Municipal Gas Station Proves Popular in Kentucky

[SimpleDon]

I think that you all are overreacting. I am shocked.

The reason the city opened their municipal fueling station to anyone is because gas stations in the town were charging 20¢ more a gallon for gasoline than stations in surrounding towns.The city thought that because of this people were not stopping in town to buy gasoline or anything else.

Had you read the article the mayor said that they didn't care if they sold any gasoline as long as they kept the prices down at the other stations in town.

They aren't Marxists trying to destroy capitalism, they are using competition to force the cost of gasoline in the town down.

The municipal and company owned fueling stations that I am familiar with don't have an attendant. You can only buy gas with a credit card like ID card. They send you a bill every month. You can do the same thing with an unattended station that requires card cards.

 

[Jimmy Higgins]

That is what I said. They don't set the price. Outside sources do.

You touch on convenience store operations, which opens up a whole new set of issues. Pricing, promotions, staffing, training, optimal facility layout. Etc.

But this place doesn't do that.

It's very hard to make money in the gas retail business without convenience store operations. They will have to burden their gasoline with a much higher level of fixed costs.

The phrase you are looking for isn't "make money", but "make sustainable profit". As long as they don't need to make that 5 to 10 or whatever percent off the top, the sustainability of the operation is simpler.

And I imagine it will be challenging to acquire gasoline at a competitive price compared to those who have a sophisticated procurement organization and significant more scale and bulk purchasing power.

That is unlikely as municipalities usually have gasoline stations of their own for the Public Works operations. So they need to gas up lots of cars and trucks (the number varies by the size of the municipality).

Oh, and if your pricing policy is "slap a few cents onto whatever you paid for it" you're often going to find you are wildly out of the market on many occasions. And gasoline customer are quite price sensitive. It's hard to offset your largely fixed costs when you aren't selling any gasoline. Even harder without a store. On the other hand there will also be cases where your gas is so cheap you'll sell it out much faster than you anticipated and run dry. Customers don't like gas stations that run dry.

Yet all these problems have yet to surface. Though I do like you argument that even if it is successful, it is doomed to fail.

 

[ksen]

I think that you all are overreacting. I am shocked.

Are you really though?

 

[dismal]

I meant examples of businesses run by cities, not examples of businesses.

That's what I listed. Or would you like to shift the goalposts now?

Since you provided words not examples there will be no need.

 

[Nice Squirrel]

That's what I listed. Or would you like to shift the goalposts now?

Since you provided words not examples there will be no need.

I accept your apology.

 

[AthenaAwakened]

That's what I listed. Or would you like to shift the goalposts now?

Since you provided words not examples there will be no need.

"De Nile" really isn't just a river in Egypt.

 

[dismal]

That is what I said. They don't set the price. Outside sources do.

You touch on convenience store operations, which opens up a whole new set of issues. Pricing, promotions, staffing, training, optimal facility layout. Etc.

But this place doesn't do that.

It's very hard to make money in the gas retail business without convenience store operations. They will have to burden their gasoline with a much higher level of fixed costs.

The phrase you are looking for isn't "make money", but "make sustainable profit". As long as they don't need to make that 5 to 10 or whatever percent off the top, the sustainability of the operation is simpler.

And I imagine it will be challenging to acquire gasoline at a competitive price compared to those who have a sophisticated procurement organization and significant more scale and bulk purchasing power.

That is unlikely as municipalities usually have gasoline stations of their own for the Public Works operations. So they need to gas up lots of cars and trucks (the number varies by the size of the municipality).

Oh, and if your pricing policy is "slap a few cents onto whatever you paid for it" you're often going to find you are wildly out of the market on many occasions. And gasoline customer are quite price sensitive. It's hard to offset your largely fixed costs when you aren't selling any gasoline. Even harder without a store. On the other hand there will also be cases where your gas is so cheap you'll sell it out much faster than you anticipated and run dry. Customers don't like gas stations that run dry.

Yet all these problems have yet to surface. Though I do like you argument that even if it is successful, it is doomed to fail.

