It's hard to turn a profit owning a gas station

[zephyrprime]

Originally posted by: JEDI
CNN

"he bought the gas station in 2003 as an investment but he has not turned a profit in 30 months because gas margins are razor thin and he cannot sell enough volume to compensate."

Never thought that about black gold.

guess it's like most franchises, where the franchiser makes all the $, and the franchisee makes minimum wage

The owner of the crude oil well makes the most money. Everyone else makes chicken feed in comparison. But on the downside, if the price of crude tanks, the oil well owners feel the pain but others much less or hardly at all.

 

[jadinolf]

Originally posted by: amdhunter

Originally posted by: jadinolf
My dad owned 2 gas stations, not at the same time.

Tough way to make a living.

Is it really? I always thought that most gas stations buy at lower price, and make huge margins when the gas prices go up. Higher gas prices doesn't affect what they initally paid, does it?

I would think they'd be raking in the dough.

Thank God these emoticons exist.:laugh:

 

[jadinolf]

Originally posted by: SampSon

Originally posted by: amdhunter

Originally posted by: jadinolf
My dad owned 2 gas stations, not at the same time.

Tough way to make a living.

Is it really? I always thought that most gas stations buy at lower price, and make huge margins when the gas prices go up. Higher gas prices doesn't affect what they initally paid, does it?

I would think they'd be raking in the dough.

If you're gas station is doing enough business to stay afloat then the gas in your tanks doesn't stay around long enough to appreciate by any substantial amount.

It's hard to turn a true profit in most business at the retail level. Margins are always thin.

That is exactly correct. My dad sold his business in 1956 and price fluctuation was just about nil. Gas sold for about 30 cents a gallon. There also were no built-in convenience stores as far as I can remember.

The money had to be made in "the back room".

 

[AgaBoogaBoo]

So if gas stations have a hard time turning a profit from gas alone, how are places like Sam's Club and Costco able to do this without a convenience store?

Edit: Read my posts below to see what my point is.

 

[Pabster]

Originally posted by: dmcowen674
It's pretty apparent, all gas stations should just shut down.

Vintage Dave :laugh:

 

[Amused]

Originally posted by: AgaBoogaBoo
So if gas stations have a hard time turning a profit from gas alone, how are places like Sam's Club and Costco able to do this without a convenience store?

Did you think about that before you posted?

 

[KK]

Originally posted by: AgaBoogaBoo
So if gas stations have a hard time turning a profit from gas alone, how are places like Sam's Club and Costco able to do this without a convenience store?

I believe costco and sams have these big brick buildings called a store.

 

[AgaBoogaBoo]

Originally posted by: Amused

Originally posted by: AgaBoogaBoo
So if gas stations have a hard time turning a profit from gas alone, how are places like Sam's Club and Costco able to do this without a convenience store?

Did you think about that before you posted?

What? That their store itself sells all those things?

If that's the case, why would they sell gas? They already had their stores established before selling gas. They sell gas now to increase profits and so that alone clearly has to be profitable for them.

Edit: I guess I'm saying to think of their gas station as an independent unit. It should be profitable on its own to be worth their time and effort, otherwise they're simply pulling money from store sales to cover cost of being able to provide gasonline. You guys make it seem like gas station owners aren't making any money and are just scraping by to stay in business.

 

[ponyo]

Originally posted by: Amused

Originally posted by: AgaBoogaBoo
So if gas stations have a hard time turning a profit from gas alone, how are places like Sam's Club and Costco able to do this without a convenience store?

Did you think about that before you posted?

:laugh::laugh::laugh:

 

[AgaBoogaBoo]

Originally posted by: KK

Originally posted by: AgaBoogaBoo
So if gas stations have a hard time turning a profit from gas alone, how are places like Sam's Club and Costco able to do this without a convenience store?

I believe costco and sams have these big brick buildings called a store.

You're missing the point.

Let's assume a new gas station opens up without selling convenience goods, just gas and nothing else. They see they aren't making enough, and so they start selling chips, drinks, food, etc. and see they are doing pretty well.

Why would you go the other way around? That is, start selling all the goods besides gasoline, and make a profit. After that, you decide you want to sell gasoline even though it won't turn a profit.

 

[ponyo]

Originally posted by: AgaBoogaBoo

Originally posted by: Amused

Originally posted by: AgaBoogaBoo
So if gas stations have a hard time turning a profit from gas alone, how are places like Sam's Club and Costco able to do this without a convenience store?

