Spartan displays successful blend — fuel and food

March 6, 2009
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The combination of food and gas, at least at one time, meant indigestion, prompting us to reach for Tums or Rolaids. Today, food and gas (petroleum) are marketing tools used to increase sales and profits. Retailers realized they needed to improve the whole shopping experience for their customers. Changes were made to differentiate offerings and to position themselves as value-added stores. Those changes are far-reaching, including adding bigger stores, wider isles, cleaner facilities, specialty products, electronic scanning, customer self-checkout, one-hour photo shops, dry cleaning, Starbucks kiosks, mini-bank branches, pharmacies, and even gas stations. The latter addition has been utilized by the large chains: Dominick’s Finer Foods, Jewel Food Stores, Dahl’s Foods, Sam’s Club, Wal-Mart, Kroger, Costco, Safeway, Albertons,  and of course, locally,  Meijer and Spartan Stores.

All these companies realized that they could tap into a new revenue stream. Supermarkets expand their brands by filling carts and tanks. Consumers feel that convenience is provided for them. Supermarkets and mass merchandisers have many of the resources necessary to get a gas station running. For example, they have the space and large parking lots. Moreover, they can then lure customers into their stores where they sell more goods with higher profit margins. This works and there is evidence to suggest that customers are beginning to prefer these alternatives to the traditional gas station. 

2009

Spartan’s plans for 2009 include opening up to five new fuel centers and up to eight major remodels of retail stores.

Retail Forward, a Columbus, Ohio-based industry consultant and research company, reported in 2003 that 13 percent of shoppers surveyed stated that their first choice for buying gas is a supermarket or other alternative station. Retail Forward also estimated that the supermarket store traffic increases between 2 and 5 percent at locations with gas pumps. These businesses are able to keep gas prices within one or two cents of the lowest price in the area because of the high volumes sold. Price is the first priority and convenience second. According to senior VP of sales and marketing for Fuel Marketing Solutions in Dallas, “Gas is not always a great margin business, but it is an opportunity to get consumers into the store.”

With today’s economy, cash-strapped consumers are calculating how to save time and money by consolidating shopping trips and work commutes. These organizations realize that they must improve their offerings to remain in the competitive retail arena.

The Spartan marketing strategy is based on the fact that differentiation is the best way to compete. There are two unique marketing plans. The first focuses on the Quick Stop Fuel & Convenience Centers that offer food products and fuel. They are well organized, clean, easily accessible, have good signage and sell various convenience products. According to a July 7, 2008, Wall Street Journal article, 3,000 gas stations over the past year have gone out of business due to higher costs. Why has Spartan Stores been successful? It is all due to its remarkable strategies: the combination of food and fuel, weekly ads that tie-in the fuel and the grocery store, and its fuel rewards program. The company’s plans for 2009 include opening up to five new fuel centers and up to eight major remodels of retail stores. In the next three years, the company is planning to open 10-15 new fuel centers and target up to 10 new/replacement retail stores. Currently, there are 19 fuel centers since the first opened in 2004.

The second plan focuses on the grocery store and fuel station combination. There are several facts that drive that strategy. For one, the economic environment is driving consumer behavior. People want to save money and they are anticipating value offerings. “When gas prices reached $4, there was a slight increase in the percent of customers using the fuel promotions,” reports Jeanne Norcross, vice president of corporate affairs. Thirty percent of fuel customers use the reward program. The company has offered a special gasoline promotion at a time when people are concerned with paying their bills.

Spartan recently offered a special two-day gasoline promotion: 99 cents/gallon for up to 20 gallons at select stores. The typical offer at D&W and Family Fare has been a year-round fuel reward program. The standard offer is 20 cents/gallon up to 20 gallons when spending $100 or more, or 10 cents off per gallon when spending $50 or more per each shopping trip. BIGresearch suggests that cash-strapped consumers are calculating how to save time and money by consolidating shopping trips and work commutes. Fuel sales did spur Spartan profits as stated in The Grand Rapids Press in October, and the forecast for 2009 is an increase.

There is a focus on convenience and easy access/one-stop shopping. According to Hartline, “D&W and Family Fare have experienced a very good year, and our complementary Quick Stop Fuel and Convenience Centers have played an important role in that success by satisfying our customer’s desire for both convenience and value.”  

Spartan’s success over the past few years has been well documented. As reported by The Grand Rapids Press on Jan. 2, 2009, only Spartan was able to show a gain on Wall Street as a local company for 2008.

Maria Landon is an affiliate professor at Seidman School of Business, Grand Valley State University.

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