Mobile apps for tracking area fuel prices have taken fuel market transparency to a level beyond just price listings on storefront signs. Now, consumers can search for the nearest, cheapest stations before ever getting in their car — and as with any market, the savvier the consumer, the more complex and dynamic the market becomes.
When motorists can quickly adjust their buying behaviors based on local competition, fuel retailers need to be able to react more strategically to market changes to ensure they're not losing customers to retailers selling cheaper fuel. But this new layer of transparency in the fuel market does not mean that you should take a reactive approach to fuel pricing. In fact, both consumers and retailers need to take a deeper look at the world of fuel pricing to make better, smarter decisions.
Let's look closer.
Many consumers hold to the belief that fuel prices are a rip-off. With fuel prices constantly fluctuating, blaming retailers is the easy thing to do. And although fuel pricing information has become more readily available, most consumers still aren't informed about what makes up the anatomy of a fuel price.
Between government tax cuts, supply chain issues, conflicts in regions that produce fuel, weather patterns that cause delays and more, the average fuel retailer makes little more than five percent in profit. In Australia, for example, retailers pay for fuel with US dollars. A few years ago, the AU dollar and the US dollar were equal, but now, the AU dollar is worth about 70 cents of the US dollar, so of course fuel prices are up.
If the consumer were more informed about all of the things that can impact prices, we would all have better, more sensible conversations about how to address the issues — if they are addressable — that cause fuel prices to increase. Instead of asking,"what's the cheapest fuel station?" consumers can ask "why is fuel so expensive?" and get more involved in the processes that drive those prices back down.
Regardless, motorists are not going to stop buying fuel (as long as gasoline-fueled vehicles are still in use). With consumers being more careful about where they purchase fuel, retailers can't afford to drop the ball at any of their sites if they want to remain profitable across their network.
In order to win more market share, retailers need to implement and maintain ultra-vigilant market strategies, continuously monitor competitor prices and adjust those prices not only to national markets but to local markets as well.
Because the reality is that even with increased price transparency, price is not the only thing driving consumer choices. When you're driving on the highway and you see your fuel light flash, the most important decision-making factor in that situation is not the one- or two-cent difference between fuel stations. The nearest retailer can be just as attractive as a competitively priced one.
A retailer's responsibility, then, is not to necessarily be the cheapest in the market, but to understand the market better than their competitors do. Are your sites in the optimal locations? Do you have a strong enough brand? Does your merchandise match local needs? The fuel retailers who implement consumer-focused strategies to optimize their retail network are the ones who will come out on top.
Sometimes, all it might take to sway a consumer is good coffee, a car wash, or good customer service. As price transparency increases and we start getting into hyper-competitive pricing wars, all of the other elements become critical to drawing in that volume and ensuring success.
The real power of fuel market transparency lies in the relationship between the retailer and the consumer. If we have a healthier retailer ecosystem, the consumer is always getting competitive prices, and the retailers benefit by always being on top of their game.
But it isn't always easy. Doing business in dynamic, highly competitive markets means there are many factors to consider — market, location, facility, operations, merchandising, brand, and price — and compiling all of that data into actionable insight is a challenging task. With the right retail network planning and fuel pricing tools, retailers will get the same transparency into their networks as consumers, and can then make smarter, more informed decisions.
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