They say that imitation is the sincerest form of flattery. In the ever-muddied waters of forecourt retailing the difficulty, sometimes, is to work out who is doing the imitating and who is being flattered. There is absolutely no doubt that the major winners in our trade (in fact every bugger’s trade) over the past 10 years have been the hypers.
Most of us enjoyed our moment of schadenfreude last month as the media whipped up the ’silicon petrol available at a hyper near you’ story. We all certainly enjoyed the couple of weeks of uplifted volume that followed, but while we counted the extra cash it served as a stark reminder of how much of our market has been grabbed by Tesco et al. We also realised just how far down the feeding chain the average retailer is.
The success of the hypers has been based on selling fuel at wafer-thin margins to drive customers to their stores. For years we have protested at the unfairness of their pricing strategy. How could we possibly compete? Where were the profits to be made that were needed for site re-investment and growth? Then along comes last month’s list of Top 50 Indies. This one has 40 cogop sites, that one has 38, another has 30 and so on.
Now even allowing for the element of hoping that if you run cogop sites you will be given first refusal when they come on the market (well, those oilers are such nice people aren’t they), you can only assume that such savvy retailers wouldn’t be operating these sites unless they were making a good return. So we have arrived at a situation where petrol retailers can make a living from a shop with a minimal contribution from fuel.
This shouldn’t be a total surprise - just look at the ads for the sale of convenience stores and see the prices being asked for businesses turning over £15,000 a week. And for those of you who point out that these cogops wouldn’t generate sufficient profits for re-investment, may I remind you that part of the shop’s gross revenue is already being skimmed off by the oilers as rent. Add that back and you’ve certainly got enough for the interest payments on a mortgage.
While we were busy imitating the hypers, however, they were more than happy to have a look at our operation. The epidemic of Tesco Express outlets opening in every conceivable location bears testimony to the fact that we were sitting on a goldmine. Unfortunately, Tesco being Tesco means they’ve taken our model and improved the offer by using their main stores to service a fresh range that any independent will struggle to match.
I know I am returning to an old hobby horse of mine, but the latest Easter egg madness from all the hypers just beggars belief. Never mind price inflation, each year the offers get sillier. I thought it couldn’t get worse than 3 for £1 - then I saw Tesco doing Mars eggs at 2 for £1.48. Despite their protestations, I just don’t believe the manufacturers are selling to the hypers at the £1.40-plus mark that the wholesalers buy at - I mean there are loss leaders and there are loss leaders. Talk about devaluing a product!
I thought that oil companies were bad marketers but obviously those boys at Cadbury’s just don’t like to be beaten. They had a perfectly good product with their 200g bars of CDM. Priced around the £1 mark it sold well. After a few years of the accountants saying it would have to go up a few pence more it was starting to get well north of a £1. No problem, said the marketers, we’ll replace it with a 250g bar at £1.35. That’ll stop those silly customers wanting to buy it for a £1. Take a trip to your local Asda or Tesco’s and you see they are proudly offering you a 250g bar at £1. As the cheapest they used to sell the old size at was 86p, Mr Cadbury has just given away an extra 20% of product for coppers. What a strange thing retailing is - whoever would have thought that price points like 50p or a £1 would be important.