2014 NACS Consumer Fuels Report | NACS – Magazine – Past Issues – 2014 – March 2014
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2014 NACS Consumer Fuels Report

How you address the trends we reveal in our recent survey may help you define how to attract consumers to your fuel island — and inside your store.

​Attracting real estate buyers is all about location, location and location. And attracting gas customers is all about price, price and price. That’s a line we’ve used many times to explain the retail fuels industry to reporters. It’s a helpful sound bite to simplify a complex industry to the general media.

Of course, incredible complexities exist within this most basic emphasis on price. To uncover these intricacies, NACS regularly surveys gas consumers to learn more about how they shop for price and what effect gas prices have on other spending — whether inside the store or in other channels.

NACS has surveyed consumers about their fuel purchasing behavior since 2007, and these surveys continue to be a critical component of the annual NACS Retail Fuels Report released each February. Over the past year we have significantly enhanced our surveys and now provide monthly consumer insights that allow us to drill down even further to determine how gas prices affect broader consumer sentiment.

So with all of this consumer information in our hands, we’ve learned a thing or two about how your customers shop for fuel, what’s driving their behavior and what it all means.

Pricing has consistently ranked as the top reason why consumers buy gas at a particular location, with roughly two-thirds of all consumers saying that it is the most important factor in selecting a fueling location, even as gas prices fluctuated from under $2 per gallon to more than $3 per gallon.

Among those consumers who cite gas prices as their top reason for shopping at a specific store, 57% said the reason they select a location is because of the posted price. However, this reason is declining and other factors are growing in importance, including discounts and a retailer’s reputation.

Consumers could be planning where they want to stop for fuel before they even drive by a gas price sign, which means they’re choosing a store because of its reputation for low prices or its tie-in to a loyalty program. Consumers are also researching (online or via mobile app) area prices.

This year’s survey found that women are more likely to shop based on gas price sign (60% versus 54% of men). In addition, 65% of consumers who buy gas at night choose a location because of the price sign — probably because they ’re running low on fuel and not planning a purchase. Geographically, drivers in the West are more likely to choose a location because of a loyalty card (24%), not surprising given the strength of branded operations in that region.

Smart retailers who attract customers to the fuel island fight hard to entice those shoppers to come inside the store for additional purchases.

We know from NACS State of the Industry data that on average, 71% of a store’s total sales are motor fuels, yet motor fuels only account for 36% of profit dollars. So converting the fuel purchaser to an in-store customer is paramount — and profitable — for convenience retailers. Simply put, motor fuels drive sales dollars while in-store sales drive profit dollars.

Among the 44% of consumers who went into the store after filling up, most also made an in-store purchase. Convenience stores are in the business of selling time and immediate consumption items — 84% of in-store merchandise is purchased for consumption within an hour. Survey respondents confirm this behavior, citing a beverage or snack as the most popular items purchased in convenience stores by customers also buying gas.

Our monthly consumer surveys revealed interesting insights on what customers see as the future of fuel. CNG, electric and diesel were mentioned, but the responses also shed light on the type of consumer who is looking ahead at fueling options beyond traditional gasoline.

Compressed natural gas (CNG) is a cost-effective alternative fuel sold at a growing number of retail outlets. In a March 2013 survey, NACS asked consumers about their thoughts on CNG, assuming that both CNG vehicles and fuels were readily available.

Among the respondents, 73% said they would use CNG, with 24% saying they would be “very likely” to use it. These responses also showed significant demographic swings, with younger consumers (31% of those age 18-34 and 29% of those age 35-49) saying that they would be “very likely” to use CNG, compared to only 15% of those age 50 and older. Younger consumers are likely more open to using newer fuels, especially if there is a price benefit to them.

Gender showed a wide gap as well, with 28% of men “very likely” to try CNG, compared to 20% of women. We found this surprising because women tend to be more concerned about the availability of alternative fuels. In reaction, retailers offering fuels beyond gasoline may want to evaluate how they market the availability of new fuels such as CNG.

Automakers introduced a slew of new diesel-powered vehicles for the 2014 model year. But before these new vehicles hit showroom floors, NACS gauged consumer interest in diesel vehicles in a May 2013 survey.

Similar to CNG, men were more likely to embrace diesel-powered vehicles than women, with 36% of men saying they might purchase a diesel vehicle, compared to 26% of women. However, the gender gap has closed considerably over the past two years. In 2012, 54% of men said that they would consider a diesel vehicle, compared to just 15% of women.

Meanwhile, a November 2013 survey found that just 38% of consumers would consider buying a diesel fuel-powered vehicle over the next decade. However, their willingness to consider diesel vehicles significantly increased in the six months between the May and November 2013 surveys: In May, 31% of consumers who plan to purchase a vehicle in the next two years said they would consider a diesel vehicle, while 50% of consumers said in November that they were likely to consider a diesel vehicle.

E15 and E85
NACS asked consumers about higher ethanol blends — E15 and E85 — in a May 2013 survey to assess their familiarity with the alternative fuels.

Only 26% said they are familiar with E15, and this lack of awareness significantly diminishes potential demand. After E15 was described to surveyed participants, only 59% said they would consider purchasing E15 if it were the same price per gallon as regular gasoline. Further complicating matters, these consumers said their primary vehicle is model year 2001 or earlier, which would prohibit them from using E15. So only 34% of consumers surveyed are authorized and willing to consider purchasing E15.

Worse, most consumers are wary of E15: 55% said they would not purchase E15 because they’re worried it would damage their vehicles and 45% are worried about decreased performance and fuel efficiency.

Surprisingly, consumers were not much more familiar with E85, which has been in the market for more than a decade. Only 29% of consumers said they were familiar with the product and only 10% said they drive a flex-fuel vehicle, a requirement for using E85.

Alternative Fuel Vehicles
While gasoline is the top choice for vehicle fueling options, consumers do want to see more alternative-fueled vehicles emerging over the next 10 years, according to a November 2013 NACS survey.

Consumers also want more than just more alter alternative-fuel vehicle options — three in four (74%) would consider buying a hybrid electric in the next 10 years, three in five would consider purchasing a flex fuel (62%), fuel cell (58%) or battery electric vehicle (58%). Half of consumers would consider a natural gas-powered vehicle (53%).

Interestingly, consumers who say they are open to purchasing these “green” vehicles are heavily motivated by economic incentives. Two in three consumers say the switch to an alternative fuel would be driven primarily by economic enticements, rather than environmentalism. Economic factors such as increased fuel efficiency or tax breaks are more important than environmental factors for those considering diesel (79%), flex fuel (75%), hybrid electric (73%), propane (71`%), fuel cell (68%), natural gas (67%) and battery electric vehicles (65%).

So what does this all mean? In 2013, NACS found that gas prices needed to be about 60 cents higher (from 49 to 72 cents) for consumers to consider changing their behavior — and about $1.40 higher ($1.34 to $1.53) for consumers to significantly change their behavior.

For more detail or insights from the report, contact NACS Vice President of Strategic Industry Initiatives Jeff Lenard.