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Retailers Need to Master New Math of Fuel Economics

Retailers Need to Master New Math of Fuel Economics

Times are tough and while people are watching their dollars, they are watching their gas tanks even more carefully. They may be looking for either value or bargains, depending on what is important in their shopping experience, but part of the bargain/value equation is whether the potential savings will offset any extra gasoline it will take to get it.

For instance, in buying a bag of dog food — it may still be the premium brand — consumers know that they will save a dollar by driving to a discount store 10 miles away, as opposed to the supermarket a half mile from their house. The equation goes: 20 miles to the gallon city driving — assuming these folks have already downsized their vehicle — means they'd be spending about $4 at today's prices to save $1. A year ago, they may not have thought twice about making the trip, but now that $3 is top of mind.

Considering the number of fuel-related promotions supermarkets are running this summer, there is widespread recognition that this is a potent marketing device. Some are just starting, while others have been going for some time. The ones that credit customers by the purchase amount, and track the accumulating discounts electronically, have a definite advantage in drawing repeat traffic, and getting consumers to make purchases they would ordinarily make elsewhere. A broad nonfood offering is the ideal complement.

So is a pharmacy program, and many chains are adding discounted generic drug offerings to their promotional arsenal. The latest are Schnucks and Dierbergs in the St. Louis area and Stater Bros. in Southern California (see story, Page 16). They won't be the last. As Greg Guenther, Dierbergs' director of pharmacy, said, $4 30-day and $10 90-day supplies represent a savings even to those who now use mail-order services from insurance companies.

There's nothing new about the concepts of value and one-stop shopping, but to take full advantage of them, retailers need to make an even greater effort to think like their customers. This means a full understanding of the new economics of fuel that are shaping their lives.

What can be done besides offering a deal on gas? More people are adopting a two-wheeled lifestyle, with bicycles or motorcycles. Safe bike parking and bagging accommodations should be considered.

Many companies are adding fuel surcharges while gas prices continue to escalate to new heights. How about a fuel discount for those who drive to a store? With online mapping capabilities, perhaps this could be tracked and allocated with a fair amount of precision from the customer's home, maybe electronically at the point of sale.

There are many possibilities to drive foot traffic while customers cut back on using their cars. A combination of tried-and-true strategies, new concepts and outside-the-box thinking can take supermarkets a long way.