Here's what I suggest. On your drive home from work today, observe some gas stations. See if you can infer from your observations what things make a gas station successful.

I suggest you may observe the following: successful gas stations are in busy locations, they are well lit, they have easy access to multiple pumps, they have efficient high speed equipment, they have automated card readers, they have convenience stores(perhaps that have exclusive deals with Doritos, Krispy Kreme, Dominos, whatever), they have a brand of gasoline that consumers consider reliable, they may have a car wash, they are clean. They may have an affiliation/affinity program with another business like a Costco, or a Canadian Tire, or a grocery store that allows them to operate as something close to a loss leader.

Why do they have these things? Gasoline is largely a commodity. Customers highly value price and convenience when they buy it. The costs of operating a gas station are largely fixed. Employee costs, property costs, lighting costs, etc are largely the same whether people buy your gas or not. The cost of acquiring gasoline in a given area is relatively the same for everyone, with discounts and efficiencies largely related to the scale of volumes you purchase.

The way a gasoline franchise is successful is to sell a lot of gallons at a very low margin and take advantage of the traffic this generates to cross-sell beer, snickers bars and lottery tickets.

This is not a big secret. Anyone with the slightest clue about gasoline retail will agree with it. Anyone who drives past gasoline stations can observe this is what they are doing.

Now, does this municipal fuel depot offer any of this? Will it have a conveniently located well lit station? Will it have easy access to multiple high speed pumps? Will it have automatic credit card readers at every pump? Will it have a c-store or affinity program? Will it have a reliable branded gasoline that customers trust? Will it have economies of scale in its fuel purchasing program?

I think the answers are no, no, no, no, no, no and uh, no.

Stations without these things are not profitable. Most of them were shut down decades ago because they were not profitable. This is why you don't see them. They do not make profit. The number of gas stations in the US has been declining for decades. It's a brutally competitive high volume, low margin business.

So the idea that you will be successful because you choose not to make a profit here is silly. You will not have that choice. You know this if you understand the retail gasoline business. Which they don't.

 

[dismal]

Since you provided words not examples there will be no need.

"De Nile" really isn't just a river in Egypt.

Oh did you see examples there? For some reason they are not showing up on my screen.

 

[ksen]

That is what I said. They don't set the price. Outside sources do.

You touch on convenience store operations, which opens up a whole new set of issues. Pricing, promotions, staffing, training, optimal facility layout. Etc.

But this place doesn't do that.

It's very hard to make money in the gas retail business without convenience store operations. They will have to burden their gasoline with a much higher level of fixed costs.

The phrase you are looking for isn't "make money", but "make sustainable profit". As long as they don't need to make that 5 to 10 or whatever percent off the top, the sustainability of the operation is simpler.

And I imagine it will be challenging to acquire gasoline at a competitive price compared to those who have a sophisticated procurement organization and significant more scale and bulk purchasing power.

That is unlikely as municipalities usually have gasoline stations of their own for the Public Works operations. So they need to gas up lots of cars and trucks (the number varies by the size of the municipality).

Oh, and if your pricing policy is "slap a few cents onto whatever you paid for it" you're often going to find you are wildly out of the market on many occasions. And gasoline customer are quite price sensitive. It's hard to offset your largely fixed costs when you aren't selling any gasoline. Even harder without a store. On the other hand there will also be cases where your gas is so cheap you'll sell it out much faster than you anticipated and run dry. Customers don't like gas stations that run dry.

Yet all these problems have yet to surface. Though I do like you argument that even if it is successful, it is doomed to fail.

Here's what I suggest. On your drive home from work today, observe some gas stations. See if you can infer from your observations what things make a gas station successful.

I suggest you may observe the following: successful gas stations are in busy locations, they are well lit, they have easy access to multiple pumps, they have efficient high speed equipment, they have automated card readers, they have convenience stores(perhaps that have exclusive deals with Doritos, Krispy Kreme, Dominos, whatever), they have a brand of gasoline that consumers consider reliable, they may have a car wash, they are clean. They may have an affiliation/affinity program with another business like a Costco, or a Canadian Tire, or a grocery store that allows them to operate as something close to a loss leader.

