June 13, 2008
Exxon Mobil Getting Out of Gas Retailing Biz
Exxon Mobil knows that it’s hard to make it selling gas at retail where the profits are just pennies on the gallon and much of what is made gets lost to credit card interchange fees. That’s why the company has decided to sell off the remaining 820 company-owned outlets it operates and get out of the retailing business altogether.
The largest concentration of company-owned stations are in Texas, with roughly 190 locations, and Florida, with 170.
“As the highly competitive fuels marketing business in the U.S. continues to evolve, we believe this transition is the best way for Exxon Mobil to compete and grow in the future,” Ben Soraci, director of Exxon Mobil’s U.S. retail sales, told The Associated Press.
Jeff Lenard, a spokesperson for the National Association of Convenience Stores, said Exxon Mobil understands the challenges associated with trying to sell gas at retail. That’s why it’s getting out of the business.
“They can actually point their attention to some other area where you can make money,” Mr. Lenard said. “Retail is incredibly volatile. This way, they can [sell gasoline] wholesale and count on a fairly predictable income.”
Discussion Questions: What do you think of Exxon Mobil’s decision to sell its company-owned stations? Can any business afford to operate stations today where gas is the primary source of revenues and profits? What needs to be done to make gasoline a viable retail business?
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This is a sad tale of missed opportunities and poor management. Exxon is following Shell in getting rid of their retail outlets–in the US. What many do not realize, the exact opposite is happening in Europe.
In Germany, Exxon is actually buying back all of their franchise outlets. Just visit a Shell station in that country and you will understand why. Impeccably clean stores with large windows, a thorough selection of food, beverages, and impulse buys. Despite the low margins, these stores are centrally run to keep their overhead costs down, gain leverage with their suppliers, establish healthy inventory turnover and maintain a customer friendly atmosphere.
It seems that US outlets have been neglected and thereby have fallen to decay. The biggest mistake was to provide payment options at the pump. Although this was a welcome move for the majority of customers, it had the drawback of keeping the wealthiest non-cash paying customers out of the store and made half of gas station real estate literally worthless.
It will be interesting to see who will purchase these outlets and what their long term goal with the locations will be.
Take a clue; Exxon Mobil is the most profitable company in history…what does that tell you about this move?
Gas is a loss leader. Wal-Mart will have a field day with it.
Gee whiz, the most profitable company in the world does not want to make money on both ends anymore? I guess they are tired of accepting their own price increases.
This is why there is no such thing as a “fuel stop” anymore. Everything is a Convenience store with gas–a “G-store.” The only advantage to fuel is that the G-store is guaranteed of getting a shot at your convenience purchases at least once a week.
I find it hard to believe that retailers can’t make money on an item that is such a commodity and in such high demand. At the very least, they can make money on the C-Store side of the business.
Would you want YOUR kid to marry someone who owns a gas station? (I’ll be heart-broken if my little key-ring fob doesn’t light up that flying horse on the pumps anymore….)
The way Exxon treats station owners is a scandal. When station owners raise prices, Exxon RAISES THEIR COST TO THE DEALER, ensuring that Exxon always comes out ahead.
Gas stations can be a profitable business…but better regulation would help.
Any stockholder will tell you that Exxon Mobile is preparing to cease operations. This will be a ten to twenty year proposition but they realize that a combination of government intervention, the high cost of exploration, and unfriendly offshore governments demand liquidation to insure the best return to their investors. Exxon, more than most, realizes its obligation to its shareholders.
They have been a pioneering exploration company and a superb manager. It will be sad to see them go.
Wondering what we will think when General Motors, Ford and Chrysler no longer sell cars anymore? Think that’s not likely? Think again. Chrysler, now private, run by a failed retail executive, is also now failing and will likely fall the way of Oldsmobile, a brand of the past.
Wal-Mart, Sams, Costco, Kroger, Safeway, Giant-Eagle, Meijer et al, are in this business as well as just about every other regional. They are doing it better. They are offering a better value, a cleaner store and discounts based on purchases. Isn’t it just possible that they were beaten at their own game?
