Variable Price Petrol!

-Chris-

http://www.irishtimes.com/newspaper/motors/2008/1029/1225197269960.html

After all our threads about passing on/not passing on the price, looks like this guy may have the best idea yet!

RichyX

I believe Kell Oil stations have been doing something similar for quite a while now, maybe a few years.

Bandara

Really stupid idea.

About 70% of your days trading happens between 7am and 3pm and this guy is alienating these people by raising his price so that when they drive past his station they see he is more expensive that the competition and drive on.

and most importantly this 70% of people account for 100% of the deli sales and most of the confectionary/coffees etc. Which is all the guys profit.

Nighttime customers are cigs, bread and milk etc stuff you don;t really care about selling.

He has it the completely wrong way around.

-Chris-

Do you not think it'll have benefits for staffing etc. - there'll be less of a rush at certain times and less of a "lull" at off-peak times?

Bandara

AudiChris wrote: »

Do you not think it'll have benefits for staffing etc. - there'll be less of a rush at certain times and less of a "lull" at off-peak times?

not at all Chris, in effect it will cost more on the wage bill.

your fulltime morning staff are your best staff, they are clued in and good at their jobs. during the day they are busy with customers and prepping food, doing the newspaper and magazine layouts etc etc. Once you have the correct number of staff working you can cope with any amount of customers.

But when you spread it over the day you then need more staff all day and all evening, except they are never going to be really busy but you still need to have them there, and your not going to find expereinced staff willing to work from 2 till 10pm as they will have kids etc, its going to be youngsters or foriegn staff that do these hours and they come and go too often to ensure a good quality of service to cope with busy periods.

I reckon I'd lose at LEAST 20% of my daily profit if I did this, in one of my site I do €2400 a day in the deli from 6am until 2pm, between 2pm and 6pm I'd do maybe €80, the profit margin on the deil is over 55% - why the hell would I throw this away to sell more petrol at a margin of about 2%.

Its madness thought up by someone who is being trying to be different to look like some sort of visionary. Except the really have no clue of the business imo

-Chris-

Cool, thx for detailed response Hammertime. Doesn't seem to make much sense after all!

TheBazman

Possibly this guy doesnt have a deli? Anyway I'm sure its different strokes for different folks - He seems to be happy to operate this way. Applegreen in Inchicore (before it was applegreen) used to do this aswell

Bandara

TheBazman wrote: »

Possibly this guy doesnt have a deli? Anyway I'm sure its different strokes for different folks - He seems to be happy to operate this way. Applegreen in Inchicore (before it was applegreen) used to do this aswell

regardless of him having a deli or not (which it does, I know of the site) its still madness.

confectionary, minerals, cakes etc sell during the day, they do not sell in anything like the same quantities at night as people have eaten their main meal of the day and are not hungry anymore.

There are also far less people around at night. Which means there are not enough to replace the people during the day that are being lost because of the higher fuel price. And these people during the day are very often reps on the road, professional drivers and people travelling decent sized journeys (as most others are in work). So this is the dream target customer for any garage as they are going to buy a paper, a sandwich, a bottle of minerals or coffee and a pack of crisps and/or chocolate. And thats multipled by how many people are in the car!

Whereas at night time this isnt happening.

Finally, this is not a new idea its been around for years but has never been brought into Ireland because its a disasterous fit to the profile of Irish consumers.

The Inchicore site is totally differnt breed to a Carlow site and there were seperate reasons for what they did.

seamus

I'm not sure.

The article didn't say he was raising the price above the competition during the day, just that he was dropping it in the evenings. So assuming that he's the same price as everyone else during the day, he's losing nothing. Also as you point out, the vast bulk of the traffic coming through is going to be people who are on mileage rates or who can expense their petrol, so a few cent here and there aren't that big a deal.

By dropping the price in the evening, he gets in extra trade which might not otherwise have passed through.

Biro

Anyone remember that guy in Ennis who had the happy hour? Think it was between 5 and 6pm on a Friday, and I think fuel was 10 pence a litre cheaper or something. THere used be a queue every week for it. That's back in the mid-90's sometime.

Bandara

seamus wrote: »

I'm not sure.

The article didn't say he was raising the price above the competition during the day, just that he was dropping it in the evenings. So assuming that he's the same price as everyone else during the day, he's losing nothing. Also as you point out, the vast bulk of the traffic coming through is going to be people who are on mileage rates or who can expense their petrol, so a few cent here and there aren't that big a deal.

By dropping the price in the evening, he gets in extra trade which might not otherwise have passed through.

Yes i see your point but he is not going to be able to be the same price as the competition during the day and then cheaper at night as he has to work within the same margin as everyone else, if I was a competitor near to him I'd just blow him out of the water by matching his cheapest price 24 hours a day as the additional high profit business i'd get in the shop would allow me to subsidise the fuel. he will then get a reputation for ripping people off during the day and only matching his competitor at nighttime. Its so easy to turn the whole concept against him.