Did you think about that before you posted?

What? That their store itself sells all those things?

If that's the case, why would they sell gas? They already had their stores established before selling gas. They sell gas now to increase profits and so that alone clearly has to be profitable for them.

Ever hear of loss leader? :laugh:
Gas can help or hurt their overall profit. Listen to Costco CC sometimes.

 

[AgaBoogaBoo]

Originally posted by: Naustica

Originally posted by: AgaBoogaBoo

Originally posted by: Amused

Originally posted by: AgaBoogaBoo
So if gas stations have a hard time turning a profit from gas alone, how are places like Sam's Club and Costco able to do this without a convenience store?

Did you think about that before you posted?

What? That their store itself sells all those things?

If that's the case, why would they sell gas? They already had their stores established before selling gas. They sell gas now to increase profits and so that alone clearly has to be profitable for them.

Ever hear of loss leader? :laugh:
Gas can help or hurt their overall profit. Listen to Costco CC sometimes.

Is there proof that more people came to their store after they starting offering gas at a loss?

 

[Exodor]

Let's say you need gas and you know you can get it at CostCo.

If you stop at CostCo for gas, do you think you might be tempted to run in "just for one quick thing?"



The gas station is a way to draw people to the store. And I'm sure it works, otherwise they wouldn't have gas stations. I'm sure both can afford to break even or lose money on the gas station.

 

[BigToque]

Originally posted by: AgaBoogaBoo
So if gas stations have a hard time turning a profit from gas alone, how are places like Sam's Club and Costco able to do this without a convenience store?

Edit: Read my posts below to see what my point is.

I assume they take the loss at the pump, but it builds brand recognition and awareness of the company in general and brings in more business to offset the losses from the gas station.

 

[ponyo]

Sam's and Costco don't always sell gas at a loss. Sometimes they do, sometimes they don't. It depends on the market condition.

As to proof it helps with store sales, ask Costco or Sams. I don't think they're doing it out of goodness of their heart.

 

[AgaBoogaBoo]

Originally posted by: BigToque

Originally posted by: AgaBoogaBoo
So if gas stations have a hard time turning a profit from gas alone, how are places like Sam's Club and Costco able to do this without a convenience store?

Edit: Read my posts below to see what my point is.

I assume they take the loss at the pump, but it builds brand recognition and awareness of the company in general and brings in more business to offset the losses from the gas station.

After reading your post, Exodor, and Naustica, it seems I was under a wrong impression. How can we find numbers to see if this is actually true?

My point of view must be somewhat skewed... last year I went to an Indy 500 event where all the local gas station owners (for this particular brand) were invited to. It seems like they're all doing well, and were talking about opening up more locations or buying one location together that was doing well. They had a nice full bar, tons of food, nice air conditioned area, etc. After that event, I didn't think of gas station owners as people scraping by for retail profits, they seemed to be doing very well. I was there the whole time and met a lot of people, would be hard to think that they were all barely making ends meet.

How can we find solid numbers to figure out what the fact is?

 

[ponyo]

Don't cry for gas station owners. Most make good money. Those that don't go out of business. Gas margins may be razor thin but it's enough usually to pay for rent and utilities. Inside sales are their bread and butter with margins in the 30-40% range.

 

[Dunbar]

Originally posted by: BigToque

Originally posted by: AgaBoogaBoo
So if gas stations have a hard time turning a profit from gas alone, how are places like Sam's Club and Costco able to do this without a convenience store?

Edit: Read my posts below to see what my point is.

I assume they take the loss at the pump, but it builds brand recognition and awareness of the company in general and brings in more business to offset the losses from the gas station.

Couple of things I can think of:

1) Both are huge corporations (Sam's Club is owned by Walmart). They can use their huge purchasing power to negotiate lower prices

2) There is no brick-and-morter retail outlet at their gas station (not even an attendant on duty). This would dramatically lower their overhead. IME they are only a few cents cheaper a gallon so I can see where it would be profitable (but probably not a hugely so). Plus, since you need to be a "member" to get the cheap price it encourages people to shop at the respective megamart.

 

[AgaBoogaBoo]

Originally posted by: Naustica
Don't cry for gas station owners. Most make good money. Those that don't go out of business. Gas margins may be razor thin but it's enough usually to pay for rent and utilities. Inside sales are their bread and butter with margins in the 30-40% range.