Why do they have these things? Gasoline is largely a commodity. Customers highly value price and convenience when they buy it. The costs of operating a gas station are largely fixed. Employee costs, property costs, lighting costs, etc are largely the same whether people buy your gas or not. The cost of acquiring gasoline in a given area is relatively the same for everyone, with discounts and efficiencies largely related to the scale of volumes you purchase.

The way a gasoline franchise is successful is to sell a lot of gallons at a very low margin and take advantage of the traffic this generates to cross-sell beer, snickers bars and lottery tickets.

This is not a big secret. Anyone with the slightest clue about gasoline retail will agree with it. Anyone who drives past gasoline stations can observe this is what they are doing.

Now, does this municipal fuel depot offer any of this? Will it have a conveniently located well lit station? Will it have easy access to multiple high speed pumps? Will it have automatic credit card readers at every pump? Will it have a c-store or affinity program? Will it have a reliable branded gasoline that customers trust? Will it have economies of scale in its fuel purchasing program?

I think the answers are no, no, no, no, no, no and uh, no.

Stations without these things are not profitable. Most of them were shut down decades ago because they were not profitable. This is why you don't see them. They do not make profit. The number of gas stations in the US has been declining for decades. It's a brutally competitive high volume, low margin business.

So the idea that you will be successful because you choose not to make a profit here is silly. You will not have that choice. You know this if you understand the retail gasoline business. Which they don't.

That's a very nicely thought out and well presented analysis of what it takes to operate a profitable gas station. Too bad it has nothing to do with what this town in Kentucky is trying to accomplish.

Do you waste this much time at work on nicely thought out and well presented analyses that ultimately have nothing to do with the project at hand?

 

[Bronzeage]

I would like cheap gas, too. I probably wouldn't like it the city opened a vintage department store and sold things cheaper than me because their sales staff was on the city payroll and the city didn't charge rent.

You wouldn't like it if I underpriced you either

So what is your point?

So long as the sellers follow whatever the rules are this day, what the customers want be damned? And what if the rules change? Customers, also known as citizens, have been known to make such changes.

If I want to invest in an oil company, I'll go buy Exxon stock. It's my free choice. I don't have a choice about paying taxes.
We hear a lot of complaints about Walmart coming into small towns and opening a store. Walmart has plenty of capital to invest and a sales volume which lets them sell at a very low price. The proverbial "Mom and Pop" stores operate on a smaller scale and have higher overhead. They cannot compete with the giant and soon close.

The city has an even better deal than Walmart. They have a ready labor pool and a gas station already in place. The labor costs disappear into the City payroll. Of course, there's no such thing as a free tank full. Someone is paying for it, they just don't know it. Even the two privately owned gas stations are paying taxes to support the City gas station.

Government resources are being used to sell gasoline at below market prices. If this is a good idea, why don't they sell bread and milk, as well? These days, most gas stations do. They have to, because the profit margin on gasoline is very small. The real money is made on beer, soft drinks and those strange things on the rollers.

If the City finds themselves in a strange situation where two private gas stations are able to sustain higher prices than neighboring towns, they should look to see what about the business environment makes it difficult for a third station to open and take advantage of the 20 cent per gallon price advantage.

 

[ksen]

Government resources are being used to sell gasoline at below market prices.

Below market according to whom?

eta: and what do you mean by "below market?"

 

[Bronzeage]

Government resources are being used to sell gasoline at below market prices.

Below market according to whom?

eta: and what do you mean by "below market?"

Market price is the number on the big sign out in front of the gas station. Debating with a sign is a futile pursuit.

 

[Keith&Co.]

Below market according to whom?

eta: and what do you mean by "below market?"

Market price is the number on the big sign out in front of the gas station. Debating with a sign is a futile pursuit.

So, the gas stations in this town are selling gas at, someone said, 20cents/gallon more than neighboring towns. People think they should be paying what other towns are paying. Or, they don't see any particular reason for the 20c/g increase. it's not like the stuff has to be carried up the mountain on the back of mules.