Really, I just cannot see any single benefit in it, I've even spoken to two other people in the industry this morning and they all immediately said it was madness.

seamus

Hammertime wrote: »

Yes i see your point but he is not going to be able to be the same price as the competition during the day and then cheaper at night as he has to work within the same margin as everyone else, if I was a competitor near to him I'd just blow him out of the water by matching his cheapest price 24 hours a day as the additional high profit business i'd get in the shop would allow me to subsidise the fuel. he will then get a reputation for ripping people off during the day and only matching his competitor at nighttime. Its so easy to turn the whole concept against him.

Really, I just cannot see any single benefit in it, I've even spoken to two other people in the industry this morning and they all immediately said it was madness.

But by your own logic, he makes the bulk of his sales during the day. So if he sells below margin in the evenings (can he?), he's hoping to offset that by increased shop sales, and there's no way his competitors can match his evening price 24 hours a day.

Maybe.

Bandara

seamus wrote: »

But by your own logic, he makes the bulk of his sales during the day. So if he sells below margin in the evenings (can he?), he's hoping to offset that by increased shop sales, and there's no way his competitors can match his evening price 24 hours a day.

Maybe.

ah-ha

but your missing the key to it all Seamus, the profitablity of the products you sell during the day is (imo) at least double of that in the evenings. So if he sells an extra 2k worth of shop sales at night and he loses €800 of shop sales during the day then I'd guess that he is actually losing money becuase of the whole venture as his wage costs will be higher.

Its a bit of a fools paradise, if I wanted to boost shop/fuel sales in the evenings I'd maybe look at a free carwash (about 80% margin so tiny cost to retailer - and no addtional staff cost) with any purchase of 30 litres of fuel - as carwashes are always very quiet in the evenings, or a free tea or coffee (again 85% margin = tiny cost to retailer) with any €20 of fuel, no one just has a coffee, they are very likely going to buy a bar or cake to eat with it, and if they do your making good margin on it.

The carwash particulary gives people the sense of getting a good deal, a free wash is worth anywhere between 5 - 10 euro. And realistically the evening people are the ones who don't traditionally use carwashes except on the weekends so your not losing revenue that you would have got anyway.

seamus

Hammertime wrote: »

but your missing the key to it all Seamus, the profitablity of the products you sell during the day is (imo) at least double of that in the evenings. So if he sells an extra 2k worth of shop sales at night and he loses €800 of shop sales during the day then I'd guess that he is actually losing money becuase of the whole venture as his wage costs will be higher.

But why would he be losing shop sales during the day? He hasn't changed his "normal" price, so the same amount of day business will come into him.

If he sells the petrol so that he's losing say, 1c per litre in the evenings, then on the face of it he makes a loss of 50c per customer. But perhaps he knows that overall he makes a profit of €2 per customer in the evening.

If he would normally sell to 40 people in the evening, then he's going to lose €20 overall. But if his stunt boosts his sales to 80 people, his overall profit increases by €140.

L1011

But if his daytime customers move to the evenings and spend less in the shop as a result....

seamus

But they're all in business. Why would they return to the shop after dropping their vehicle back in work.

TBH, it probably depends on the location of the shop and the volume of business. For the figures I've quoted above, it would barely seem worth it. But for a bigger shop, say like the Texaco beside the Foxhunter on the N4, it could draw in all the hometime commuters - hungry and tired from their day in work and with 45 minutes driving in front of them = ka-ching!

Bandara

seamus wrote: »

But why would he be losing shop sales during the day? He hasn't changed his "normal" price, so the same amount of day business will come into him.

If he sells the petrol so that he's losing say, 1c per litre in the evenings, then on the face of it he makes a loss of 50c per customer. But perhaps he knows that overall he makes a profit of €2 per customer in the evening.

If he would normally sell to 40 people in the evening, then he's going to lose €20 overall. But if his stunt boosts his sales to 80 people, his overall profit increases by €140.

but Seasmious the garages around him are just goingt o match his lowest price point, (ie the evening price), that then leaves him with his ass out thwe window all day as he'll be dearer than the others and in effect there will be no point of visiting him in the evening.

Anyways people are not going to bother unless he is at least 3 or 4 cents cheaper and again if he is that cheap the other garages will just match him, are you really going to leave your house at 8 at night while watchign the telly/playign with the kids etc to drive to some garage cause he is a cent cheaper?

I don't think you'll bother.

seamus

Hammertime wrote: »

but Seasmious the garages around him are just goingt o match his lowest price point, (ie the evening price)

But not if he prices the petrol so that he's making a loss - they can't match it.

Bandara

seamus wrote: »

But not if he prices the petrol so that he's making a loss - they can't match it.

course they can, and they will.

I've been selling fuel at a loss for the past 2 weeks. I'm making so much extra in the shop due to the high volume of customers I've no intention of changing it

seamus

Interesting to know

Bandara

seamus wrote: »

Interesting to know

lol

testicle

Hammertime wrote: »

Really stupid idea.

About 70% of your days trading happens between 7am and 3pm and this guy is alienating these people by raising his price so that when they drive past his station they see he is more expensive that the competition and drive on.

