellence
What fuels will is particularly important because retail-
you be selling ers also believe their competition is not
in 10 years? coming from the immediate corner.
(Retailers saying More than 80 percent of retailers be-
“extremely likely” or lieve that their competition comes from
“somewhat likely”) stores at least one half a mile away.
“Competition for the consumer’s
dollar doesn’t stop with getting them
71%
High-blend ethanol
Estimated conversion
rate, fuel to in-store
to the pump,” said Bishop. Nearly four
in 10 retailers (38 percent) said that
customers: they are going to focus on highlighting
(responses grouped, more in-store price promotions at the
68% Biodiesel
open-ended question) pump to help drive customer traffic
into the store.
70-79%: 80% or higher: 20% or less:
4 percent 4 percent 4 percent InsIght 3:
41%
Electric charge/
Retailers are looking at
a future without liquid
battery swap
21-39%: fuel — but still consider it
60-69%:
11 percent essential today.
12 percent Convenience retailers, who today sell
34%
Compressed 50-59%: 30-39%:
approximately 80 percent of the motor
fuels purchased in the United States,
natural gas 16 percent 25 percent are keeping an eye on a future beyond
petroleum.
22%
Retailers think that electric charge/
40-49%: battery swap will be the biggest change
25 percent
Hydrogen in fueling a decade from now, and thank-
fully, that belief seems to match the
9%
change in green car technologies. At the
January 2010 Washington Auto Show,
Biobutanol electric vehicle technology was at the
forefront, a sea change from last year
when electric vehicles vied with hydro-
gen, compressed natural gas and pro-
pane in a much smaller space. The 2010
auto show featured the newest collec-
How big a threat to your fueling business are...? tion of alternative-fuel vehicles ever
(Retailers saying “significant” or “very significant”) displayed — 65,000 square feet, 13 times
larger than last year’s 5,000-square-foot
77% 66% 65% 37% 14% alternative vehicle pavilion.
Other Non-traditional Regulations Supply Alternative That said, retailers don’t consider
convenience fueling outlets challenges fuel vehicles electric vehicles one of their biggest
stores challenges today — in fact, only one in
seven believed that alternative (or flex)
fuels vehicles are a significant threat to
their operations. Competition — wheth-
(percentages rounding to nearest whole number)
er from other convenience stores or non-
traditional fuel outlets — tops the list as
38 nacsonline.com March 2010

6. pricing tactics continue to evolve, which have been speaking on behalf of other president of The Parker Companies in
ultimately influences how to drive incre- retailers who share similar thoughts. Savannah, Georgia. “But the underpin-
mental business inside the store. More than three-quarters of retailers ning to everything is the general mood
Much more emphasis will be placed are optimistic about the future outlook of our industry and our customers, and
on promotions and foodservice in 2010, of their company — nearly three times this optimism can go a long way in over-
according to retailers. The Balvor/ more than that of the overall economy. coming our challenges.”
NACS survey found that 85 percent of This reveals, like Durling, that conve- “The big message to me from these
respondents feel they will offer more in- nience retailers do not believe they have results is that you better be good at
store promotions and 80 percent say to participate in recessions. something if you expect to continue to
they will strengthen their foodservice Not one retailer felt that the compa- compete at the highest level,” said
offers. In comparison, 66 percent of the ny’s prospects were “extremely pessi- Parker. “And you better focus on the in-
retailers are focusing on optimizing the mistic,” compared to 6 percent who felt side of the box, and you need to really
tobacco category this year. that way about the U.S. economy. understand where you are making your
“Given the economic times, it’s not “The reality is that our industry is money.”
surprising that value-driven strategies challenged,” through increasing com-
are increasing,” said Bishop. “Price pro- petition, the commoditization of fuels Contact Jeff Lenard at jlenard@
motions — whether they are two-for and the continuing onslaught of new nacsonline.com or (703) 518-4272
deals, temporary reductions or a multi- regulations and taxes, said NACS Vice with questions or comments on how
pack offer — are a well-documented way Chairman of Research Greg Parker, NACS can improve this resource.
to drive short-term results. However, an
increasing number of retailers are now
investing resources into foodservice — a How do you feel about your
longer-term strategy that can have a sig- prospects this year for…?
nificant return for the business, if exe-
cuted effectively.” Your c-store U.S.
Retailers also are putting a greater
company industry economy
focus on increasing their conversion
rates between fuel and in-store custom-
ers. Whichever is the case, the challenge
25%
Extremely
7%
Extremely
2%
Extremely
optimistic optimistic optimistic
is two-fold: getting consumers to the lot
53% 60% 29%
to buy fuel and moving a greater per-
centage of all site traffic into the store.
Interestingly, some retailers are looking Somewhat Somewhat Somewhat
at how they can drive more store traffic optimistic optimistic optimistic
to the pump, as many loyal customers
frequent some stores many times a week
if not a couple of times each day.
The mean conversion rate was 42 How do you feel about your
percent among all responses, but when prospects this year for…?
weighting for store size, the conversion
rate improved to 44 percent. In-store
merchandise Foodservice Motor fuels
InsIght 4:
The industry’s positives
make retailers optimistic.
21%
Extremely
26%
Extremely
12%
Extremely
optimistic optimistic optimistic
“We don’t participate in recessions,”
51% 39% 45%
said Dean Durling, president and CEO
of Quick Chek Corp., during the “A Tale
of Two Retailers” panel discussion at Somewhat Somewhat Somewhat
last year’s NACS Show. He was speaking optimistic optimistic optimistic
about his company’s future, but may
March 2010 nacS Magazine 39