CEO, National Retail Solutions (NRS). NRS POS, NRS PAY, NRS FUNDING & NRS PETRO: Helping independent retailers organize, compete and thrive.
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Consumers and business owners are facing challenging times at gas stations across the nation. Due to the pandemic, people are making fewer trips to the gas station. The number of people working at home has skyrocketed, and with no commute, they don’t need service stations as often as they did in the past. With the remote working trend likely to continue in the immediate and possibly long-term future, the need for gas will likely not increase. There has also been a decrease in family vacations, which means fewer vehicles fueling up for long road trips. Finally, the federal government’s encouragement of the adoption of hybrid and electric vehicles, by default, disadvantages gas stations.
All of this adds up to very small profit margins, an average of 1.4%, or $0.05-$0.07 a gallon.
EMV Compliance: A Costly Necessity
On top of looming industry-wide shifts towards hybrid and electric vehicles, recently enacted EMV compliance regulations could cost gas station owners tens of thousands of dollars. As of April 2021, gas station pumps must be compatible with EMV cards (otherwise known as chip cards), or major credit card companies will no longer protect station owners from fraud. EMV has made card transactions safer, but credit card fraud continues to be extremely common. Upgrading pumps for EMV payment acceptance can cost many thousands of dollars per pump and require business downtime.
There are, however, retrofit EMV technology solutions through which compliance is painless and affordable. Less expensive and messy than completely renovating pumps, retrofitting for EMV can take hours, whereas messy digging could take days or weeks. On the other hand, entirely new pumps tend to be more efficient and save business owners money in the long run.
While the advantages of becoming EMV compliant come with a high price tag, the high rate of fraud at the pumps and card companies’ new policy of refusing to cover service station owners who are not EMV compliant can take an even more costly toll. Non-EMV-compliant stations can compromise sensitive consumer information, while EMV compliance serves to deter fraud and protect cardholders, offering peace of mind for gas station owners and customers alike.
EMV-compliant readers also prevent skimming, a common practice in stealing credit card information. Many compliant credit card readers have safeguards in place to prevent the insertion of skimmers. In some solutions, insertion of a skimmer actually shuts off the card reader and no transactions may be conducted until the skimmer is removed. Today's consumers want reassurance that their information will never be a security concern or risk and business owners simply cannot afford unnecessary errors. This extra safeguard can prove invaluable.
Other Ways To Maximize Profit
Some service station owners have found creative ways to combat reduced car and foot traffic and increase profits, for instance by taking advantage of tobacco buydown programs. Tobacco manufacturers such as R.J. Reynolds and Philip Morris offer reduced pricing and rewards to retailers based on the monthly volume of tobacco sales. Gas station convenience stores can also offer promotions like a free cup of coffee or “Buy X get Y” deals that help attract more customers to fill up their gas tanks outside.
Merchants can also look into designing a merchandising plan to maximize profits. This may include stocking convenience store shelves with staples and essentials and creating an inviting environment for stopping in on foot, while allowing customers to pay for mini-mart purchases and gas at the same time. And of course, offering a nice clean restroom is a plus for drawing customers out of their cars and into the store.
Funding Options For Upgrades
It can feel prohibitive for a gas station owner to have to shell out substantial funds for inventory and renovation or upgrade projects that might not offer immediate ROI. However, with cost and profit analyses and responsible planning, the benefits of upgrading are well worth the cash outlays. But this means a station owner may feel a financial burn for a while. Especially these days, with so much industry-wide uncertainty, the stress of expending funds for upgrading can become overwhelming.
Bank loans are a common way for a business to obtain cash. But bank loan applications are a long, arduous, complex process, especially for business owners who don’t speak English as their first language. Businesses can become discouraged by the huge amount of documentation and scrutiny of credit required to obtain a bank loan. A cash advance, on the contrary, is quicker. With a quick application and quote, a business can have cash in its hand within just a few days. Ideally, a cash advance is totally transparent, with no hidden fees. Cash advance companies don't consider poor credit to be a deal-breaker and tend to offer more flexible repayment programs. On the other hand, interest rates are often much higher.
Final Takeaways
Every retailer knows that to prevail, they must stay on top of the competition. This may mean upgrading technology to be more efficient. It may mean spending money to make more money. In any industry, running a successful business requires nurturing and attention to detail — and planning. Planning for the moment, to keep up with industry standards, and planning ahead with the foresight to take current trends forward. Covid-19 and the 2021 EMV compliance deadline took gas station owners by surprise, but may actually be blessings in disguise, as these retailers are pushed to adapt, upgrade and think forward for success.
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