Forecourt Trader - 30 years at the heart of the fuel retailing community

Star turn

01 July, 2007
Getting shop management right
Page 14 
In last month's forecourt Trader we noted a surge in fuel sales based on the Database figures for March - possibly as a result of the fall-out from the supermarket fuel fiasco in February. We did wonder whether this was a temporary blip or the start of a trend. Well, looking at the latest figures from April, it would seem that all of those motorists who had supposedly forsaken 'cheap' fuel for 'quality' have been unable to kick their addiction to supermarkets. In short, April's fuel volumes were right back to normal.
However, April's figures do contain a rather odd value all of their own. In fact two 'odd' values that are really different sides of the same coin. Look at the 'Closing Stock' value of £17,703 (remembering that this is at 'cost', not 'retail' prices) and then look at the 'Stock Turn' figure - 33.4 (so our average shop was theoretically turning over its total stock at a rate equivalent to over 33 times a year). Now these really are quite extraordinary figures. First the stockholding value - £17,500 was typical in 2001 or 2002 - but that was at 2001 and 2002 prices. Since then the values in cash terms have risen, along with inflation, to the point where last year's overall average was in excess of £20,000. Of course if we do adjust for inflation, then last year's average holding comes down a little to just below £20,000 - but on the same basis April's 'inflation-adjusted' value would drop to £16,300.So what's going on? Well, we don't believe that our average shop has suddenly become smaller. Look at the sales figure - just below £59,000 excluding VAT - and see how it's actually 18% up on a year earlier. Even if we strip out a year's inflation (currently 4.5% on the old, but reliable, RPI index) that still gives us an increase of over 13% on a year ago. In fact April 2007 was one of the highest shop sales months that we've ever recorded. The answer is really in that 'Stock Turn' value of 33.4 times - it's definitely the highest we've recorded to date and follows from March's then-record figure of 29.4 times. For comparison the closest we have to these last two months was back in July 2005 and that was only 27.7 times.If you've a decent memory you may recall that we've occasionally mentioned the 'Rate of Return on Stock' as a very basic but valid measure of shop performance and efficiency. Years ago the retail trade in general used to refer to it as 'the 250 Rule' because it was considered that a score of 250 or more (ie a rate of return of 250% per year on the value of your average stock holding) was the sign of a good, efficient, retail operation. For a long time we've considered that, in the forecourt sector, a more accurate benchmark value was somewhere between 400% and 500% - which is typically the trend we saw steadily creeping upwards during the past decade.There have been a few exceptional months before - such as July 2006 where the figure went over 640% - but since February this year we've seen 564%, 578% and now 724%. There can be little doubt that this trend shows that forecourt retailers are finally on top of their game at managing a fast-moving consumer goods store. It's been a long time coming. Veterans of the industry still remember the shock when back in the very early 90s Esso revamped its entire company-owned network, getting rid of loads of non-food lines to make way for bright new 'grocery' and 'snack' racks along with bigger tobacco gantries and rows of drink coolers. A whole generation of licensees protested that they were losing products on which they could make 45-60% gross profit in favour of things that attracted much smaller margins. Yes, we all did the rate of return calculations and could 'prove' that the new-style shops should easily beat the 150-200% rate then current, but in practice it wasn't quite so easy. The early versions of grocery and convenience formats did lack some subtlety (along the lines of 'stock everything and then order the whole lot again next week) and even the most forward-thinking site operators got burnt trying to cope with ordering, stocking and selling products that had sell-by dates rated in the order of days, rather than seasons or years.Well, many years down the road it looks as if forecourt retailers have finally got the hang of it, and could probably teach many of the current high street retailers a thing or two about shop management.



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Weekly retail fuel prices: 15 January 2018
RegionDieselLPGSuper ULUL
East124.9460.90131.85122.27
East Midlands124.34132.31121.54
London125.0662.90132.42122.10
North East123.94133.63121.07
North West124.1658.50132.51121.18
Northern Ireland123.4169.90128.40120.85
Scotland124.5774.90130.88121.33
South East125.1561.40132.52122.48
South West124.73130.24121.91
Wales124.44128.57121.19
West Midlands123.7465.23132.27121.20
Yorkshire & Humber123.9161.90132.74121.12

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