TECHNOLOGY: Fuel for thought

In the Oct. 1 issue Progressive Grocer ran coverage of its Executive Roundtable Series: Technology and the Independent Grocer, which brought together six operators to share ideas and debate the issues surrounding retail technology. This month we continue the roundtable coverage with the retailers' discussion about fuel operations.

Roundtable participants were Leonard Harris, president and c.e.o., Chatham Food Center, Chicago; Todd Perry, s.v.p., Fresh Encounter, Inc., Findlay, Ohio; Susan and Steve Hinck, owners, Hinck's Economart, Ellsworth, Wis.; Larry Schaffer, director of information technology, Niemann Foods, Inc., Quincy, Ill.; Mike Parker Sr., secretary/treasurer, Lindstrom Foods, Lindstrom, Minn.; and Kurt Rodhe, president, Rodhe's IGA Super Center, Millersburg, Ohio.

Progressive Grocer: Describe your fuel operations and how you're leveraging technology in them.

Perry: We have two fuel centers, and we're looking at doing some more. One of our banners is Community Markets, and under that concept we're trying to put in pretty much everything that services the surrounding community. The two fuel centers we have are in a market center with a population of about 2,000. We're the only store in town. We also have a bank and a drug store. That's why we've been putting fuel in.

We really haven't done a great job of upgrading our fuel systems. We can run our fuel from the point of sale. We don't do any cross-promotions at this time. I don't know in that type of market -- where you really kind of own the market -- what benefit you're going to realize from it. However, we do want to do more fuel. It's been profitable for us.

PG: Do you have an opportunity for your nonfuel operations to partner with nearby convenience store operations that offer fuel?

Perry: In some communities we have that opportunity. In fact, we're just trying a new concept. It's called a Market Express, and we're looking at building that because our stores have gone from the only player in town to all of a sudden the secondary player to a Wal-Mart or somebody else coming in. We're looking for ways to build traffic.

Susan Hinck: Our fuel is integrated to our POS system with our loyalty card. At the pumps we have cash acceptors and credit card acceptors. We also have a bar code scanner for our loyalty card.

We give all our loyalty customers a three-cent-per-gallon discount on gas. We're running a promotion right now: If they buy groceries inside, we give them a coupon for $5 of prepaid gas. The balance is loaded onto their loyalty card, and it stays on until they use it. The next promotion we're going to roll out will involve pass-on allowances from the vendors. We use our gas more for promotion. You buy groceries, you get gas. That seems to work for us.

We need the cash acceptor because 30 percent or 40 percent of our sales are still in cash.

PG: Does that help reduce your credit card transaction fees?

Steve Hinck: Oh, yeah. The more cash you got, the less you have to pay.

Susan Hinck: We're the only place in town after a certain time where if you don't have a credit card, you can get gas. And we're one of the only places that accept credit cards after a certain time, too. We don't close down. And with technology, we can run the pumps unmanned. It takes 10 minutes a day to man these things.

We use bar code scanners and cards because they cost less. You're paying 55 cents or so for a magnetic card, where with a scanning card you're talking 25 or 30 cents, so there are thousands of dollars in savings if you can go to a scanner rather than a magnetic one. But the bar code scanner is kind of primitive. I wish they would upgrade them. There are two or three main dispenser manufacturers, and none of them have a decent bar code scanner.

Schaffer: I think one of the reasons they don't is a security issue. You can just photocopy a bar code.

Steve Hinck: I can go to a pump right now, take your card, and get gas with it. What's the difference? Because it's all at the pump.

Schaffer: But you have to have my card.

Steve Hinck: You have to have my card, too, to scan.

Schaffer: If I know your number --

Susan Hinck: You can't punch it in.

Schaffer: No, but if I know your number, I can go to our computer and generate a bar code.

Steve Hinck: I don't know if that's going to be a huge problem -- it's no difference, really. I can't see any difference between a magnetic-stripe card and one with a bar code. You could put a PIN number on there, if you want to make it more secure, but I don't think you really need it.

Rodhe: Has gas helped to increase your in-store business?

Susan Hinck: Our prepaid sales are going up where they have to buy groceries and pay for the gas inside, and it's put on the card. The customers love the prepaid cards.

Steve Hinck: Plus you hold their money. And it saves us on the percentage for the credit card. It's popular with parents. They give their kid one of our prepaid cards and load it with $20, $30, and they know the kid's not getting pizza. They know they're just getting gas. They know where that money is going. Mothers like it because they don't have to leave their kids and come into the store.

Schaffer: We have five fuel sites on supermarket lots, and we have 11 convenience stores, but that was an acquisition that was made separately. We are basically experimenting with fuel. We put our first site in as a kiosk, an attended kiosk. The second site went in unattended. The third site went in with a convenience store. The fourth and fifth sites were unattended.

We started off with a promotional piece of cents off per gallon, buy Cheerios, get three cents off a gallon. The problem that we ran into, though, was a funding point. We are an extremely aggressive company when it comes to our vendors and squeezing every promotional penny we can get. So we were already tapping all the promotional money we could get. It just wasn't there.

We ended up deciding that it just wasn't terribly successful for us, primarily because we didn't put a lot of money into it. We went instead to a variable promotion -- every day the cents off per loyalty customer changes. You walk in, it might be three cents, it could be five cents, it could be two cents. You never know what you're going to get, but you're going to get something better than the street price. So you try to build the perception that you always know you're going to save some by getting gas there.

Susan Hinck: Why do you do the variable promotion?

Schaffer: To incent customers to come back -- it gives variety, surprise. If volumes are down on Wednesdays, you want to raise the discount. You can experiment more. The other thing was if we set it at a certain amount, it becomes an entitlement. So by changing it and making it up and down, you never know what's going on. But you always know you're going to save over anybody else in town.

It still ultimately goes back to that big question of capital dollars. Each year the cap budget is put together, and we throw out all these ideas and things people would like to do, and then you say what the critical ones are, what has to be. It's clearly not a "Wow, that's going to be hugely successful," or it would have made it higher up on the list.
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