So, if the city buys gas and sells it at prices comparable to the neighboring cities, are they at-market or below-market?

 

[ksen]

Below market according to whom?

eta: and what do you mean by "below market?"

Market price is the number on the big sign out in front of the gas station. Debating with a sign is a futile pursuit.

If that's all "market price" is then who gives a fuck if a municipality is able to offer gas at below the inflated price some gas station owners think you should be paying?

And how do you know those numbers on the sign aren't above market price? I mean one town over the numbers on the sign are 20 digits lower.

 

[Jimmy Higgins]

That is what I said. They don't set the price. Outside sources do.

You touch on convenience store operations, which opens up a whole new set of issues. Pricing, promotions, staffing, training, optimal facility layout. Etc.

But this place doesn't do that.

It's very hard to make money in the gas retail business without convenience store operations. They will have to burden their gasoline with a much higher level of fixed costs.

The phrase you are looking for isn't "make money", but "make sustainable profit". As long as they don't need to make that 5 to 10 or whatever percent off the top, the sustainability of the operation is simpler.

And I imagine it will be challenging to acquire gasoline at a competitive price compared to those who have a sophisticated procurement organization and significant more scale and bulk purchasing power.

That is unlikely as municipalities usually have gasoline stations of their own for the Public Works operations. So they need to gas up lots of cars and trucks (the number varies by the size of the municipality).

Oh, and if your pricing policy is "slap a few cents onto whatever you paid for it" you're often going to find you are wildly out of the market on many occasions. And gasoline customer are quite price sensitive. It's hard to offset your largely fixed costs when you aren't selling any gasoline. Even harder without a store. On the other hand there will also be cases where your gas is so cheap you'll sell it out much faster than you anticipated and run dry. Customers don't like gas stations that run dry.

Yet all these problems have yet to surface. Though I do like you argument that even if it is successful, it is doomed to fail.

Here's what I suggest. On your drive home from work today, observe some gas stations. See if you can infer from your observations what things make a gas station successful.

I suggest you may observe the following: successful gas stations are in busy locations, they are well lit, they have easy access to multiple pumps, they have efficient high speed equipment, they have automated card readers, they have convenience stores(perhaps that have exclusive deals with Doritos, Krispy Kreme, Dominos, whatever), they have a brand of gasoline that consumers consider reliable, they may have a car wash, they are clean. They may have an affiliation/affinity program with another business like a Costco, or a Canadian Tire, or a grocery store that allows them to operate as something close to a loss leader.

Why do they have these things? Gasoline is largely a commodity. Customers highly value price and convenience when they buy it. The costs of operating a gas station are largely fixed. Employee costs, property costs, lighting costs, etc are largely the same whether people buy your gas or not. The cost of acquiring gasoline in a given area is relatively the same for everyone, with discounts and efficiencies largely related to the scale of volumes you purchase.

The way a gasoline franchise is successful is to sell a lot of gallons at a very low margin and take advantage of the traffic this generates to cross-sell beer, snickers bars and lottery tickets.

This is not a big secret. Anyone with the slightest clue about gasoline retail will agree with it. Anyone who drives past gasoline stations can observe this is what they are doing.

OK. So these are important things to run a good gas station. Well lit, located in a good place, multiple pumps. You know, that you've given me these secrets that apparently only you and retail gas station owners know, I can go out and make a fortune now!

But on the other hand, if these things are so obvious, is there any reason to suspect that the Town is entirely unaware of them?

Now, does this municipal fuel depot offer any of this?

Why does it need to? That comment was with respect to the Municipality being completely ignorant to the world of gasoline acquisition.

Will it have a conveniently located well lit station? Will it have easy access to multiple high speed pumps? Will it have automatic credit card readers at every pump? Will it have a c-store or affinity program?

You mean like how they likely have similar things for there Town Hall for utility bill payments, tax payments, etc...? You make it sound like that local government knows nothing about money.

Will it have a reliable branded gasoline that customers trust?

