The urgent need to fund U.S. road improvements could result in motor fuel tax increases up to 70 cents per gallon, with tax hikes hitting at the federal or state level—or possibly both. Convenience store operators need to be prepared to respond strategically to these price hikes in order to preserve customer loyalty.
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The U.S. Chamber of Commerce is recommending a 25 cent-per-gallon increase to the federal gas tax. Further, since 2012, more than 30 states have already approved plans to raise transportation revenues and many of the remaining states are in the process of pursuing increases. Here’s a look at some of the proposals:
- Kentucky: proposed 10 cent-per-gallon increase
- Michigan: proposed 45 cent-per-gallon increase
- Minnesota: proposed 20 cent-per-gallon increase
- Wisconsin: proposed 8 cent-per-gallon increase
A federal tax increase in addition to a state tax increase would create a challenging environment for fuel marketers who rely on fuel purchases to drive in-store sales. Unfortunately, higher fuel prices will likely erode many motorists’ positive views of c-stores. Motorists also might choose to drive less if fuel prices surge. C-store owners operating in a high-tax state near the border of a state with lower taxes will likely face the most challenging circumstances of all, as customers migrate to stations over the border to take advantage of lower fuel prices.
Although higher fuel taxes could shake up the playing field, there are things fuel marketers can do to protect their competitive advantage. Here are three ideas.
1) Offer fuels that are typically priced lower than E10, such as E15 and E85. California is known for having some of the highest fuel prices in the country. Sales of E85 there have increased over 250% in the past five years. E15 and E85 offer ways to win new customers who are looking for ways to ease the burden on their pocketbook.
2) Incentivize customers to pay cash for their fuel by offering them a discount. Not only will cash-paying consumers benefit from a discounted price, cash payments eliminate swipe fees charged to c-stores for credit card purchases. Further, in order to close the transaction, most cash-paying customers will be required to step inside the c-store, where lucrative purchases for food and other items can be made.
3) Launch a user-friendly loyalty program. Introducing a strong loyalty program before prices escalate will help to retain existing customers. Make it easy for customers to enroll in the program and to earn rewards such as cash-back incentives, discounted fuel prices, free products and deals, coupons and birthday gifts.
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This post is sponsored by Source North America