Giant Eagle and newcomers like Kmart are rolling out gas price promotions in anticipation of Memorial Day weekend
May 24, 2013 12:30 PM
A Giant Eagle GetGo station on the South Side.
By Erich Schwartzel Pittsburgh Post-Gazette
Happy Singh expects lines of cars to form at his service station in Moon this holiday weekend. He hasn't nailed down a price for gas yet, but he has stocked up on propane and hot dog buns.
That's because the bottom line at the Happy Mini Mart mirrors that of gas stations nationwide -- Mr. Singh can expect to earn more money on candy bars than on the unleaded gasoline that's hovering around $3.55 per gallon in the Pittsburgh area.
"We make more money on ice bag sales," said Mr. Singh.
Frozen water is more valuable than sweet crude in the topsy-turvy world of gas station economics. And as an estimated 31.2 million travelers hit the road this Memorial Day weekend, gas stations are trying out strategies that treat the pump as just one stop on the way to picking up a sub or milkshake inside.
The business models are driven by necessity: Americans are accustomed to earning gas savings when they shop at area grocery stores, and new retailers are using the holiday to enter the fuel savings market.
PG graphic: Pittsburgh, U.S. gas prices (Click image for larger version)
While such savings are good for consumers, they can eat away at the tiny profit seen at gas stations accustomed to making cents on the gallon. So more money must be made inside the store, especially as analysts say better car mileage rates translate to fewer trips to the pump.
Pennsylvania traditionally has been one of the highest-priced states in the nation for gasoline, but in recent weeks it has bucked the national trend. The average price in Pittsburgh on Thursday was $3.567, about 12 cents cheaper than the national average and less than the $3.683 seen in the region one year ago.
Pittsburgh prices have fallen steadily for the past three months, but only in early May dipped lower than the national average. That local average is expected to stay relatively flat through the weekend, said Gregg Laskoski, senior petroleum analyst at GasBuddy.com, which is based outside of Minneapolis.
Pennsylvania's downturn in prices has been helped by Canada, which has increased crude exports to the East Coast.
That Canadian supply has led to lower prices across Pennsylvania. Mr. Singh at the Happy Mini Mart said he can expect to make about 9 cents on every gallon sold this week -- a meager amount that is reduced to almost nothing if credit card fees are taken into account.
At the same time, Mr. Singh is competing with retailers using the long weekend as a chance to lure customers with loyalty program promotions. The arrangements reward customers with per-gallon savings when they spend a certain amount of money.
The practice, once dominated by the region's largest grocers, is attracting newcomers.
Under one new program, BP stations honor savings earned by shopping at Kmart. Shell also has doubled down on its convenience store sales, allowing customers to earn savings on the gas they pump outside by spending more on chips and soda inside.
"Kmart and other grocery stores are trying to link the emotional attachment to gas savings to their stores," said Jeff Lenard, spokesman for the National Association of Convenience Stores, in Alexandria, Va.
"Gas is becoming its own currency."
And the pennies saved by consumers add up to millions of dollars around Memorial Day, when nearly 90 percent of all travelers are expected to go by car. AAA Travel projects about 34.8 million Americans will travel 50 miles or more this weekend.
The opportunity hasn't been lost on local grocers who want customers to load up on barbecue supplies and then hit the road after filling up at an affiliated station.
Shop 'n Save has a Pump Perks program that is taking 20 cents off a gallon for every $50 spent in stores. That 20 cents is double the amount typically saved, and runs through May 29.
Giant Eagle also boosted its fuelperks savings by 10 cents until May 29. In Pittsburgh, that increase means savings of 20 cents per gallon, while smaller GetGo markets like Columbus, Ohio, save 30 cents.
The O'Hara grocer has added sub sandwich stations and milkshake makers to some locations, and opened three supersized sites in the Pittsburgh over the past seven months that include indoor and outdoor cafe seating.
"I think that people choose GetGo as a great place to buy food," said Rob Borella, Giant Eagle spokesman. More than a third of the GetGos in southwestern Pennsylvania now have a sub station.
With retailers like Sheetz and Wawa already famous for their made-to-order subs, Pennsylvania is gaining a national reputation as a premier market for gas stations that seem to sell petroleum as a side business, said Mr. Lenard.
"There is an evolution underway," he said, "and places are becoming a food store that happens to sell gas."