A rising number of independent retailers are installing gas pumps on-site or partnering with local gas stations to offer customer incentives. But the question, according to a panel discussion on Tuesday at the 2014 NGA Show in Las Vegas, is whether or not the cost of such programs yields an adequate return on investment for retailers.
According to Reed Kessler, executive vice president of Aberdeen, S.D.-based Kessler’s Inc., his family-owned company has seen substantial benefit from its fuel program – which saves customers on average 40 cents per gallon -- including attracting those shoppers who use Electronic Benefit Transfer (EBT), as well as an ability to better compete with mega-retailer Walmart.
Jay Lawrence, president of Texas-based Lawrence Bros., noted that his company’s program has gained considerable traction due in large part to the popularity of fuel incentives programs overall. “Our competitors are Walmart and H-E-B, who are very competitive between themselves, and we’re along for the ride,” he said. Lawrence Bros. has realized an overall supermarket sales lift since the fuel program was implemented.
Offering a fuel program has been an effective tool to build strong relationships with customers and compete against the national retail chains, according to the panelists.
Kessler noted that forming a fuel partnership is the most cost-effective way for independent retailers to build a program, and also the most beneficial. “The ROI was quick,” he said. “Partnering is a quick and easy way to get into this, and driving grocery sales is how you make your money back.” Kessler also noted the tie-in between grocery items on promotion and fuel incentives, pointing to “10 for $10” deals on certain items, as well as meat promotions, as among the most popular.
For Lawrence, promoting the program – particularly through social media – has enhanced his company’s ability to build relationships with customers, especially in the face of competition from Walmart and H-E-B. “We try to differentiate,” he said, adding that such promotional efforts have helped to build long-term engagement and loyalty.
The Lowdown on Loyalty
Regarding the benefits of integrating a loyalty card into their respective fuel programs, the panel members were split. Lawrence noted that he was happy with the operation of his company’s program, and was not planning on implementing a loyalty card. Kessler, however, recommended the loyalty program, as it allows the convenience and flexibility of linking one card to another, assuming groceries and gas are purchased during separate trips.
The National Grocers Association (NGA) is the national trade association representing the retail and wholesale grocers that comprise the independent sector of the food distribution industry.