CAPE CORAL, Fla. -- Hurricanes Harvey and Irma have departed, and they've left a trail of destruction in their paths. Unfortunately, some retailers suffered damage that goes beyond their physical sites and extends to their brand image. This corollary damage occurred because of actions—and inactions—taken before, during and after the storms.
Here are a few examples of these missteps and some best practices to follow during the next disaster that could help win over customers for life ...
1. Franchisee troubles
In early September, Florida Attorney General Pam Bondi put retailers on notice: If they got caught price gouging during Hurricane Irma, they could expect to be called out on live TV. She made good on her threat when she told Fox News that one of the largest U.S. convenience-store retailers had taken advantage of its customers. She called them out by name and shamed them for selling bottled water for an outrageous $30 a case.
The company released a statement that while its stores are run by franchisees who set their own prices, it did not condone the alleged behavior and would deal aggressively with the accused franchisees. It also pledged $150,000 to the American Red Cross and planned to deliver free ice and bottled water throughout the state.
However, the damage was done. The company received a black eye when the story earned national coverage.
Best practice: I am working with a client in Mexico who is looking to franchise his brand. I have encouraged him to include clauses within the franchise agreement that will address various price-gouging regulations so that franchisees do not take advantage of a situation and destroy the brand. It is important to ensure such clauses exist today and to clearly remind franchisees of them before a crisis.
2. Unanswered claims
In another case, recent news reports said that a large retailer with a well-known brand was selling ice for $20 per bag and bottled water at $20 per case at one of its sites, as well as gasoline at $2.99 per gallon, 30 cents above the local average. Further damaging this brand: The accused gas station did not answer the media’s phone calls for comment.
Another complaint alleged that at one convenience store in Orlando, Fla., an employee offered to sell D-cell batteries for $5 each. Phone calls by the media to the store were not answered.
Best practice: It is illegal in Florida for retailers and hotels to raise prices during a state of emergency to increase profit margins. Business owners can raise prices if wholesale costs increase, as is often the case with gasoline. However, not all retailers increase their prices to be in line with the new cost. Also, some retailers, after running out of fuel, kept their price signs at the last price they sold it at. This provided a stark contrast to the prices posted by retailers who were lucky enough to have fuel.
The best strategy a retailer can take in setting fuel prices is to only raise them to the level that others on the street that still have fuel have raised them. While it can be frightening to sell fuel at retails that are below your costs, the goodwill that you will generate will earn you brand loyalty and healthy volume after the crisis.
And unless the entire fuel infrastructure is destroyed, you will also have a period of high margins immediately after the crisis, as wholesale costs typically drop quicker than the street. This was my experience during Superstorm Sandy. While millions of dollars were lost on paper in the week leading up to the storm, the large margins and appreciative customers afterwards wiped out the losses.
Finally, require your branded-station owners to respond to media inquiries, and develop a book of possible questions and recommended answers. While the answers may not satisfy everyone, the alternative lack of a response will leave consumers with a clear admission of guilt.
3. Wrong information
There were several complaints during the recent hurricanes that a well-known and generally well-liked chain was advertising gasoline for $9.99 per gallon at its stations. A company spokesperson said gas never sold for that price, and that the number was incorrectly posted “when the store ran out of fuel.” Unfortunately, area residents may never have heard the explanation, which came after they saw the erroneous price while evacuating. Again, a brand was tarnished.
Best practice: Make sure that your sites are topped off with as much fuel as possible going into the crisis. If you run out of fuel, make it your standard practice to post zeros on your price signs or turn them off completely. This is better than leaving the last price that you sold gas for, as it could mislead customers and frustrate them when they find out you do not have any fuel. Don’t assume that $9.99 is a clear message. Even though the retailer was responsible and never gouged prices, consumers interpreted the situation differently.
Also, make sure you have power backup in case of an outage. If you cannot invest in a generator for your station, contract with a supplier to keep a certain amount on retainer so that you are first in line in a crisis.
In my Florida neighborhood, where the eye of the storm passed 5 miles from my house, my loyalty shifted to the fuel brands that were able to reopen and sell gas as well as ice and water sooner than those brands who didn’t reopen their stores for days.