newmarketbuilders exclusive: Adding Fuel to the Fire

Fuel sales have become a hot spot for supermarkets and big box retailers of late, and the independent and small chain gas stations that are being pushed out of the market are not too happy about it. An independent gas station owner has filed suit against Safeway, claiming that the retailer is selling gas below cost in violation of California’s Unfair Practices Act. Meanwhile, Kroger is backing a bill that will make it a whole lot harder to bring such suits to court in the future.

If Kroger has its way, potential litigants would have to determine the price of every item that is sold in conjunction with a fuel purchase and factor in the costs involved in selling the items in order to prove that the fuel was sold at a loss. This would make it practically impossible for anyone who values their time and money to pursue a lawsuit.

A growing number of retailers, including Costco, Sam’s Club, Safeway, and Kroger, offer deals that either tie fuel purchases into those made in the main store, or link them to club and loyalty card membership. Safeway’s Club Card program, for example, offers three cents off each gallon of gas to holders of the card, and additional discounts kick in depending on grocery purchases. 

Whether wrapping fuel into value-loaded schemes or using fuel as a loss leader to lure customers to the main store, the field of fuel sales has become a battleground and now, a global retail game-changer.

In the UK, supermarkets now account for almost half of gasoline sales, with Tesco’s 15 percent share leading the pack. Brian Madderson, chairman of RMI, which represents petrol retailers, claims that unfair and predatory pricing is forcing the closure of 250 to 300 independent operators each year. Madderson is fed up with retailers using gas as a loss leader and stated in this week’s Telegraph that his organization wants “to stop supermarkets from selling petrol as if it was a can of beans.”

But why should anyone give a can of beans how retailers market gas? Protecting fuel retailers by making gas promotions off-limits for everyone else is like prohibiting Wawa, Sheetz, and other convenience retailers from promoting their food offerings lest they steal market share from grocers, or quick serve restaurants, or, these days, even drug stores.

And what about alternative fuel solutions?

A growing group of non-fuel retailers including Walgreens, Giant Eagle, Kohl’s, Ikea and, yes, Kroger, have installed electric charging stations in their locations. Walgreens plans to install them at roughly 800 locations nationwide this year, with the goal of becoming the biggest retail host of chargers nationwide. Walgreens charges for their chargers – In Florida, for example, the stations will impose a rate of about $2.49 an hour, which is more than the cost of charging up at home but still less than half the cost of gas for comparable mileage, according to the company. Kroger, on the other hand, is making its recently-announced North Texas charging stations free for the first year, and then converting to a pay system in 2013. That would seem to be the epitome of a loss leader, and yet no one is protesting.

Do you think that retailers should be able to tie gasoline prices to other purchases? 

Retailers Doing More with Less: Carol Spieckerman Speaks with Progressive Grocer Store Brands

In Store Brands' March cover story, Carol Spieckerman speaks to Randy Hofbauer about the new tactics retailers are using to promote private brands as pricing pressure escalates.

Read Do More With Less

Article by Randy Hofbauer for Store Brands, March 2012

Banner Brands: Blah or Brilliant? Take Two from the Private Brand Movement Conference

Carol's second take from the Private Brand Movement conference ran on Retail Wire this week. In the article, Carol ties together insights from several presenters on the use of banner brands and puts a spotlight on the differences between European and U.S. retailers' banner brand perspectives. 

BrainTrust Query: Let Your Banner Wave?

Should retailers align their private brands with their banners or build their brands separately? Based on presentations at the Private Brand Movement conference, it depends on whom you ask. 

In his presentation, "Creating Value Together: How European Retailers and Manufacturers Collaborate to Innovate," Koen de Jong, founding director at IPLC, noted that, for most European private brands, store banners "drive the offer." He cited Carrefour as an example of a retailer whose good, better and best private brands each bear the Carrefour name. 

In a co-presentation on the following day, Maggie Hodgetts, head of design for U.K.-based Waitrose and Jonathan Ford, creative partner for Waitrose's design firm, Pearlfisher, detailed the painstaking process that led up to the creation of Waitrose's mid-tier, health-oriented banner brand: Waitrose LOVE Life. 

The launch was portrayed as an expression of Waitrose's personality, its existing values around health and its reputation for care, consideration and quality. According to Mr. Ford, the Waitrose brand values were already a "great starting point," so the overarching opportunity was to be more "explicit" about those values and, in the process, express the positive side of health and well-being. The brand essentially became Waitrose writ large. 

Stateside retailer presentations told a different story. Alex Petrov, Safeway's VP of consumer brands spoke to the need for private brand quality to "ladder up" to the banner and vice versa. Interestingly, he confessed that, in some cases, Safeway's private brands seemed to "fall behind" and out of alignment as they upgraded store environments. With Safeway's private brand portfolio, including its new launches, heavily weighted toward non-banner brands, the company obviously believes that achieving alignment doesn't have to be an exercise in literalism. In fact, Safeway's non-banner O Organics brand led the way in its retailer-to-retailer brand model just as Craftsman and DieHard did for Sears. Clearly, major brand equity can be built separately. 

In her presentation, "Branding with Southern Style," Lisa Edwards, Belk's packaging design manager, indicated that the re-working of Belk's private brand has focused on modernizing its existing non-banner legacy brands, such as Kim Rogers and Red Camel, and creating a few more, such as accessory brand, Via Neroli, and the soon-to-be-launched cosmetics brand, Parisian, rather than attaching the Belk name to these products. According to Ms. Edwards, Belk customers perceive and receive the retailer's private brands as national brands, particularly in rural areas where Belk is the only game in town. Belk has encouraged individual store teams to use their imaginations to interpret the brands in their particular store's environment, enabling a form of localization-on-a-shoestring, and driving even more passion for the brand portfolio. Belk would seem to serve as a great example of how non-banner brands can more easily take on national brand characteristics. 

More than once during the conference, Trader Joe's was cited as a rare U.S. retailer that effectively leverages banner brands to drive differentiation. Does the fact that Trader Joe's is owned by German retail icon, Aldi, take them out of the running? 

Read what the Retail Wire Brain Trust had to say.