Stop talking out your hole about something you know nothing about. During the day, this individual station is the same price as the competition.

I can also assure you, in reference to your comment reference the deli/coffee, that if you commute to Dublin, you've left Carlow long before the prices have gone up again in the morning.

He's also not the only station in the town that does this. There is at least one other that varies their prices at will throughout the day.

Is Carlow the cheapest in the country for petrol? 110.9 in places...

SV

testicle wrote: »

Stop talking out your hole about something you know nothing about.

He owns and runs a petrol station.

Bandara

ClioV6 wrote: »

He owns and runs a petrol station.

More than one Station. But Mr Ignorant doesn't deserve a response to his needless abuse on a very interesting and previosuly well debated thread.

tw0nk

Hammertime, just to pick at one of your points about other garages matching said garages price.... In Enniscorthy where I live which is 10 mins from Ferns, I checked prices yesterday, most expensive was 125.9, cheapest was 120.9, so it looks like the garages in the town aren't bothered with matching competitors. To make things worse, on the main road to dublin, going through ferns, the price was 115.9 yesterday, thats a full 10 cents cheaper than the dearest in the town.

I know John Brown brought this up in the Dail previously but its shocking to see, on a side note, I filled up in Waterford on Sat for 113.9

unkel

testicle wrote: »

Stop talking out your hole

Stop using abusive language. That's a warning.

-Chris-

testicle wrote: »

Stop talking out your hole about something you know nothing about...

Interesting... please tell me more!

:rolleyes::rolleyes:

Bandara

tw0nk wrote: »

Hammertime, just to pick at one of your points about other garages matching said garages price.... In Enniscorthy where I live which is 10 mins from Ferns, I checked prices yesterday, most expensive was 125.9, cheapest was 120.9, so it looks like the garages in the town aren't bothered with matching competitors. To make things worse, on the main road to dublin, going through ferns, the price was 115.9 yesterday, thats a full 10 cents cheaper than the dearest in the town.

I know John Brown brought this up in the Dail previously but its shocking to see, on a side note, I filled up in Waterford on Sat for 113.9

Twonk

Its very hard to explain mate, its a bit of a crazy business when it comes to the smaller garages in the country. I've had one of my sites at 113.9 for the past 2 weeks, I was the cheapest in the country for a good 4 or 5 days and my output quadrupled overnight, the two stations nearest me, both within about 2 miles were at 124.9 and 119.9 until the last few days. People then assume that they are being robbed by these stations as I am 11 and 6 cents respectively cheaper than them.

Thats not the case however, half the reason I could sell at this price is because i filled my storage tanks with close to 160,000 liters of fuel the day of the budget to avoid being hit for the 8c increase, the garages near to me have storage of 16k and 40k respectively. Also I'm banging out close to 1/4 million litres a week on this particular site so I can manipulate the market and buy large amounts when the price falls without any cashflow problems as I know I'll not be sitting on the fuel for long.

I'm not explaining this very well, but trust me when i say that the 2 garages near me can't react even if they want to. I have them completely buried on preice knowing they cannot match me within 5 cents even, and eventually when they do shift their old more expensive cost price fuel and then lower their prices I'll bury them again by taking another 3 or 4 cents off the price as the new cheaper fuel that they are benefitting from is also benefitting me.

In addition the fact I have several car washes, a hugely strong deli and a reputation as a good site makes it hard for them to ever compete. A lot of these smaller operators are really really struggling to survive. These price flucations are absolutely killing them to the poitn of going out of business, and they even get charged a delivery fee of between €50-€110 on their fuel as they cannot take full loads (ie a full tanker at a time) whereas I get charged nothing simply because I have the capacity to take multiple loads a day if i want to. Bear in mind they are getting 16k litres and are hoping to make a profit of €320 on it and are then getting hit buy a delivery charge of a hundred euro or so!

ANDF they have to pay for the fuel within a day of receiving it, despite the fact it may take them a week or more to sell it.

Its becaome a very tough business for the smaller guys

tw0nk

thanks for really good reply hammertime, since joining the ranks of the commuter my loyalties have gone out the window and I buy purely on price now, one interesting thing Ive noticed is that when I need a car wash if I buy in an apple store the price of petrol is reduced 3/4 cents a litre.

thanks again for taking the time to respond.

Bandara

tw0nk wrote: »

thanks for really good reply hammertime, since joining the ranks of the commuter my loyalties have gone out the window and I buy purely on price now, one interesting thing Ive noticed is that when I need a car wash if I buy in an apple store the price of petrol is reduced 3/4 cents a litre.

thanks again for taking the time to respond.

there is no loyalty in the fuel game, as for that car wash deal pah, from next week I'm doing 10 cents a litre off with ANY carwash bought not just the topwash.

And there is no restriction on the amount of liters you can buy.

:P

testicle

ClioV6 wrote: »

He owns and runs a petrol station.

I know that. He doesn't own and run this station in question, which is what I was referring to. As evidenced by his earlier post regarding the station in question's prices during the day.