Will Walmart Put Rivals in Rearview Mirror With Gas Rollback?
Walmart announced on Monday the return of its Great Gas Rollback program, which allows customers using one of the chain’s gift cards, credit card or MoneyCard to save 15 cents a gallon on fuel purchases made at more than 1,000 Murphy or Walmart stores in 21 states through July 7.
"For every cent gas prices climb, consumers have $1 billion less to spend," said Gisel Ruiz, chief operating officer for Walmart U.S., in a statement. "Over the past two years, our Great Gas Rollback has saved customers more than $100 million."
Walmart is not alone in trying to capture customers with gas deals. H-E-B also announced on Monday that customers who purchase its gift card can save up to 12 cents a gallon at participating company gas stations in Texas. The program also runs through July 7.
Giant Eagle’s Fuelperks program allows shoppers to get a discount of 10 cents a gallon of gas at its GetGo stations for every $50 spent on groceries.
Costco members using its American Express card get three percent cash back on all gas bought at its clubs.
Discussion Questions
What effect will the Great Gas Rollback have on Walmart’s business and those of its competitors? Do you expect to see a significant increase or decrease in the numbers of retailers participating in gas discount programs in the years ahead?
Fuel is regarded as a non-emotional purchase, except for price. Perhaps that’s because we have to buy fuel, but is that any different than having to buy milk for a family? It may be that it’s because fuel prices by law have to be posted for all to see, bringing out the value seeker in us all.
For whatever reason, consumers regard a discount on gas to be of a higher value than the same amount being taken off a grocery or other item. That is what had driven the rise of all the programs linking groceries, etc. purchases and to fuel. The original programs were based on the customer earning a fuel discount by buying specific items, entitling them to X cents per gallon discount. Today those still exist with other programs allowing you to earn X cent per gallon based on total purchases. New programs such as Coke Rewards are being directly linked to the manufacturer/producer.
These programs will continue to proliferate until it will be possible to secure a discount at most fuel locations. However, they’re no different than any similar programs; the offer has to be attractive enough to secure participation.
Since these programs last for a while, it makes it worth the time and effort for consumers to use and save over several months and many fill-ups.
Gas doesn’t look to be declining any time soon.
I think many people are trying to consolidate driving/trips; if you get them on the lot, you probably get them in the store.
(See today’s discussion on loyalty programs.)
This one works big…until everyone else does it. But, the advantage Walmart has is they will be able to do it deeper and longer than any competition.
The price of gasoline, a necessity in today’s world, continues to fluctuate upward. And, with Washington and the Environmental Protection Agency making noise about insisting that sulfur content being lowered, and industry saying that the price of gas will rise 7-8 cents per gallon, the consumer will be seeking opportunities to save.
Each month, the Prosper Insights & Analytics Monthly Consumer Survey asks thousands of respondents about the “Impact of fluctuating Gas Prices on spending.” In March, 45.8% say they will be driving less—that compares to 34.5% saying that in March, 2007, meaning less opportunity for retailers.
Walmart’s actions, and those of Giant Eagle, Kroger, Costco, etc. recognize the impact registered by these same respondents—36.8% say that they are reducing dining out, compared to 28.7% taking that action in March, 2007; 29.9% are spending less on clothing compared to 22.2% compared to pre-recession; 20.5% are spending less on groceries, vs. 14.2% six years ago; and 21.0% are delaying major purchases, compared to 18.4% in March, 2007.
The consumer continues to assure themselves that they remain deleveraged. If retailers expect to continue to drive topline revenue, they have to keep the customer at the center of their equation. Gas is a way to participate.
Fuel discount programs will be effective as long as gas prices are on the rise.
As others have commented, the offer becomes weaker when virtually every grocer has a fuel discount program in play. In my view, we are getting close to that point and grocers need to look beyond fuel to differentiate.
A nuance of the Walmart program is that earnings are triggered upon use of a prepaid or gift card. Similar to the manner in which Starbucks and Dunkin’ Donuts are using prepaid cards, Walmart is creating behavior change and opening up multiple revenue streams by specifying the way purchases must be made to trigger rewards.
Note that Walmart’s constant drive for low prices is not founded on simply lowering the price, but in going through their own cost structure, as well as that of their suppliers (!) looking for where cost savings might be achieved. It is that looking through their suppliers’ cost structures that has been offensive to many suppliers, and has led to charges of monopsony—dominating the supply chain, not the market.
But 100 years of history, first with A&P up until the 1950s, and now Walmart, show the tremendous societal benefit of this approach. And of course, those who have excelled at that business strategy, A&P and Walmart, have themselves excelled in business achievement, and legitimate dominance of their markets.
It is ALL about efficiency (as most of life is.) The remaining inefficiencies in self-service retailing are predominantly the inefficiency of the shoppers themselves. Whether willy nilly, or by strategic design, The Third Wave of Retailing is founded on the efficiency of the shopper—not on that of the retailer or anything in the supply chain.
Too bad the customer can’t drive the car into the store. If we can’t get the customer to actually enter the store, I’ll settle for them driving onto my parking lot. Walmart is smart. Get people to make a habit of driving to Walmart, just as you would any other gas station or convenience store. Once on the lot, they may come in and buy other merchandise. (Like Walmart doesn’t know that!)
The big discount on gas also reinforces the identity of Walmart being a low priced retailer.
Retailers can learn a lot from the gas discount program. In the end, let’s get our customers to be reminded of us, notice us and buy from us. Let’s make the experience a habit. That’s what Walmart is doing.
According to several reports, some shoppers have walked away from Walmart because of stockout issues and long checkout lines. Walmart is addressing the problems, and adjusting in-store head counts to improve shopper experience. The move to a gas discount program may get them driving back to Walmart.
Seeing more gas discount programs tied to loyalty program rewards in Southern California—Von’s (Safeway) and Ralph’s(Kroger) at Shell and Chevron respectively offering 10 to 20 cents a gallon off of pump prices. It seems to be working, keeping more shoppers coming back to the destination. Focus on gas prices reminds shoppers of the cost of driving around for special prices.
It will bury them. How can they afford to sell for 15 cents a gallon less?