Food retailers that sell gasoline are finding that soaring gas prices are causing more shoppers to take advantage of in-store, point-of-sale programs that discount purchases at the pump.
Retailers interviewed by SN are also seeing higher redemption rates for discounts, which some shoppers are applying to greater quantities of gas.
"Although most cars only have a 15-gallon tank, customers are now redeeming a [single] reward on as many as 23 gallons of gas," said Tom Montgomery, project manager for fuel stations, Spartan Stores, a retail/wholesale company based in Grand Rapids, Mich. "This trend is more prevalent as gas prices rise." Previously, he said, a reward would be applied to between 12 and 15 gallons on average.
Montgomery suggested that customers are either fueling up two vehicles at a time or filling gas cans in addition to their cars to stretch their discounts as much as possible. He also noted that customers may be waiting until their fuel tanks are almost empty before filling up on gas. Spartan Stores is not discouraging this behavior since customers are authorized to redeem up to 25 gallons of gas on a single reward ticket, Montgomery said.
In addition, Montgomery said that Spartan is seeing a higher redemption rate for fuel discounts.
Spartan offers its fuel rewards program in three Michigan stores that are equipped with fuel pumps. Upon payment at the POS, customers are given a receipt with a bar code that contains a fuel reward for cents off per gallon based on the items they've purchased or the amount of money they've spent. The program is facilitated by technology from Irving, Texas-based Excentus (formerly CCISTech).
Since Spartan's fuel reward program is not linked to a loyalty program, enrollment is not required to earn and redeem fuel rewards. Consumers redeem rewards at the pump by scanning the bar code on the receipt before the gas is pumped.
Pittsburgh-based Giant Eagle observed an increase in the number of customers earning and redeeming rewards in its fuelperks! program, also facilitated by Excentus. In the Cleveland market, cars were seen lined up at Giant Eagle fuel stations.
"Its popularity has increased a little over the past few months," said Brian Frey, spokesman for Giant Eagle. "It could be attributed to rising fuel prices and the fact that people are driving more for vacations and summer traveling."
As part of the fuelperks! program, every $50 spent with the chain's Advantage Card at a participating Giant Eagle supermarket earns customers a 10-cent discount on each gallon of gas purchased at 64 GetGo stations, located at Giant Eagle stores and stand-alone outlets. GetGo stations are owned by Crossroads Convenience, a joint venture between Giant Eagle and Guttman Enterprises.
Reward points can be earned at approximately 190 out of the chain's 220 stores. Customers redeem points by swiping a Giant Eagle Advantage Card at the GetGo pump. Consumers can accumulate fuelperks! savings up to the full price per gallon of gas.
At Spartan, despite higher fuel reward redemption rates. fuel profits remain steady at 9 to 13 cents per gallon, according to Montgomery. "In my market the price of fuel has [fluctuated] from $2 to $2.79, but the profit picture hasn't changed at all," he said. [The fuel rewards] model works because I have incremental sales increases in the grocery store and that is how I pay for the discount."
In fact, many fuel rewards are paid for by consumer packaged goods manufacturers, according to Scott Wetzel, vice president of marketing and partner development, Excentus. "Retailers can take a manufacturer's item-based promotion and convert the price reduction into savings on fuel. For instance, they can convert a 30 cents-off discount on a product into 2 cents-off per gallon of gas," he said. Stores also pay for fuel discounts from their general marketing budget.