Can independent grocers compete in the fuel business?
By Jane Olszeski Tortola
Over the past couple of years, we’ve witnessed it all as “retailers” small and large seek to offer one-stop shopping and convenience to today’s hurried consumers.
Supermarkets are opening health clinics in their lobbies. Gasoline stations are leasing space to food establishments. Drugstores are selling milk and eggs, promoting gift cards and offering flu shots and blood pressure checks. Hospitals are getting into the pharmacy business inside of supermarkets. Hair salons and optical departments are booming inside of supercenters. At times, it all seems mind-boggling.
Whether these strategies and others developed to increase sales and build customer loyalty will prove worthy of their investment—or become passing fads—is yet to be determined. However, one is undoubtedly here to stay, and that’s supermarkets selling gasoline.
As an independent battling tough regional and national chains whose go-to-market strategies include offering fuel and related services, you’re likely asking yourself, “Where do I start? What do I need to know? And is getting into the gasoline business going to be worth the effort?”
As you ponder these questions and others, allow me to remind you of a column that I wrote a few years back featuring one of IGA’s most innovative retailers, Tom Kishman, and his wife, Jan, who were celebrating the recent opening of Kishman’s Gas ‘N Go.
Searching for a way to “increase volume at a time when sales were flat and give customers yet another good reason to shop at Kishman’s IGA,” the second-generation retailer teamed with his wholesaler, Kentucky-based Laurel Grocery Co., to construct a fuel station in the parking lot of his popular Minerva, Ohio supermarket. Little did the single-store operators realize that the venture would quickly become—and remain—one of its most powerful promotional tools.
Recently, I caught up with Kishman and asked him to share with Grocery Headquarters’ readers what he’s learned since entering the fuel business, and here’s what he had to say.
“First of all, we don’t consider ourselves to be in the fuel business,” says Kishman, “We are in the rewards business. When customers buy groceries, they are rewarded with free gas. We want our customers to shop at Kishman’s IGA because our store is clean and offers a good product selection at fair prices and because they get rewarded for shopping here.”
Those rewards, according to Kishman, typically include saving 10 cents per gallon of gas for each $50 spent inside the store, excluding the purchase of some items such as tobacco product. He dubs this his “market basket approach.”
“As an independent, we can be very creative in marketing different types of rewards and we like to involve all departments,” Kishman says. “Rewards really increase for customers by participating in annual marketing events such as our case goods sale, our bakery/deli graduation and holiday party promotions, and more. All customers have to do after making their purchase is present their Kishman’s Club Card at our Gas ‘N Go and they are instantly rewarded.”
Treated as a department of the store, but separated from inside sales, Kishman’s Gas N’ Go is supplied by the Atlanta-based Mansfield Oil, a company that Kishman describes as “first-class and knows the independent.”
A strong relationship with your supplier is one of the most important components of a successful fuel rewards program, he explains. “Gas is a very volatile commodity, more so than any product sold inside the store. It’s truly affected by global issues and trends and we depend on our supplier to help us manage all the various concerns.”
Today, not surprisingly, one of Kishman’s greatest concerns is the labor involved in operating the fuel station. “We have one labor hour for every hour that we operate the Gas ‘N Go,” he says. “Our sales mix is 90% gasoline and 10 % other, depending on how we market the ‘other.’ If I were to do it all over again, I’d likely operate the fuel department as a self-serve unit in an effort to reduce operating costs.”
When customers shop at Kishman’s IGA, they’re sure to see the community minded owner at work. Whether he’s brainstorming new customer rewards promos with his staff, helping a volunteer group set up a hot dog stand outside the store, or he’s dressed in a black tuxedo on Mother’s Day while pumping gasoline and presenting flowers to every mom who patronizes his Gas N’ Go, Tom Kishman says, “First and foremost, I’m a grocer. While fuel has become an integral part of our business, our focus is to always be ‘the friendly store with so much more!’”
Jane Olszeski Tortola is a freelance writer who devoted over three decades of her career to working in a family owned supermarket company founded by her late father. She is a graduate of The Ohio State University and is active in a number of food industry organizations. She can be reached at JANIEOT@aol.com.