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BangBen
In search of diaper deals and cheaper milk, Erin and Chris Smith joined their local warehouse club. To their surprise, the Cary, N.C., couple found their biggest savings at the pump: They saved about $200 last year at the club’s filling station, which discounts fuel for members. Cheaper gas is becoming popular territory for warehouse clubs and supermarkets – a bigger play for customer loyalty, and a new opportunity to pad their own bottom lines.
Warehouse clubs and grocery chains are increasingly offering discounted fuel at their U.S. stores — often up to 10 cents or more per gallon lower than other stations a few blocks over. There are about 5,000 of these so-called “hypermarts,” up 37% over the last five years, with another 200 expected to open next year, according to EAI, Inc., which tracks the petroleum sector. About 70 supermarket chains now include fuel stations at some of their stores. But this growth in discount gasoline comes with a catch: To get the deal, customers usually have to spend a certain amount of money in the store, or they have to be warehouse club members – at $40 a year or more.
For their part, retailers barely profit from their fuel station sales, says Ron Santicola, a consultant focused on retailing and fuel distribution at Gerson Lehrman Group, a research firm. But it’s worth it: The lure of cheap gas leads customers to spend more money inside the stores, analysts say. That $200 Smith says she saved last year? It went right back to BJ’s (BJ: 47.16, -0.38, -0.79%). “Instead of having hot dogs for dinner, we might have steak,” she says. For retailers whose in-store margins average 25% per product, even small additional sales can have a big impact, says David Livingston, an independent supermarket analyst.
Still, with gas prices up 9% this year, the savings can be significant. The average American household spends about $2,000 per year on gas, according to the Bureau of Labor Statistics; a $200 annual savings cuts that budget by about 10%. That’s money that could be saved, or used to pay down debt, or even have steak instead of hot dogs. To make these programs work for you, SmartMoney looked at three popular ways to get fuel on the cheap — and their potential savings and pitfalls.
The downside: Loyalty programs – whether they net savings on gas, air miles or some other reward – tend to kill the comparison shopping instinct. When it comes to gas and groceries, consumers whose gas discounts are tied to store loyalty cards could end up paying more for grocery items that could be found cheaper elsewhere, simply to earn points for discounted gas, says Livingston. For example, Marci Loehner, a stay-at-home mom in Cincinnati admits that she barely comparison shops anymore, in order to maximize her loyalty points – and save $24 on gas each month. As a result, supermarkets can raise prices without customers noticing, or caring, Livingston says. A spokeswoman from Safeway, which offers up to a 10-cents-per-gallon discount on gas to loyalty club members who spend $50 or more, says that product pricing and gas pricing are unrelated. Kroger declined to comment on pricing.
Who wins: Families who buy several hundred dollars worth of groceries per month. They’re already spending enough to be eligible for the added gas discount, says Santicola.
Read more: 3 New Ways to Save on Gas - Spending - Autos - SmartMoney.com http://www.smartmoney.com/spending/autos/3-new-ways-to-save-on-gas/#ixzz177YG8fWb
Warehouse clubs and grocery chains are increasingly offering discounted fuel at their U.S. stores — often up to 10 cents or more per gallon lower than other stations a few blocks over. There are about 5,000 of these so-called “hypermarts,” up 37% over the last five years, with another 200 expected to open next year, according to EAI, Inc., which tracks the petroleum sector. About 70 supermarket chains now include fuel stations at some of their stores. But this growth in discount gasoline comes with a catch: To get the deal, customers usually have to spend a certain amount of money in the store, or they have to be warehouse club members – at $40 a year or more.
For their part, retailers barely profit from their fuel station sales, says Ron Santicola, a consultant focused on retailing and fuel distribution at Gerson Lehrman Group, a research firm. But it’s worth it: The lure of cheap gas leads customers to spend more money inside the stores, analysts say. That $200 Smith says she saved last year? It went right back to BJ’s (BJ: 47.16, -0.38, -0.79%). “Instead of having hot dogs for dinner, we might have steak,” she says. For retailers whose in-store margins average 25% per product, even small additional sales can have a big impact, says David Livingston, an independent supermarket analyst.
Still, with gas prices up 9% this year, the savings can be significant. The average American household spends about $2,000 per year on gas, according to the Bureau of Labor Statistics; a $200 annual savings cuts that budget by about 10%. That’s money that could be saved, or used to pay down debt, or even have steak instead of hot dogs. To make these programs work for you, SmartMoney looked at three popular ways to get fuel on the cheap — and their potential savings and pitfalls.
1. Loyalty rewards at supermarkets
How it works: Shoppers with the supermarket’s loyalty card are eligible for discounted gas – usually about five to 10 cents cheaper than nearby filling stations. Then it gets a little complicated: Customers can earn deeper discounts by spending more money in the store. The more they spend, the deeper the discount. In some markets, Kroger customers who spend $400 in the grocery store can get a discount of up to 40 cents per gallon. On a 25-gallon fill-up, that’s a $10 savings.The downside: Loyalty programs – whether they net savings on gas, air miles or some other reward – tend to kill the comparison shopping instinct. When it comes to gas and groceries, consumers whose gas discounts are tied to store loyalty cards could end up paying more for grocery items that could be found cheaper elsewhere, simply to earn points for discounted gas, says Livingston. For example, Marci Loehner, a stay-at-home mom in Cincinnati admits that she barely comparison shops anymore, in order to maximize her loyalty points – and save $24 on gas each month. As a result, supermarkets can raise prices without customers noticing, or caring, Livingston says. A spokeswoman from Safeway, which offers up to a 10-cents-per-gallon discount on gas to loyalty club members who spend $50 or more, says that product pricing and gas pricing are unrelated. Kroger declined to comment on pricing.
Who wins: Families who buy several hundred dollars worth of groceries per month. They’re already spending enough to be eligible for the added gas discount, says Santicola.
Read more: 3 New Ways to Save on Gas - Spending - Autos - SmartMoney.com http://www.smartmoney.com/spending/autos/3-new-ways-to-save-on-gas/#ixzz177YG8fWb
