"Unwinnable" Gas War Shutters Two Stations
WICHITA, Kansas -- Southeast Kansas convenience store chain, The Fleming Corp., based in Stilwell, Kan., put two of its Maize Road convenience stores located here on the market, surrendering to an "unwinnable" gas price war, according to company officials cited in The Wichita Eagle.
The convenience stores were originally Amoco stations that were sold to Fleming four years ago. One store closed in mid-March, the other in May 2006.
A local price war between QuikTrip and Kwik Shop left the stores reeling, said company president Ed Roitz. However, not being able to break even on gas sales can't be blamed on either of the larger chains, he said.
"They're big, smart and doing what they should be doing in the marketplace," Roitz told the paper. "None of this is their fault."
Both chains sell gas at no to low margins to attract shoppers to the site, where they can be lured inside for higher margin items, the report stated.
Roitz blames the quantity discounts that are offered to large chains that buy in bulk.
But those discounts don't amount to much, according to Vance McSpadden, the head of the Oklahoma Petroleum Marketers and Convenience Store Association.
"Pennies, less than a dime [a gallon]," he told the paper. "But this is an industry built on pennies, and we've got the same thing you've got coming down here."
Tack on credit card fees, and it's not unusual to see losses of 20 cents per gallon on a gas sale, said Tom Palace, executive director of the Petroleum Marketers and Convenience Store Association of Kansas.
"When the credit card companies are making more money than the people selling the product, there's a problem," he added, noting that the group supports legislation to restrain interchange fees.
And when gas prices rise, the fees do as well. "It's percentages -- 3 to 4 percent," he said. "Do the math. At $3 a gallon, that's 9 to 12 cents on a low-margin sale right there."
The future of Fleming Corp. will continue with a Valero-branded store and truck stop in the region.
"The whole economic model is upside down on gasoline right now," he told the paper. "The busier the store, the more money you lose."
The convenience stores were originally Amoco stations that were sold to Fleming four years ago. One store closed in mid-March, the other in May 2006.
A local price war between QuikTrip and Kwik Shop left the stores reeling, said company president Ed Roitz. However, not being able to break even on gas sales can't be blamed on either of the larger chains, he said.
"They're big, smart and doing what they should be doing in the marketplace," Roitz told the paper. "None of this is their fault."
Both chains sell gas at no to low margins to attract shoppers to the site, where they can be lured inside for higher margin items, the report stated.
Roitz blames the quantity discounts that are offered to large chains that buy in bulk.
But those discounts don't amount to much, according to Vance McSpadden, the head of the Oklahoma Petroleum Marketers and Convenience Store Association.
"Pennies, less than a dime [a gallon]," he told the paper. "But this is an industry built on pennies, and we've got the same thing you've got coming down here."
Tack on credit card fees, and it's not unusual to see losses of 20 cents per gallon on a gas sale, said Tom Palace, executive director of the Petroleum Marketers and Convenience Store Association of Kansas.
"When the credit card companies are making more money than the people selling the product, there's a problem," he added, noting that the group supports legislation to restrain interchange fees.
And when gas prices rise, the fees do as well. "It's percentages -- 3 to 4 percent," he said. "Do the math. At $3 a gallon, that's 9 to 12 cents on a low-margin sale right there."
The future of Fleming Corp. will continue with a Valero-branded store and truck stop in the region.
"The whole economic model is upside down on gasoline right now," he told the paper. "The busier the store, the more money you lose."