gas pump, gas prices
Fuel prices are historically more volatile than other commodities because so many factors can affect them.

Many consumers heed the popular notion that it’s best to buy gas on Mondays when it’s cheapest and not on Fridays when it’s most expensive. For convenience retailers, no such generalization holds because fuel prices are so volatile, with many variables impacting price fluctuations. The only thing certain is this: when it comes to keeping fuel pricing competitive, every second counts.

Fuel sales yield low profit margins, with the average pretax profit for convenience stores at just 5 cents per gallon, according to the National Association of Convenience Stores (NACS). On top of low margins, fuel is historically more volatile than other commodities, such as food or metals. A wide range of factors can affect fuel prices, from an explosion in oil facilities in the Middle East or a savage hurricane that destroys offshore oil platforms to something as innocuous as gas stations matching each other’s prices.

The combination of volatile prices and low profit margins makes it critical for convenience retailers to maintain optimal pricing at all times. But how do you keep fuel prices competitive without sacrificing profit margins? And how do you ensure you have the right prices despite all the variables going on behind the scenes?

4 Ways to Keep the Pricing Right, All the Time

As a retailer, it’s necessary to monitor your competitors’ prices, market patterns, seasonal demand, and the latest news affecting global oil supply around the clock. Here are four ways that can help you keep track of many variables – and help you make timely decisions to maintain competitive prices.

  1. Use Internal and External Data: Use the science of data to optimize fuel pricing on both wholesale and retail sides of your operations. It takes an aggregate of information to be able to set competitive prices: historical data, competitor pricing, market trends, price indexes and predictive analytics. If you’re still manually compiling information in a spreadsheet, consider automating the process. Pick a robust fuel pricing solution that leverages both internal and external data, optimizes your pricing efficiency and gives you the capability to quickly customize pricing rules based on trends and analytics.
  2. Use Real-Time Data: In order to respond quickly when prices are fluctuating, you’ll need the most current information supplied in real time. You can’t make informed decisions by relying on outdated information or lengthy data gathering processes to make pricing comparisons. Take advantage of a fuel pricing solution that applies dynamic pricing principles, optimizes pricing baselines and leverages all available market data. You also need powerful analytics that deliver meaningful insights into current market conditions.
  3. Expect the Unexpected: With so many factors affecting fuel prices, it’s near impossible to predict what changes are coming next. That’s why you should power your operations with technology that can help you easily model scenarios and ensure that you’re ready to adapt quickly when unforeseen changes hit the market. Choose a solution that leverages the power of machine learning to help you determine the optimal pricing for unexpected events.
  4. Develop a long-term strategy: All of these suggestions can help your operations compete successfully, every day. But to ensure long-term growth, you’ll also need a strategy to optimize fuel pricing over longer periods, and whether it’s going to be a volume strategy or market position strategy. Make a habit of using analytics and data-driven information to support your long-term strategy and success. Fuel pricing is not a one-time event, but a continuous cycle that requires constant monitoring.

Fuel Sales Growth Today and Tomorrow

In 2018, overall c-store sales rose by 8.9 percent to $654.3 billion, led by a 13.2 percent increase in fuel sales. Despite fuel’s slim profit margin, it still accounts for 69.6 percent of total c-store sales, making competitive pricing all the more crucial for business success.

To grow both your fuel volume and sales, optimize your pricing and keep the right prices at any given moment. You should attract consumers through a variety of in-store offerings and a relevant loyalty program that offers members what they want, but don’t lose sight of the importance of the prices at the pump. Remember that majority of drivers (59 percent) still choose where they buy gas based on fuel price.

Did You Know: Your Source for PDI News provided by PDI, the leader in enterprise management software for the convenience retail and petroleum wholesale markets.