We appreciate your feedback regarding the outlook for hypermart gasoline marketing in the US. The hypermart site and volume forecast was based on a company-by-company review and addressed limitations due to site permitting, company site inventories, announced plans, and new store builds.
The limitation in receiving permits to build new sites was addressed in the forecast for the West Coast and Northeast market areas where zoning laws tend to be more restrictive. However, this limitation is not universal across the US.
The fundamental change in gasoline marketing that is referred to is due to several key phenomena:
- Some of the hypermarts are approaching new heights with traffic levels approaching 5,000 visits per day and employ a very high volume, low-margin approach to marketing. These economies of scale in merchandising have never been achieved at this level of site density.
- Technology and cross-merchandising are being employed by a number of the hypermarts to link in-store sales, pump sales, and customer loyalty. These are new advancements that will continue to change and impact the market.
- Most of the hypermarts are employing their own brand name for their fuel marketing operations and, in many cases, the customer views the gasoline brand as superior or equal to traditional brands.
- A number of the hypermarts are also building convenience stores along with their gasoline retail operations in their "big box" store parking lots.
- The economics of constructing a gasoline retail operation in the parking lot of a supermarket or mass merchandiser location has significant advantages over a conventional new store build.
- The hypermarts have some advantages in their cost structure for staffing and supplying their retail/convenience store operations due to the integration with their existing operations.
These changes-coupled with the number of hypermart gasoline sites that have been built, are being built, or are being planned-represent a major fundamental change in gasoline marketing.
Recognition of these changes is key to planning and implementing gasoline marketing strategies and operations in the future. The primary factors that could dampen the hypermart industry's advancement of gasoline marketing are a slowing economy, tight gasoline supply, sustained inversion of unbranded-branded gasoline prices, and hypermart market saturation.
However, retailers are advancing their gasoline marketing thrusts at a rapid pace to maintain their competitive positions.
Joseph J. Leto
President
EAI Inc. (Energy Analysts International)