Whatever it is, they're doing well. This kind of complaining from them is just for attention, IMO. If that attention succeeds and he gets people to buy gas from him for acting like he's loyal to the community, then great, he's a businessman and does whatever it takes to put an extra buck in his pocket.

"So I just thought: What can I do to help the consumer?"

A business owner acting like he cares? Business owners always try to play it off like they don't have a lot of money or are essentially doing a favor to the community. In reality, they know they're making money.

What does he means by he's been operating at a "loss"? You can stretch definitions 50 different ways or write off 50 different things, factor in some huge "loan" he made to purchase it with, etc.

 

[PCMarine]

I actually live a few miles away from that gas station... it's actually pretty nice, but the gas there is always more expensive than the competition.

 

[AgaBoogaBoo]

Originally posted by: Dunbar

Originally posted by: BigToque

Originally posted by: AgaBoogaBoo
So if gas stations have a hard time turning a profit from gas alone, how are places like Sam's Club and Costco able to do this without a convenience store?

Edit: Read my posts below to see what my point is.

I assume they take the loss at the pump, but it builds brand recognition and awareness of the company in general and brings in more business to offset the losses from the gas station.

Couple of things I can think of:

1) Both are huge corporations (Sam's Club is owned by Walmart). They can use their huge purchasing power to negotiate lower prices

2) There is no brick-and-morter retail outlet at their gas station (not even an attendant on duty). This would dramatically lower their overhead. IME they are only a few cents cheaper a gallon so I can see where it would be profitable (but probably not a hugely so). Plus, since you need to be a "member" to get the cheap price it encourages people to shop at the respective megamart.

1) When it comes to gas, can they do that a lot? Obviously they are buying in larger quantities, but they don't have the same power as they would with manufacturers for goods they sell in the store.

Dullard said this in a thread yesterday:
"So, Kraft, you sell 100 products at Walmart. Make mac and cheese available at 5 cents/box or we pull every product you make off all of our shelfs in all stores. You lose billions in sales if you do that, thus give us cheap mac and cheese." Clearly, Kraft has a choice: no profits on one product or lose billions. They have to bend to Walmart's demand.

How many places can Wal*Mart go to for gas? Are they stuck with 1 provider? I don't know the answers to these, but I'd bet that they can't demand prices as well as they can do that for other products.

2) If this is the case, and it's the most profitable method, why aren't other gas station owners doing it? They know they're making a profit and doing well, and this is my main point I've been trying to make in this thread.

 

[AgaBoogaBoo]

Originally posted by: PCMarine
I actually live a few miles away from that gas station... it's actually pretty nice, but the gas there is always more expensive than the competition.

People will probably buy from him too, he's become their friend and is fighting for the consumers.

 

[trmiv]

Originally posted by: Exodor
Let's say you need gas and you know you can get it at CostCo.

If you stop at CostCo for gas, do you think you might be tempted to run in "just for one quick thing?"



The gas station is a way to draw people to the store. And I'm sure it works, otherwise they wouldn't have gas stations. I'm sure both can afford to break even or lose money on the gas station.

There's no such thing a just running in for one quick thing at a Costco.

 

[dmcowen674]

Originally posted by: SampSon

Originally posted by: dmcowen674

Originally posted by: Eli

Originally posted by: dmcowen674
It's pretty apparent, all gas stations should just shut down.

I am intrigued by your ideas and would like to subscribe to your newsletter.

I'll PM you when the website is re-vamped.

Going back to horse and buggy and rail will fix a lot of ails in this country and globally.

Even Warren Buffet beleives this to be true.

There are very few cons, mainly all pros, unles of course you are an Oil Baron.

I'd hate to do my job with a horse and buggy.

Kidding aside. If the country were to go to a animal power transport system, the amount of energy needed to support the animals would increase exponentially. From feed to land resources. Keeping livestock is not cheap or free by any stretch of the imagination, I know this from experience.

May not be cheap but does not require Oil or Gasoline.

It's coming back like it or not.

 

[ultimatebob]

Funny... I thought that the secret was to put your gas station next to a highway off-ramp, where you can sucker out of state drivers into paying an extra 15 cents a gallon over what the stations in town charge.

Or, if you live in a state that doesn't do octane inspections, sell regular gas as premium.