Retail giants, convenience drive evolution of Texas gas stations
Not Your Father's Fill-up
There's not much chance a Texan with a cranky car can get it fixed at a full-service gas station these days.
The gas stations with garage mechanics that once dominated the sale of gasoline and diesel fuel in Texas are all but extinct. They've been replaced by convenience stores that sell everything from t-shirts to fried chicken, and by fuel pumps at grocery stores and "hypermarts"--retail giants such as Costco and Wal-Mart.
Industry insiders say the complexity and cost to repair modern autos drove service stations into oblivion.
"Repairs were always the service stations' major profit center, and when those went away, so did the stations," said Scott Fisher, vice president of policy and public affairs for the Texas Petroleum Marketers and Convenience Store Association (TPCA).
No more mechanics
The sale of gasoline and diesel fuel is a $19 billion-a-year business in Texas, and the industry has changed dramatically in recent years. Convenience stores, which have steadily replaced the service stations of yesteryear, employ nearly 77,000 Texans, according to the TPCA.
There are about 14,600 fuel retail facilities in Texas, according to TPCA. The majority, about 11,200, are convenience stores that sell fuel. There are nearly 700 "high volume retailers" (HVRs) that sell gas. HVRs are operated by large-scale retailers like H-E-B, Costco, Albertson's and Wal-Mart. There are about 560 truck stops and another 2,200 retail facilities--mostly marinas, service stations and car washes.
An improving economy has helped keep fuel sales up, but convenience store owners say profit margins are thin.
To compete with the hypermarts, convenience store owners have focused on service and other factors to attract customers, said Allen Smith, president of Triple S Petroleum and current TPCA president. Triple S operates 21 Shell brand stores in the Austin area and provides supplies to 17 stores with outside owners.
"You've got to have service, you've got to have the right merchandise selection and you've got to have a facility with the right look," Smith said. "It can't be old and dumpy looking. People want something new and exciting."
Often, it's what's in the store, not at the pump, that counts, Smith says. Sales of food, drinks and other merchandise at convenience stores in Texas topped $11.5 billion in 2003, or $75,000 per store, per month, according to the Convenience Store News Industry Report.
One of the biggest changes in the industry was the dawn of the hypermart. A growing number of Texans now get a fill-up at a grocery store like H-E-B, Randall's, Kroger or Albertson's, or at a retailer like Costco or Wal-Mart.
"Seven or eight years ago, there weren't any HVRs," said Doug DuBois Jr., director of membership and education for TPCA. "Now Texas has at least 40 percent of the nation's HVRs."
Hypermarts often sell twice as much gas as a typical convenience store. Some hypermarts can sell up to 2.6 million liters a month, compared with about 415,000 liters a month for a convenience store, according to the National Association of Convenience Stores.
The high volume of sales typically allows hypermarts to sell gas for three to 10 cents per gallon less than convenience stores, according to a 2003 report by Energy Analysts International (EAI) of Westminster, Colo.
One of the places hypermarts have made the most inroads is in Dallas-Fort Worth, according to EAI. From early 2001 to September 2002, the market share for hypermart gasoline sales increased about 15 percent. The competition has kept profit margins low for area retailers.
And the Dallas-Fort Worth area, the EAI concludes, is a likely glimpse into the future of gasoline sales in Texas and the rest of the United States.
Bruce Wright and Greg Mt.Joy