U.K. Supermarkets Compete for Gas Station Business

NACS Daily News

Britain’s supermarkets are offering steep discounts on gasoline, leading to tough times for many independent gas stations.

LONDON – Britain’s major supermarket chains are offering steep gasoline discounts in an effort to lure customers, and the effort is impacting independent gas stations which are closing in large numbers, Petrol Plaza reports.

Morrisons is offering loyalty points on its new fuel card while Asda has launched a price comparison smartphone app. Meanwhile, Sainsbury’s and Tesco have offered shopping discounts with a fuel purchase.

In response, Brian Madderson, chairman of the Retail Motor Industry Federation (RMI), has lobbied the Office of Fair Trading (OFT) to launch an inquiry into the practice, maintaining that the pricing is unfair and predatory and thus makes it impossible for them to compete.

There are currently 8,000 independent gasoline retailers in Britain, compared with 21,000 two decades ago and 40,000 in 1966. The RMI predicts that in five years, there will be only 1,200 supermarket and major oil company petrol garages left.

Last year in Britain, supermarkets accounted for 45% of total fuel sales from 1,316 sites, compared with 37.4% in 2010, according to the Energy Institute and market analyst Experian Catalist.

Madderson said small stations typically earn 5 pence in profit on a liter of gasoline (roughly 30 cents per gallon). The major supermarkets have used “loss leading” tactics that trim at least 5 pence off a liter, assuming the shopper spent a certain amount in their store. And Sainsbury’s has gone further, offering 10 pence off a liter of gasoline if the consumer spent a certain amount in-store or online.

Madderson has also blamed oil companies for unfair dual pricing, a practice that he said has forced 300 small retailers out of business each year. “They simply cannot compete,” he said.

In response, supermarkets maintain the marketplace works competitively and effectively. Andy Peake, Asda’s Petrol Trading Director said, “We welcome the OFT’s decision to look into petrol and diesel prices. At Asda we are committed to doing everything we can to bring motorists the lowest possible fuel prices. Our preference would be that everyone charged a national price for fuel, that way drivers would be treated as equals regardless of where they live.”