They likely simply looked at what they would have to do in order to compete and decided they couldn’t. And in reality, they can’t. The business is different. Consumers have made new choices as to how to purchase fuel. The business has changed and they didn’t. It’s not so different than what happens in any segment of retailing. Case in point, the auto industry, Kmart, Sears, etc. Its as simple as that.
Personally, I’d like to see the C-store/Gas station model disappear. It would be nice to pull up to the pump and have somebody pump your gas and clean your window, check your oil and so on just like in the ‘good old days’. Gas stations never have made much profit from the gas end of the business. Their profits came from auto repairs and tire service.
The increasing complexity of the automobile and over-regulation of business in general made the C-store concept increasingly viable, but it never was that much of smart move for anyone to go into without a lot of backing. Profits are so small today in retail anyway that the only way a store or chain can succeed is through sheer volume.
The only way to do that in the gas/C-store environment is to have a place that is more conveniently located, and have lower prices than your nearest competitor. It’s pretty simple as to why these businesses are struggling. I say get rid of the beer and open up the repair bays. I’d sooner buy from a real filling station any day, except I can’t find one.
Capital allocation is the #1 skill at Exxon Mobil. Exxon Mobil isn’t saying that gasoline retailing is unprofitable. It isn’t saying that c-stores with gasoline are unprofitable. Their experience shows that petroleum exploration, refining, and distribution have a higher return on investment than retailing. That shouldn’t be a surprise to anyone in the gas station business. If gas stations and convenience stores had higher returns on investment, they’d be able to pay their miserable employees better and more of their entrepreneur owners would be leading lower-stress lives.
It’s not just the competition that has made convenience retailing margins so meager. There are also the legal liabilities. ExxonMobil is far more susceptible to being sued than any regional dealer, because they’re the world’s largest oil company. Factor that into the costs and surely it’s not profitable enough.
Exploration, production and refining are ExxonMobil’s core competencies. They’ve never been great at retail because it’s not who they are. It’s hard to tailor an individual c-store’s offerings to the community it serves when all decisions are made at the corporate level. That’s why you might find an entire shelf devoted to beef jerky in an ExxonMobil store in New York City. Local operators are better at it, period. Coca-Cola got out of the bottling business, I’m guessing for similar reasons.
ExxonMobil and BP are the last two big oil companies that still own many of their US stores. The others got out of that business long ago. BP has been trying to sell their 3,000 US stores for over two years now, with some success. Like it or not, big box retailers (e.g., Wal-Mart), regional operators (e.g., Sheetz) and grocers are driving the evolution of convenience retail. Evolve or die.
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This is a sad tale of missed opportunities and poor management. Exxon is following Shell in getting rid of their retail outlets–in the US. What many do not realize, the exact opposite is happening in Europe.
In Germany, Exxon is actually buying back all of their franchise outlets. Just visit a Shell station in that country and you will understand why. Impeccably clean stores with large windows, a thorough selection of food, beverages, and impulse buys. Despite the low margins, these stores are centrally run to keep their overhead costs down, gain leverage with their suppliers, establish healthy inventory turnover and maintain a customer friendly atmosphere.
It seems that US outlets have been neglected and thereby have fallen to decay. The biggest mistake was to provide payment options at the pump. Although this was a welcome move for the majority of customers, it had the drawback of keeping the wealthiest non-cash paying customers out of the store and made half of gas station real estate literally worthless.
It will be interesting to see who will purchase these outlets and what their long term goal with the locations will be.
Take a clue; Exxon Mobil is the most profitable company in history…what does that tell you about this move?
Gas is a loss leader. Wal-Mart will have a field day with it.
Gee whiz, the most profitable company in the world does not want to make money on both ends anymore? I guess they are tired of accepting their own price increases.
This is why there is no such thing as a “fuel stop” anymore. Everything is a Convenience store with gas–a “G-store.” The only advantage to fuel is that the G-store is guaranteed of getting a shot at your convenience purchases at least once a week.