It is Kentucky, so they could be using something that Bubba distilled in that large tub in his backyard.

Stations without these things are not profitable. Most of them were shut down decades ago because they were not profitable. This is why you don't see them.

I see them. They still exist. Small stations that don't have a place to walk in to get bubble gum and Cheez-its. They are not all that uncommon.

The number of gas stations in the US has been declining for decades.

As has average use of gasoline.

It's a brutally competitive high volume, low margin business.

Which makes it a little bit easier to run if you don't have to worry about the required profit margin to continue running the store. If breaking even is enough, which works for the Government, then you are at an advantage.

So the idea that you will be successful because you choose not to make a profit here is silly.

Didn't say that success was inevitable, just that having lower overhead in addition to requiring that you only need to break even are advantages that can help.

You will not have that choice. You know this if you understand the retail gasoline business. Which they don't.

dismal, we realize that you think that you are the only person that knows how shit works, but that isn't true.

 

[Bronzeage]

Market price is the number on the big sign out in front of the gas station. Debating with a sign is a futile pursuit.

So, the gas stations in this town are selling gas at, someone said, 20cents/gallon more than neighboring towns. People think they should be paying what other towns are paying. Or, they don't see any particular reason for the 20c/g increase. it's not like the stuff has to be carried up the mountain on the back of mules.

So, if the city buys gas and sells it at prices comparable to the neighboring cities, are they at-market or below-market?

Why are two different businesses selling for 20 cents more? Is their cost of doing business higher than the neighboring town? Is the neighboring town at an Interstate Highway, and benefits from a large volume of travelers? There are a lot of factors to consider. The cost of doing business is usually higher in a small town, if only because of the low sales volume and the extra distance goods must travel. Does the City own a fuel tanker which drives to a distant fuel distributer and returns loaded, but this cost is not included in the price of gasoline?

If the City sells 20,000 gallons of gasoline and discovers they sold it below cost, when all the factors are included(other than the wholesale price/gal), it's of no great consequence. City Hall will not have to close. If a private business under prices it's goods, it might not be able to pay the rent, or what's worse, it might be able to pay its taxes.

Selling cheap gasoline won't close City Hall, but low tax revenue might.

 

[Nice Squirrel]

That is what I said. They don't set the price. Outside sources do.

You touch on convenience store operations, which opens up a whole new set of issues. Pricing, promotions, staffing, training, optimal facility layout. Etc.

But this place doesn't do that.

It's very hard to make money in the gas retail business without convenience store operations. They will have to burden their gasoline with a much higher level of fixed costs.

The phrase you are looking for isn't "make money", but "make sustainable profit". As long as they don't need to make that 5 to 10 or whatever percent off the top, the sustainability of the operation is simpler.

And I imagine it will be challenging to acquire gasoline at a competitive price compared to those who have a sophisticated procurement organization and significant more scale and bulk purchasing power.

That is unlikely as municipalities usually have gasoline stations of their own for the Public Works operations. So they need to gas up lots of cars and trucks (the number varies by the size of the municipality).

Oh, and if your pricing policy is "slap a few cents onto whatever you paid for it" you're often going to find you are wildly out of the market on many occasions. And gasoline customer are quite price sensitive. It's hard to offset your largely fixed costs when you aren't selling any gasoline. Even harder without a store. On the other hand there will also be cases where your gas is so cheap you'll sell it out much faster than you anticipated and run dry. Customers don't like gas stations that run dry.

Yet all these problems have yet to surface. Though I do like you argument that even if it is successful, it is doomed to fail.

Here's what I suggest. On your drive home from work today, observe some gas stations. See if you can infer from your observations what things make a gas station successful.

I suggest you may observe the following: successful gas stations are in busy locations, they are well lit, they have easy access to multiple pumps, they have efficient high speed equipment, they have automated card readers, they have convenience stores(perhaps that have exclusive deals with Doritos, Krispy Kreme, Dominos, whatever), they have a brand of gasoline that consumers consider reliable, they may have a car wash, they are clean. They may have an affiliation/affinity program with another business like a Costco, or a Canadian Tire, or a grocery store that allows them to operate as something close to a loss leader.

