The World's Unsexiest Business
adding a little sizzle to the convenience store industry
Let's call it a duel between brand iconography: a newsletter with unique typography set on a signature peach yellow colored paper versus a web 3.0 multi platform ecosystem replete with price scraping deterrent technology (yes, I've tried albeit unsuccessfully)
For the former, the business model largely relies upon a grassroots movement style heavy handed collective effort of an army of call center 'analysts' (I wouldn't want to offend anyone here by the relegation of staff titles) reaching out to hundreds upon thousands of convenience store owners and operators for supplier and retail prices to collect data to repackage and sell. Integrity seems to be maintained through human 'second pass' common sense and perhaps passive verification.
For the latter, let's call it decentralization at its best (or worst) with a contributor base that teeters between altruistic price informer and competitor manipulator. Sometimes the lines become blurred as evidenced by what seems to be none other than price sabotage while other times consumers simply need to be made aware of a hard to refuse deal at the pump. Revenue is measured in terms of views, clicks, downloads, and subsequent aggregate advertising dollar spend. The integrity of such a system is reasonably kept intact by a distributed self policing effort and something akin to open outcry: if you don't like it or think it's right, someone (human or perhaps bot) will eventually reign in the forces of 'checks and balances' to restore order.
Both company leaders ensure their respective public presence need no fanfare yet their ubiquity as de facto market authority personalities and experts on prices at the pump has largely remain unchallenged for years. But for the sake of dispensing accolades, a 'skin in the game' honorary award might very well be handed to Trilby simply for her longstanding family name having become synonymous with the data itself.
No I mean yes I mean NOOOO!!!
Then comes the use followed by the abuse. The eventual outcome after a year of being in service? A pesky yet temperamental button which no longer functions followed by an irate mob of customers whose subsequent behavior to such a failure in the system is nothing short of completely 'flipping out'.
This beckons the question of what seems to be 'dumb money' R&D spending by Gilbarco and Dresser Wayne: where the heck are you dumping oodles of this cash when nearly every site (50+) I've been to over the last year has experienced the same dramatic wear and TEAR??? Down to very same button, no less.
Solution: Since the 'NO' button seems to be pressed exponentially more times than the 'YES' button, randomize where 'NO' will be placed on the screen so that button wear and eventual tear can be evenly distributed.
I’ve purposely omitted nearly all analysis on the gas station side of the CSGS economics equation because it’s been covered quite extensively by various industry publications among other internet media outlets. However, the reason I want to address fuel tank temperature correction is that for gas station operators in Southern California during the summer, depending on how high the mercury can soar, this can be a sizable (albeit somewhat predictable) windfall.
But how do you maximize its contribution to your bottom line?
For this narrow three month window, it may be more worthwhile to consider a more competitive pricing strategy which will enable to you to sell more gallons thereby increasing the potential for more temperature corrected fuel deliveries. But to be able to do so you’ll need to determine the most optimal reduction in margin which hinges on correctly forecasting price elasticity.
Simply stated, how many pennies of margin do you reduce for each daily thousand gallons that you’d like to sell more of?
Ideally, you want to be able to preserve as much penny margin (per gallon) as possible for each incremental gallon sold.
Mathematically, here are the variables you’ll need to optimize:
Plotting out a cross section of how a sample of 15 locations have performed over a two year period (2014 - 2016), notice how there isn’t a uniform drop in margin for each incremental 1k gallons. The reduction in penny per gallon margin starts to ease as we approach 10k gallons per day of throughput.
As I'm sitting in a DTLA Starbucks on a rainy Friday morning, I happen to overhear (by the way, it's not considered eavesdropping when everyone can hear it!) in an all too Hollywood fashion and bursting bright techni-color-ful detail a rather boisterous legalese speaking and c-suite budding 'bro' on an epic conference call with his "strategic execution team" spelling out the very details of a market disrupting plan. The lack of discretion of such a plan might lead you to think it's all just a bunch of bro-grammers trying to sell their latest hare-brained idea to a deep pocketed retailer. But when "Jelinek's onboard in a way you cannot even imagine" gets peppered in every couple of minutes, that very braggadocio might lead you to strongly think otherwise. If you didn't know or care to realize, Craig Jelinek is the current CEO of the behemoth retailer Costco who has given somewhat 'carte blanche' status to his retail gas business development strategists to build that business at any cost.
Now what happened to be uttered oh so vociferously in such a public display of corporate non-discretion and brogrammer bravado were the following:
1. "serious game changer"
2. "shop while your car gets filled up"
3. "blockchain nah scrap that QR code type of validation valet ticket type of system"
4. "those small time dirty gas stations don't know what's coming their way"
Such a rollout is slated for an undisclosed (at least to my semi-prying ears) Northern California Costco in close proximity to a technology startup that is working with the disrupting retailer to launch the initiative.
Top-tier gas fuel retailers and marketers beware! Looks like preparations might be in order for a rough year ahead. Margin erosion might be just the beginning.