Welcome to the world of fuel retailing in 2011, which promises to remain [image-nocss] as volatile as it was during the close of 2010. U.S. average retail gasoline demand was almost flat last year, growing a meager 0.28% compared to 2009, and experts predict that trend will continue.
Meanwhile, rising global demand will exert pressure on prices that we will experience locally at the pump. I concur with industry observers who are forecasting the return of $4.00 per gallon gasoline in 2011 in the United States, which will reduce demand even further, putting more pressure on retailers' profits.
This drop in fuel demand will force retailers to rethink their business model: Do I want to maintain my market share by taking from others? How can I increase fuel margins through pricing and/or cost efficiencies? Do I need to be more prepared for alternative fuels and electric charging? How do I operate my sites with less volume at the pump--and possibly in the store--and still meet financial objectives? Such are the questions retailers will need to consider in 2011, which will be a year of planning and adjustment for many.
Faced with these challenges, having business intelligence and data analysis tools is vital for retailers to be successful. Retailers must adjust for changes and re-strategize their business model to deal with selling a declining volume commodity.
Retailers are now in a position to consider the following: How do I strategically position my sites (forecourt and store)? What is the most effective way to take market share and increase volume or grow margins? How can I use pricing to meet financial objectives? How will expected trends affect the profitability of my sites?
Effectively using business intelligence data is the only way for a retailer to know how to answer these questions or successfully adjust prices, volume and margins to meet goals and targets in this changing fuel retailing environment.
Challenges and opportunities are ahead in 2011. Fuel retailers who rely on the most accurate, flexible and up-to-date information on prices and volumes will be best equipped to meet these challengers and come out ahead.
Bob Stein is president of Florham Park, N.J.-based KSS Fuels Inc., a global provider of pricing software, analytics and consulting services that provides "knowledge beyond the numbers" to fuel retailers and wholesalers in the oil and gas, convenience store and retail industries. Previously, Stein served as chairman and CEO of Dairy Mart Convenience Stores Inc., a 700-store convenience retailing chain based in Cleveland.
What do you think? How are you strategizing in this volatile market? Email your comments to CSP News Director Steve Holtz at sholtz@cspnet.com.
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