I find it hard to believe that retailers can’t make money on an item that is such a commodity and in such high demand. At the very least, they can make money on the C-Store side of the business.
Would you want YOUR kid to marry someone who owns a gas station? (I’ll be heart-broken if my little key-ring fob doesn’t light up that flying horse on the pumps anymore….)
The way Exxon treats station owners is a scandal. When station owners raise prices, Exxon RAISES THEIR COST TO THE DEALER, ensuring that Exxon always comes out ahead.
Gas stations can be a profitable business…but better regulation would help.
Any stockholder will tell you that Exxon Mobile is preparing to cease operations. This will be a ten to twenty year proposition but they realize that a combination of government intervention, the high cost of exploration, and unfriendly offshore governments demand liquidation to insure the best return to their investors. Exxon, more than most, realizes its obligation to its shareholders.
They have been a pioneering exploration company and a superb manager. It will be sad to see them go.
Wondering what we will think when General Motors, Ford and Chrysler no longer sell cars anymore? Think that’s not likely? Think again. Chrysler, now private, run by a failed retail executive, is also now failing and will likely fall the way of Oldsmobile, a brand of the past.
Wal-Mart, Sams, Costco, Kroger, Safeway, Giant-Eagle, Meijer et al, are in this business as well as just about every other regional. They are doing it better. They are offering a better value, a cleaner store and discounts based on purchases. Isn’t it just possible that they were beaten at their own game?
They likely simply looked at what they would have to do in order to compete and decided they couldn’t. And in reality, they can’t. The business is different. Consumers have made new choices as to how to purchase fuel. The business has changed and they didn’t. It’s not so different than what happens in any segment of retailing. Case in point, the auto industry, Kmart, Sears, etc. Its as simple as that.
Personally, I’d like to see the C-store/Gas station model disappear. It would be nice to pull up to the pump and have somebody pump your gas and clean your window, check your oil and so on just like in the ‘good old days’. Gas stations never have made much profit from the gas end of the business. Their profits came from auto repairs and tire service.
The increasing complexity of the automobile and over-regulation of business in general made the C-store concept increasingly viable, but it never was that much of smart move for anyone to go into without a lot of backing. Profits are so small today in retail anyway that the only way a store or chain can succeed is through sheer volume.
The only way to do that in the gas/C-store environment is to have a place that is more conveniently located, and have lower prices than your nearest competitor. It’s pretty simple as to why these businesses are struggling. I say get rid of the beer and open up the repair bays. I’d sooner buy from a real filling station any day, except I can’t find one.
Capital allocation is the #1 skill at Exxon Mobil. Exxon Mobil isn’t saying that gasoline retailing is unprofitable. It isn’t saying that c-stores with gasoline are unprofitable. Their experience shows that petroleum exploration, refining, and distribution have a higher return on investment than retailing. That shouldn’t be a surprise to anyone in the gas station business. If gas stations and convenience stores had higher returns on investment, they’d be able to pay their miserable employees better and more of their entrepreneur owners would be leading lower-stress lives.
It’s not just the competition that has made convenience retailing margins so meager. There are also the legal liabilities. ExxonMobil is far more susceptible to being sued than any regional dealer, because they’re the world’s largest oil company. Factor that into the costs and surely it’s not profitable enough.
Exploration, production and refining are ExxonMobil’s core competencies. They’ve never been great at retail because it’s not who they are. It’s hard to tailor an individual c-store’s offerings to the community it serves when all decisions are made at the corporate level. That’s why you might find an entire shelf devoted to beef jerky in an ExxonMobil store in New York City. Local operators are better at it, period. Coca-Cola got out of the bottling business, I’m guessing for similar reasons.
ExxonMobil and BP are the last two big oil companies that still own many of their US stores. The others got out of that business long ago. BP has been trying to sell their 3,000 US stores for over two years now, with some success. Like it or not, big box retailers (e.g., Wal-Mart), regional operators (e.g., Sheetz) and grocers are driving the evolution of convenience retail. Evolve or die.