Inflation and high fuel prices make a dangerous mix.


By Roy Strasburger

“It is always something”– Roseanne Roseannadanna, social commentator and pundit.

Generally speaking, consumers are fed up with the way things are going. COVID-19 and the ensuing lockdowns took a toll on people’s patience and flexibility. Retail rage became a thing. Customers quickly got upset with store staff for any type of inconvenience—whether it was mask mandates or being out of their favorite product. This happened in our stores on almost a daily basis.

Now, there is a new set of factors to tip people over the edge: inflation and high fuel prices. While these two items are related, I have found that the retail consequences are different for each.

The U.S. retail fuel industry has done an outstanding job of creating customer price sensitivity. No other industry promotes the price of their products with two-foot-high numbers on the side of the road. I’d wager that most drivers can quote you the price of a gallon of gas but not the price of a gallon of milk.

But I digress. Nevermind.

There are two main issues that result from high fuel prices, and the first is psychological. The average consumer does not understand why fuel prices go up and tends to blame retailers for the high prices. The knee-jerk reaction is that the retailer is gouging the public and making a huge profit. Trying to explain that fuel prices are directly related to the cost of fuel and that most fuel retailers do not calculate their profitability on a percentage basis but, rather, on a cents-per-gallon basis, does not help to mollify anyone.

The second issue is fuel consumption. When the price of gasoline goes up people tend to drive fewer miles because it becomes more expensive. Therefore, gas demand goes down, retailers sell fewer gallons, which causes fewer customers to stop at the store. That chain of events can have an impact on the profitability of the business.

Regarding inflation (which, for my purposes, I am focusing on products other than fuel), the customer reactions don’t seem to be as emotional. Inflation causes consumers to think more about their pocketbook and make buying decisions based upon the perceived value for money. This can have an impact on convenience store sales when the public perception is that products in c-stores are usually more expensive than in other locations. Shoppers will go to other retail channels (such as dollar stores, grocery stores or online) to buy their goods, while looking for the best value.

So how do we combat these two challenges? First, we must educate our employees so that they can have intelligent conversations about prices and why they have gone up. The simple answer is that the cost of goods (i.e., the price that the retailer has to pay) has increased due to supply chain issues and the war in Ukraine impacting the global cost of raw materials.

The second strategy is to make sure that you are providing value for money in your store. Inflation and high prices mean that people will have less money to spend because their incomes have not increased at the same rate as the price of goods. Typically, what we see in a convenience store is that the customer “trades down” on product categories to try to save money and get a better value. For example, instead of buying an expensive craft beer they may buy a mass market brand. A similar thing happens with products that you sell in different sizes. People will buy a small package rather than a large one of the same product because it costs less money.

Create and advertise promotions within your store showing your value proposition to your customer. Work with your suppliers to see if you can get discounts and rebates so you can do BOGO or multipack discounts to make the consumer feel that they are getting more for their money. It is important to promote the economic value—how much money the customer is saving by taking advantage of the promotion.

Finally, giving away something for free can have a big impact on the customer and make a lasting impression. Choose items that do not have a large cost to you—such as coffee or fountain drinks—and include them in a larger bundle. To be even more effective, randomly give out something for free to a customer who will appreciate the gesture and will develop a special bond with your store. Who doesn’t like to get something for free?

The irony of Roseanna‘s comment is that she was at the peak of her fame the last time that fuel prices and inflation were both running high in the U.S. The industry weathered those difficult economic times and will do so again. The key is being sensitive to the concerns of your customer, whether they are emotional or financial, and provide them a value that will be recognized and appreciated. What costs you a few cents now will create a long-term customer in the future, and you will get a significant return on your investment.

(Editor’s note: For those of you not of a certain age, Roseanna Roseannadanna is a character created by Gilda Radner on Saturday Night Live in the late 1970s.)


Roy Strasburger is the CEO of StrasGlobal. For 35 years, StrasGlobal has been the choice of global oil brands, distressed assets managers, real estate lenders and private investors seeking a complete, turnkey retail management solution.