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  • Mark Lotstein


With retail fuel margins getting tighter, we recently have had multiple clients ask us our opinion on offering cash and credit pricing at the pumps. I am very much in favor of this option, while Bruce Butler feels it is not a great solution. The pros:

  • Cash/Budget-Oriented Consumers: Many people pay for as many things as possible with cash to help them avoid spending beyond their means.

  • In-Store Sales Increase: The customer has to come into the store to pay, thereby allowing you to capture additional sales.

  • Higher Profitability: You will have a stronger margin on cash sales. Most retailers offer only a 5- to 10-cent dis- count vs. credit. The processing fee is higher than that.

  • Cash Flow: You will have more immediate cash vs. waiting for your fuel supplier to process your credit cards.

  • Perceived Value: Many people are looking for the best price possible, be it against all competitors or from a brand they know and trust.

And the Other Side

  • Bruce: Mark is not old enough (only 45) to remember that we used to do business on cash/credit pricing. In the ’70s, the federal government took the major oil companies to task based on the argument that we should not charge customers for using their credit cards to buy fuel. The result was that we could not charge a higher fee for credit-card usage.

So here we are, more than 30 years later, offering a “discount” for paying with cash, as opposed to a surcharge for using a credit card. The cons:

  • Is it really needed? I am a retailer, and 70% of my customers are credit buyers, so do I want to charge them for using their card? I think there are many other stores out there that do not offer cash/credit pricing and yet have many happy customers.

  • Before pay at the pump, we had longer lines at the register.

  • The real reason dealers switch to cash/credit pricing is to be able to post the lowest price possible on the street. The average cost to retailers including at the pump and in-store credit is 2.5% to 3%. I recently reviewed prices at a number of stations in Fairfield County, Conn., and found that with the average street price for credit regular of $3.95, the cash price was $3.89. So a $3.89 cash price times 2.75% would be $4 to cover the cost of credit to the retailer. The margin theory allows you the ability to post a lower price, but I don’t believe it has a positive effect on margins.

  • When we introduced pay at the pump, we had concerns about customers not coming into the store. That turned outter. We may have lost customers or had customers who did not buy any items because they just wanted to get in line and pay for their gas as quickly as possible. I also believe the cash/budget consumers are less likely to pay c-store prices. That’s why they are using cash (to get the lower price).

  • Customers under age 25 seem to have no concept of cash. They use only debit or credit cards, so they would have no interest in the discount.

  • I believe perceived value depends upon if the customer thinks he or she is being charged for using a card, or getting a discount for using cash.

So if the real reason is to have the lowest price on the street, doesn’t that mean I am trying to attract the least loyal customer? My best customer is one who buys premium fuel and is willing to pay for the convenience of not having to make another stop to buy grocery items. These customers also primarily use a credit card.

We should never try to be all things to all customers. The best long-term strategy is to find a niche and excel at it. The bottom line: Do your homework and understand your customer before you match the competition on anything.

Mark: Offering a cash price is not always the right decision, but it can increase your margins and show that you care about your customers. In today’s economy, you are offering people a chance to save a few dollars. I am more loyal to a station that allows me the option to pay with cash and save 10 cents a gallon.


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