Gas station profits, Carrotmob and NAU
May 15th, 2008
With the current price of gas and the record profits being posted by companies like Exxon, it would stand to reason that this is a good time to be a gas station owner. Apparently not. Via NPR: Higher prices mean slimmer profits for gas stations.
As it turns out, that’s not the case. Of the $3-4 per gallon of gas that we’re paying these days, over 70% goes towards the crude oil itself and only about 3-15 cents actually go to the gas station owners. The worst part is that the station’s profit margin per gallon is fixed thanks to their delivery contracts but the credit card transaction fees are based on a percentage of the dollar amount of the gas sold. This creates a pretty bad situation for the station owner as their profit per gallon is significantly cut. The example given was of a station that makes 16 cents per gallon and then pays 7 cents in credit card fees for regular unleaded.
In Texas, I’ve seen a number of cash-only or cash-preferred gas stations and never really knew why they offered cash a better price than credit card sales but this makes perfect sense.
Will I change my ways? I don’t know… but I’ll certainly think about it.
Carrotmob is an interesting one… Via the one and only Ze Frank, I learned of a group out in San Francisco called Carrotmob whose stated purpose is to organize consumers to make purchases from companies that agree to make environmentally friendly choices.
If you have a few minutes, you can watch the video of their first proof-of-concept campaign and see how it went down but here’s the short version:
Carrotmob went around to 20 some-odd corner/liquor stores in San Francisco and promised that many shoppers would come if they would commit a certain percentage of their purchases to making environmental improvements to their stores. The stores then bid against each other until the winner came in at 22%. A study was done to make recommendations of what could be improved and how much it would cost, and then at a specific day and time, the people would show up.
And show up they did! For reference, this store receives about $2,000-3,000k in revenue on an weekday and the mob spent over $9,000!
Carrotmob Makes It Rain from carrotmob on Vimeo.
All in all, I think that this is an interesting concept blending good old consumerism with community and environmental activism… I’m kind of curious as to how it scales though. An example is given of toothbrushes, and I think its spot on because its easier for something like this to succeed if its a commodity where environmental effect is the differential factor but I acknowledge that I’ve selected some things mostly based on their environmental impact. Case in point, my Nau outerwear. I specifically decided to buy from Nau because of their commitment to sustainable fabrics, recycling and their unique Partners for Change program where a percentage of each purchase is shared with a charity partner of your choice.
And yet, as I typed that last sentence, I visited NAU and found out that they are going out of business as they haven’t been able to get more funding. They are currently having a 50% off clearance sale and so I’m picking up a couple of items. Its bittersweet.
hm, almost seems like a bad business strategy.
I’m not sure which part you consider to be the bad business strategy, but Nau had a good thing going which in my opinion, went too fast and then got whacked by bad timing.
It seemed odd to me that they were opening up a store after such a small time in business. It was a great concept though! Not very much inventory at hand, and instead, a sample of each item in each size so that folks could figure out what they wanted to get. Instead of cashiers, they had self service stations to minimize the number of people needed to run the store.
That part of the concept, I was and still am very much behind. I would love to see a place where I can go try things out and compare, then go order them online.