The History of Self-Fueling

February 01, 2014

On June 10, 1964, John Roscoe flipped the switch to activate the first remote access self-service gas pumps in the United States. The convenience store sold only 124 gallons of gas to a dozen or so customers, but the fuel retail experience would never be the same.

A Visionary Man
Roscoe initially wanted nothing to do with remote access self-service gasoline. He’d opened his first convenience store in 1957 in Denver and by 1964 was operating a chain of 12 stores in the area.

One day, Herb Timms stopped by with a box he’d invented that would allow an attendant inside the store to dispense gasoline at the pumps. “I was initially reluctant,” said Roscoe. “But fortunately for me, my banker knew Herb and he convinced me to give his invention a try.”

Business took off at his Westminster, Colorado store where Roscoe first tried it out. And he quickly added remote fueling to two more stores. By July, the stores were averaging 4,500 gallons in sales per week. “What made self-serve so important to the convenience store industry was that we already had the facility,” said Roscoe.

“By spending $10,000, we effectively got the gasoline business from full-serve gas stations without their labor expenses. Convenience store sales had averaged about $300 a day and developed about $100 a day in pre-tax margin dollars. However, if you could sell 1,000 gallons of gasoline with a 10-cents-a-gallon margin, you could double your margin without adding much to your expenses.”

(In the 1960s, gas margins were much like other retail margins, and it was common to have 10-cent margins with gas priced between 20 and 30 cents per gallon. Today, gross margins on gasoline are approximately 18 cents per gallon — but expenses are much greater. After expenses, including credit card fees, pre-tax net margins are approximately 3 cents per gallon.)

Slow Adopters
For remote self-service gasoline to expand, regulatory changes were necessary. “Most state laws had provisions that forbade self-serve dispensers in service stations,” said Bob Benedetti, who is responsible for the flammable liquids code project for the National Fire Protection Association.

Gradually, 48 states changed their fire codes to allow for self-service dispensers. “Some thought there would be an increase in the incidence of accidents or fires at service stations with self-service dispensers, but that never materialized,” said Benedetti.

Self-service is still prohibited in New Jersey and Oregon, as well as in scattered municipalities across the country, particularly in Massachusetts.

Despite the change in state laws, acceptance within the convenience store industry moved at a snail’s pace.

“The idea was so foreign to the established line of thinking that some convenience store owners thought it was ridiculous, that no one would want to pump their own gas,” said Fred Lowder, who co-owned the Jiffy convenience store chain with his father.

To help change that mindset, Roscoe offered to speak about his success on a panel called at the 1964 NACS Annual Meeting.

“I was with a person [on the panel] who operated a meat market in Portland, Oregon. After the presentations, all of the questions from the floor were directed to the meat market operator. Gasoline sparked no one’s interest,” said Roscoe.

“A good share of convenience store operators didn’t have the $10,000 to invest in the device, so overall acceptance was extremely slow. It probably took at least 10 years before there was much acceptance by the industry.”

Lowder agreed. “It was a process for the industry to finally figure out that they couldn’t have a convenience store without gasoline, and self-service was the way to go.”

The 1973 and 1974 gasoline shortage further fueled the drive to self-service. Long lines at gas stations prompted California to pass a law requiring every station to post prices

“The price-posting law made gasoline more generic, and that really helped self-service,” said Jerry Cummings, a retired oil executive with California-based Robinson Oil Corporation.

A Hit With Consumers
Unlike retailers, the public loved the idea from the start. Because convenience stores could sell unbranded gasoline from self-service pumps cheaper than the branded, full-service stations, customers flocked to convenience stores for their fill-ups.

“The public is interested in lower prices and immediately went for self-service gasoline,” said Roscoe. With gasoline typically selling for 20 cents per gallon, a discount of even 2 cents per gallon translated into a 10% savings. “That was significant enough to bring people in.”

Gasoline sales certainly drove traffic, but even in its early days it didn’t necessarily drive profits as retailers operated on increasingly thin margins to attract cost-conscious customers.

Pay-at-the-Pump Technology
In the beginning, one of the biggest challenges with self-service was how to integrate ease of payment into the self-service experience, said Scott Negley, director of global product management for Wayne.

In the mid-1980s, credit card readers were integrated into pump dispensers. But for pay-at-the-pump to really take off, engineers still had to figure out how to make the readers work with a variety of different networks and point-of-sale systems.

“The solutions had to be adaptable or configured for a wide range of systems controlling the equipment at stations,” said Negley.

Roscoe jumped on pay-at-the-pump in the early 1980s, debuting it at select stores in Benicia, California, in 1984. His vendor, Cubic Western, had developed a pre-paid gas card and installed card readers into the pumps to read the cards. “We adopted their system and later moved on to credit cards,” he said

Not everyone in the industry embraced pay-at-the-pump, however.

“Some people thought it was a stupid idea because customers wouldn’t go inside the store anymore and in-store sales would drop,” said Negley. “But what they found was the opposite: Sales went up because the experience inside the store was better without gas-only customers clogging up the line.”

Bob Renkes, executive vice president and general counsel for the Petroleum Equipment Institute, agreed that fuel marketers were initially reluctant to install pay-at-the-pump technology because they feared profit loss from in-store merchandise.

“Those who did initially put in pay-at-the-pump didn’t lose traffic inside but probably gained it because they were providing quick and easy access at the pump,” he explains. “Buying gasoline is already a distressed purchase, so anything a retailer can do to make it less stressful is good. Pay-at-the-pump has done that.”

Transformational Technology
Fast-forward to today, and there’s no doubt that remote self-service dispensers have transformed the gasoline industry.

“It changed the convenience store industry forever,” said Roscoe. “It allowed convenience store operators to locate on better sites and increase their overall attractiveness.”

But think bigger: Would Internet retailing as we know it exist without the introduction of self-serve gas? Consider today’s travelers who buy airplane tickets and book a hotel online, confirm check-ins at the airport and the hotel — all without a face-to-face interaction?

Remote fueling was really the first instance where customers interacted with a machine to define what they were buying.

Self-service speeds up transaction times, increases ordering options and helps take costs out of the system.

But most of all it has redefined convenience — and the convenience store industry.