Why do they have these things? Gasoline is largely a commodity. Customers highly value price and convenience when they buy it. The costs of operating a gas station are largely fixed. Employee costs, property costs, lighting costs, etc are largely the same whether people buy your gas or not. The cost of acquiring gasoline in a given area is relatively the same for everyone, with discounts and efficiencies largely related to the scale of volumes you purchase.

The way a gasoline franchise is successful is to sell a lot of gallons at a very low margin and take advantage of the traffic this generates to cross-sell beer, snickers bars and lottery tickets.

This is not a big secret. Anyone with the slightest clue about gasoline retail will agree with it. Anyone who drives past gasoline stations can observe this is what they are doing.

Now, does this municipal fuel depot offer any of this? Will it have a conveniently located well lit station? Will it have easy access to multiple high speed pumps? Will it have automatic credit card readers at every pump? Will it have a c-store or affinity program? Will it have a reliable branded gasoline that customers trust? Will it have economies of scale in its fuel purchasing program?

I think the answers are no, no, no, no, no, no and uh, no.

Stations without these things are not profitable. Most of them were shut down decades ago because they were not profitable. This is why you don't see them. They do not make profit. The number of gas stations in the US has been declining for decades. It's a brutally competitive high volume, low margin business.

So the idea that you will be successful because you choose not to make a profit here is silly. You will not have that choice. You know this if you understand the retail gasoline business. Which they don't.

Apparently you do not live in a place that has fuel stations that are 100% automatic and do not provide such services beyond a couple vending machines. Figuring you are an expert in the field, I figured I'd let you know that such successful commercial enterprises exist.

 

[Bronzeage]

Market price is the number on the big sign out in front of the gas station. Debating with a sign is a futile pursuit.

If that's all "market price" is then who gives a fuck if a municipality is able to offer gas at below the inflated price some gas station owners think you should be paying?

And how do you know those numbers on the sign aren't above market price? I mean one town over the numbers on the sign are 20 digits lower.

Do you understand what a market is?

 

[SimpleDon]

I think that you all are overreacting. I am shocked.

Are you really though?

I forgot my [/sarcasm] end tag. [/apology][/also sarcasm]

 

[Keith&Co.]

So, the gas stations in this town are selling gas at, someone said, 20cents/gallon more than neighboring towns. People think they should be paying what other towns are paying. Or, they don't see any particular reason for the 20c/g increase. it's not like the stuff has to be carried up the mountain on the back of mules.

So, if the city buys gas and sells it at prices comparable to the neighboring cities, are they at-market or below-market?

Why are two different businesses selling for 20 cents more?

I don't know. The citizens surely suspect the convenience stores in town are gouging greedheads.

Is their cost of doing business higher than the neighboring town? Is the neighboring town at an Interstate Highway, and benefits from a large volume of travelers? There are a lot of factors to consider. The cost of doing business is usually higher in a small town, if only because of the low sales volume and the extra distance goods must travel.

Apparently the town citizens don't think that the situation justifies the mark-up.

Does the City own a fuel tanker which drives to a distant fuel distributer and returns loaded, but this cost is not included in the price of gasoline?

I'd bet that the local refinery owns the truck and truck operations are included in the price of the gas sold to the city.

If the City sells 20,000 gallons of gasoline and discovers they sold it below cost, when all the factors are included(other than the wholesale price/gal), it's of no great consequence. City Hall will not have to close. If a private business under prices it's goods, it might not be able to pay the rent, or what's worse, it might be able to pay its taxes.

Selling cheap gasoline won't close City Hall, but low tax revenue might.

That's kinda the point of the exercise. The high prices in town are driving tourists OUT of town, and the city is not gaining the revenues from the tourist dollar.
As far as the tourists are concerned, the prices in other towns are part of their market. They're taking their vacations elsewhere.

So i'm still wondering what you mean by 'market price.' The town is in competition with their neighboring towns for the tourist dollar, so if they match those prices, are they under or at market price?