Dillons Adds Fuel Services Separate Of Grocery Sites

Dillons said it’s building its first gas station not located on the site of a Dillons grocery store, The Wichita Eagle reported.

Operating as a small convenience kiosk surrounded by Dillons’ logoed gas pumps, the new store is expected to open next month and is the first such concept under the Dillons flag, company spokeswoman Sheila Lowrie told the newspaper.

The small kiosk is just blocks from other Dillons gas locations located near grocery stores sites in that part of Kansas.

Dillons parent company Kroger also owns Kwik Shops, which has multiple locations in the same area near Wichita. Kroger began building gas stations in 2006 as far as three blocks away from existing grocery stores.

"Our customers are taking advantage of the additional fuel savings that we offer them, and this is another opportunity to provide them with the convenience,” Lowrie said, though she wouldn’t say if the company planned further expansion for the concept.

Lowrie said the kiosk will be stocked with items similar to the small kiosks in Dillons’ parking lots –pop, cigarettes, candy, gum and other quick snacks. Money orders and Western Union money transfers also will be available.

The new store caused some ripples in the industry and among retail analysts, who said Dillons’ move to spread its gas brand is unexpected, according to the newspaper.

"It’s not a conventional retailing move," Dotty Harpool, a marketing professor at Wichita State University, told The Wichita Eagle. "I’d love to see their research, but I’ll tell you, they’re an innovative company, pretty quick on their feet."

The move is a mild surprise to Dillons’ gasoline competitors in Wichita, especially given the proximity of the two other parking lot stores in northwest Wichita.

"It doesn’t surprise me too far, but I wonder why they wouldn’t have expanded the Kwik Shop banner," said Bill Walljasper, a spokesman for Casey’s General Stores in Ankeny, Iowa.

Jim Denny, a QuikTrip spokesman in Tulsa, downplayed the significance of the store, which will be across the street from a QT.

"Typically, when people do that they take a little bit of our business, but not very much," he said. "If they’re doing that (directly targeting a QT location), then it’s not a good strategy. I’d imagine they’re looking for the best locations that run the best volume of business."

Much of the surprise is rooted in gasoline as a retail commodity: a low, if any, margin product used to draw customers into a larger store to buy higher-margin items.

"It’s a destination product for us," Walljasper said, "not necessarily a loss leader, but more as a number one destination product for a c-store. For us, as far as a gross profit contributor, it’s the least profitable."

That’s what intrigues Harpool the most about Dillons’ decision.

"Of all the industries they could get into, it’s the least attractive because there’s so little money to be made," she said. "It could be that they’re thinking long term, seeing that independents are closing up shop. It could be a Starbucks approach, a store on every corner to build multiple brand loyalty."

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