fuel pricing, data-driven fuel pricing
With the right technology, convenience retailers can connect internal and external data sources to maximize fuel margins and improve store performance.

At the risk of stating the obvious, it’s critically important for convenience retailers to get fuel pricing right. After all, fuel sales account for nearly 70% of a typical c-store’s total sales, according to the latest NACS State of the Industry data. And because a vast majority of US convenience stores sell fuel, the overall profitability of the industry hinges on operators’ ability to price their core product effectively.

The good news, NACS says, is that fuel margins for the US industry as a whole increased last year by 7.5%. If individual convenience retailers can expand these margins further, they’ll be in a better position to compete in their specific markets.

So, what can convenience retailers do to maximize those margins? What have they done so far, how can their processes improve, and what do they need to get started?

The Intelligence Convenience Retailers Need to Maximize Fuel Margins and Drive Profits

Let’s start with the basics. First, low prices bring customers to the pump – research shows that consumers love saving money on the price of gasoline. But earning the most profit per gallon possible is how convenience retailers boost their bottom lines. Maintaining the balance between customer volume and per-gallon profits is the core of every fuel pricing strategy.

To maximize margins, convenience retailers need to base those strategies on a variety of information, not simply wholesale fuel cost or competitors’ posted prices. This includes external data sets – events, weather patterns, seasonality – as well as more traditional internal and historical data. It’s not enough for a convenience retailer to recognize that last week’s per-gallon price drew a high volume of customers and expect the same price to attract the same volume this week. Nor is it enough for that retailer to assume that raising their price in step with increases to their wholesale cost will allow them to maintain their margins.

Today’s fuel pricing environment is more complex than that; convenience retailers need an efficient solution that makes best use of all data to present the best per-gallon price to customers in real-time.

Using Automation to Move Beyond Traditional Pricing Processes

While c-store operators do have pricing systems in place, many still rely on spreadsheets and manual data input and management. As a result, they lack a way to dynamically adjust their prices in response to market changes and find themselves trapped in either-or strategies: pricing for volume or pricing for margin.

Additionally, they expend valuable labor (often their own, or their managers’) recording, tracking and manually managing historical and competitor pricing information. Not only is this inefficient, it makes it impossible to perform advanced analytics or see the effect of fuel pricing on other aspects of the business, like in-store sales or foot traffic patterns.

To maximize margins on fuel – and improve the profitability of their entire operation – convenience retailers need a pricing technology platform that can connect data across multiple sources, analyze that data in as close to real time as possible, and facilitate automated, dynamic pricing adjustments.

The Science Behind Fuel Pricing
Discover the technology used to predict fuel trends

Improving the Fuel Pricing Process with Connected Data

An effective fuel pricing technology solution will help convenience retailers identify and access the right external data (competitor pricing indices and statistical models, among others) and combine it with back-office, ERP and POS data to provide the highest level of intelligence possible. These two features of a fuel pricing solution – sourcing relevant external data and the ability to connect it with data from multiple internal systems – are crucial to balancing per-gallon profitability with customer volume. With connected data as well as an automated price-setting process, the day-to-day (or hour-to-hour) pricing of a gallon of fuel becomes more optimal, and maximum margins can be attained. However, achieving optimal pricing often requires technology many convenience retailers can’t develop or implement on their own.

Identifying a Technology Partner to Help

A trusted technology partner can help convenience retailers achieve their pricing outcomes without having to make major investments in their own platforms and systems. By providing the right technology and expertise, a technology partner will help convenience retailers connect internal and external data sources to maximize fuel margins and improve the overall performance of their stores.

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.