Car Wash and Motor Fuels: Fueling Frustration

Fuel price volatility is here to stay. Marketers must learn how to manage it to their advantage. That was the cold, hard message conveyed in the 2008 NACS State of the Industry (SOI) report.

Marketers are urged to pay attention to sales volumes, but also focus on gross margin dollars and to always look at fuel net of credit card fees.

On a monthly basis, the average store sold 119,374 gallons in 2007, up 2% from 117,039 in 2006. Monthly per-store sales in 2007 were $326,277, an 11% jump over the $293,981 generated per store in 2006, but that was largely due to the higher average selling price in 2007 ($2.73), which jumped 8.8% over the previous year ($2.51).

The average fuel margin for 2007 increased just .6 cents to 14.3 cents per gallon, up from 13.7 cents in 2006. The margin after credit card fees were factored in fell 4.2 cents per gallon to a dismal 10.1 cents.

The good news is c-stores still dominate the nation’s fuel business—the industry sold 79% of all gas and diesel in the U.S. last year—and industry experts continue to hammer the need to drive fuel customers in-store.

But profitability is going to continue to be difficult as consumers are being squeezed by an economic recession, a higher cost of living and less discretionary funds. Higher gas prices could ultimately hurt in-store visits. For the week of June 2, the average cost for a gallon of gas in the U.S. was $3.976, up 81.9 cents from a year ago. California ($4.242) was by far the state with the highest prices. By region, the West Coast ($4.166), New England ($4.028) and Central Atlantic ($4.001) all crept above the $4 per gallon mark.

 

The Car Wash

On the car wash side of the business, customers typically decide where, when and how often they wash based on four primary factors: convenience, speed, quality and price, said Ryan Carlson, editor of Washideas.com.

Convenience: The busiest locations are typically those that are the most accommodating to consumers’ needs.

Speed: "In-bay automatics that require customers to go inside a building to purchase a wash code were among the highest noted instances of customers that chose not to wash again due to issues of speed of service," Carlson said. "Customers interviewed said that had cash or credit card payment acceptance been available at the entry station they would wash more often at the location."

Quality: By far, customers are more concerned about their own personal needs over the quality of the service provided. "It goes to reinforce that customers will always pay for a better quality service, especially if the higher quality comes with factors of convenience and speed," Carlson said.

Price: What many wash owners are figuring out is that pricing is more art than science in many cases. What works for one wash location may not work for another. "Realize that if you meet a customers needs for convenience, speed and quality you can charge more even if your competitor offers the same wash service," Carlson said.

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