As fuel margins shrink, your company is likely searching for new ways (maybe any way) to create new sources of profit. Here are some proven ideas to create profit segregated according to market segment:
Wholesale Fuel Increased Freight Charges – Many marketers are finding customers less resistant to increased freight right now than they are to actual fuel prices. Knowing this, rather than quoting customers a gas or diesel price that includes freight, they quote the product before freight. In many instances, this allows them to add that extra penny of half-cent to the freight portion of the bill without upsetting the customer.
You can even use this strategy when delivering to dealer accounts with common carrier. You can use posted freight rates, and then negotiate a discounted rate with your carrier that allows you to keep that extra profit in your pocket.
This strategy can get destroyed when there is saturation of local freight companies or common carriers that start discounting freight rates to the point that freight rates become as public as fuel prices. If marketers and common carriers were smart, they would keep actual freight rates private. We’ve seen what seven-foot-high gas price signs do to the market. Haulers would be well advised not to repeat this mistake with freight rates.
Service Fees – Many marketers keep fuel prices low and competitive by charging service fees for special service. The most frequently charged fee in today’s marketplace is for emergency service. It’s interesting to see how marketers define emergency. For some, it’s any delivery needed in less than 24 hours. Your market place and competitor efficiency will dictate your definition.
Automatic tank monitoring and keep full service can also produce income. Many customers are willing to pay you a fee for taking over their fuel management so they don’t need to worry about run outs. You can add an extra incentive for the customer to feel good about the fee by offering a non run-out guarantee where you pay the customer if you do let them run out!
Lubes Total Fluids Management Fees – The most recent big profit-maker in lubes is service fees for total fluids management. Your company essentially takes over sampling, ordering, delivery and anything else the customer may require to run their business for an agreed upon monthly fee. It’s not as easy as it first sounds. You must back up this service with guarantees and it works best with a lube engineer at your disposal so as not to get in over your head on technical problems.
Equipment Leasing – Another profit maker is leased equipment. Rather than trying to artificially increase the price per gallon of the product to pay for equipment placed on site, many marketers are finding greater success with straight monthly leases. Some savvy lubes marketers have begun sister equipment companies to handle the equipment placement, including install and removal charges. These companies can operate independently of the actual lube supply company. This concept works well for fuel wholesalers who frequently help dealers with imaging. The equipment company can be its own contractor, doing pump and canopy work.
Propane remains less price-sensitive than other fuel products throughout most of the U.S., however extra profits can still be captured. Equipment sales, maintenance service, repairs and price-hedged fixed contracts are all good profit-producing endeavors for any propane marketer. Emergency service fees and charges for less than minimum gallon delivery thresholds can also help boost profits.
Convenience Stores Unique Proprietary Food or Beverage – Homemade food is growing in appeal as fewer families have time for home cooking. The trick to success is a signature product. Spectacular profit-producing items include specialty pizza, a breakfast grill, locally made jerky, flat grill hamburgers, homemade tacos, specialty ice creams provided by a local vendor, homemade candy, cakes and pies. The secret to success is having something that tastes great that the customer can’t get anywhere else nearby.
Rent Space/Charge Royalties – You want traffic in your store plus impulse buys not related to fuel. For this, you may need an outside product or service vendor. What works? That depends upon your market area. One marketer converted his fast food area to a dry cleaning pick-up. He receives rent plus 5% of weekly sales. For success, the vendor needs to be compatible with your target customer. Another store added a floral shop. Your imagination (and space) is the limit.
Unique Non-Food Item – This is where some stores are really making money. Some examples? A fishing department complete with hand-tied fishing flies, a hunting gear area together with a license service at the counter, a Christian books and gifts department, locally made silver and stone jewelry. Again, you need to look at your customer base and available customer base, your local unique products, and see if you can find a fit. Don’t look for your unique item at your next petroleum trade show. If it’s at the trade show, it’s not unique!