Fighting Back Against Aggressive Competition
Aggressive competition can give any small- to medium-sized fuel retailer sleepless nights, but it’s personified by a saying commonly used in the Yellowhammer State: If you can make money on gas in Alabama, you can make money anywhere.
The competitive nature of the markets— alongside fluctuating volumes and market consolidation—can be very costly for retailers. This has led to some retailers thinking very differently about their stores and how they should be pricing their fuel.
One of those retailers is Below The Line member Jonathan Tang. He is the senior vice president at Ira Phillips, owner of 11 sites and operator of 4 of them under their Tang Mart dragon-themed brand. They are located in the heart of Alabama and competition couldn’t be tougher.
“It’s hyper competitive as both a state and a region.” he says. “Competition can be so aggressive that the fuel side of the business can be less about how much you can make and more about how little you might lose.”
Even if you are not running into negative margins, your competition could be driving down your profits, reducing the ability to reinvest in current stores or even grow into new ones. The impact can go way beyond just making less money on fuel.
This is particularly tough for retailers who have always had a ‘follow-down’ approach as bigger players—that are still growing— have more buying power and the volumes to operate on thinner margins. They operate with much larger economies of scale, and even if some locations are losing money on fuel this can be made up for elsewhere in their portfolios.
In order to thrive in these market conditions, Ira Phillips has been making investment in their stores and has been looking at new ways to manage them.
“We took back some of the underperforming consignment sites, cleaned them up and focused heavily on customer service,” Tang said. “Through this development, as well as traditional advertising and social media, we now have a recognized brand that ties to a great store and that has led to an increase in volumes.”
The next big step for Ira Phillips and Tang Mart is to take control of their retail fuel pricing by partnering with EdgePetrol, whose retail fuel pricing software shows volumes, profits and live weighted and blended margins in real-time. Access to this new and valuable data is driving profitability for Tang. “Before EdgePetrol we were just following the nearest competitor. It was difficult to back up decision making,” he said.
Going forward, pricing will have a big part to play in the growth of the business. “Pricing is part of the overall puzzle. In order to grow the brand we need to determine who we are. With EdgePetrol we are now able to understand the floor and the ceiling and how they will impact volume and margin.”
EdgePetrol’s Customer Success Team is also working closely with Tang to decide on which strategies will work best. Weekend discounts and changing premium grade spreads are two potentials being considered. “It’s great to have someone to discuss strategies with as it’s not something retailers typically speak about to each other because of price fixing laws,” Tang said. “The knowledge of Nick Heffernan (Customer Success Manager) and the wider team is extremely valuable.”
While the biggest players are leaning more towards automation, independent multi-site operations are more agile, and as a result can optimize their stations in real-time leaving nothing on the table. As Tang puts it, “We are too small to be big and too big to be small.” Success at this level requires a more intricate understanding of the stores and the way consumers react to the price on the street.
“Admitting you have a problem is the first step. We can’t define and measure strategies without accurate data at our fingertips,” said Tang. “I’ve been doing this for 11 years and EdgePetrol is opening the curtains and letting all the light in. It’s very refreshing.”
As the industry continues to change, the way retailers think about their stores will too. Without access to the data to support decision- making, it is possible to be left behind.
Mark Truman is the chief revenue officer of EdgePetrol (backed by Dover Fuelling Solutions), which provides pricing software that gives station owners real-time accurate insight to help them combat reducing volumes and aggressive competition by making better pricing decisions. Visit edgepetrol.com to find out how EdgePetrol can help your business or call +1 856 441 0894.
For more information,
contact Mark Truman
or +44 (0) 7793845155