Consumer Perceptions Vary About C-Store and Fuel Retailers

Customers guess retailers make 48 cents profit per gallon of fuel sold after expenses, when the reality is closer to 15 cents per gallon.

While consumers intellectually understand that the corner store isn’t responsible for high prices at the pump, they still don’t like fuels retailers, according to findings released today from the new 2012 NACS Consumer Fuels Report.

The corner gas station/convenience store, so often the outlet for consumer ire over high prices, is not perceived as the cause of consumers’ pain. When given four possible explanations for higher prices, only 9% of consumers say that gas stations increasing profits is why gas prices increase. By comparison, 35% cite speculation with oil traders, 26% cite oil companies increasing profits and 19% cite supply and demand as the reason behind gas price increases (11% did not select a response).

When asked how much retailers make in profit—after subtracting costs, such as rent, insurance and all other fees—consumers think that retailers make 48 cents per gallon in profit after expenses. The reality is that the markup on fuel over the past five years has averaged about 15 cents, which is one-third of what consumers think that retailers are making in profit. After factoring in expenses, retail profits average about two cents to four cents per gallon.

Interestingly, while consumers may overstate retailer profits, what they believe is a “fair” profit is in line with what they think retailers are making. Consumers say that a “fair” profit is 38 cents per gallon.

The term “convenience store” is synonymous with the term “fuel retailer” — 80% of the gas sold in the country is purchased at a convenience store. But these two terms have different definitions, according to consumers. For example, consumers think of convenience stores as local businesses or national chains, while they believe that gas retailers are an extension of a major oil company.

Consumers estimated that the major oil companies own 60% of the gas retailing outlets in the country, but only one in nine consumers (11%) said that major oil companies own convenience stores.

Integrated, major oil companies have their brand prominently on display (i.e., store signage, fuel canopy, the brand of fuel) at about half of all fueling stations in the country. However, less than 1% of these fueling stations are actually owned and operated by one of the oil companies.

“These results actually speak more to long-standing perceptions that are undoubtedly reinforced by signage at the pump,” said NACS Vice President of Government Relations John Eichberger. “While less than 1% of all fueling stations are owned by the major oil companies, consumers see fuels businesses as affiliated with oil companies because half of the stations in the country sell a branded fuel and have signage that may reinforce their long-held misperceptions.

Consumers are less willing to pay for renewable fuels than they were a few years ago, with a majority of customers saying they are not willing to pay more at the pump for renewables. In 2009, the NACS survey found that half of all consumers would pay more for renewables.

Among the 38% who say they would pay more for renewables, the highest price point they would be willing to pay is 13 cents more per gallon. It remains to be seen how this hypothetical scenario plays out with consumers overall remaining very price sensitive.

One-third of consumers indicate that they will be making a new vehicle purchase within the next three years, and they are considering a number of various non-gasoline-powered vehicle options — especially dual-fuel vehicles. More than seven in 10 consumers (71%) say that they would consider a hybrid electric vehicle, and 38% of all consumers would consider a flex fuel vehicle. Meanwhile, 37% of consumers would consider a plug-in electric vehicle and 35% would consider a diesel fuel-powered vehicle.

Consumers in the West are more likely than the overall population to consider an electric vehicle, with 91% saying that they would consider a hybrid electric vehicle and 55% saying that they would consider a plug-in electric vehicle.

Interestingly, there is a huge gender gap with diesel-powered vehicles, perhaps related to old stereotypes of diesel fuel being dirty or not having the same performance characteristics of gasoline. While 54% of male consumers say that they would consider buying a diesel fuel-powered vehicle, only 15% of females say that they would consider a diesel.

This is the third of three reports examining findings from the NACS Consumer Fuels Report that are now online as part of the 2012 NACS Retail Fuels Report, www.nacsonline.com/gasprices. NACS will release additional backgrounders throughout the month of February, and the March NACS Magazine will feature additional insights from the report.

 

 

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