Groceries fuel gas discounts



Sunday, August 13, 2006 Grocery stores need gas discounts to compete, a store owner says. By DON SHILLING VINDICATOR BUSINESS EDITOR Shoppers have more ways than ever to save money on gas while buying bread and milk. These retailers have added or expanded their programs that provide fuel discounts for spending money in their stores: Giant Eagle last month began offering bonus discounts at its GetGo gas stations with purchases of select items. These are in addition to its discount of 10 cents off each gallon of gas for every $50 spent in the store. Magnotto's Hermitage Shop N' Save has been offering similar discounts for the past two years. Other western Pennsylvania Shop N' Saves, including one in New Castle, started a fuel discount program last spring. Marc's this month started offering $25 gas cards that provide a 10-cent-per-gallon discount at Speedway. Fuel discounts are becoming more popular all across the country, said Bill Greer, a spokesman for the Food Marketing Institute, a trade group in Washington, D.C. One-third of food stores have gas pumps now, up from 21 percent three years ago. Though the trade group doesn't have statistics on fuel discount programs, Greer said they have become widespread and are often to tied to customer loyalty cards. What's expected The trend is growing so fast that one area store owner said customers have come to expect it. "If you're not in the fuel business today, you can't compete," said Michael Magnotto, owner of the Shop N' Save in Hermitage. He saw the popularity of such programs on the West Coast, so he installed gas pumps at his store three years ago. He provides two types of discounts. Shoppers receive 10 cents off each gallon of gas for every $50 spent, plus manufacturers provide additional fuel discounts for buying certain items. These range from 2 cents to 40 cents per gallon of gas. Magnotto said manufacturers have seen that they can sell more products by attaching fuel discounts. "I see manufacturers getting involved more and more because they know what drives the customer," he said. Also, retailers in other industries, such as Home Depot, are starting to open gas stations at their stores. Not all store owners see the need to provide fuel discounts, however. Price comparisons Local grocer Henry Nemenz said retailers who provide fuel discounts are covering the cost of discounts with higher prices in their stores. "We give shoppers low prices instead," said Nemenz, who owns five IGA stores in Mahoning County. Family members also own 15 Save-A-Lot stores in the region. Nemenz said he is combating the focus on fuel discounts by doing price comparisons in some of his stores. He puts shopping carts with items bought at his store and a competitor's to show his shoppers the price difference. "We want to show the public that they shouldn't have to save money on gas by paying more for something else," he said. Dan Falcone, owner of a Shop N' Save in New Castle, is one retailer who is happily providing the fuel discounts to shoppers. Shop N' Save stores in western Pennsylvania that don't have gas pumps were able to link up with Sunoco this spring to provide what has become standard — 10 cents off per gallon of gas for every $50 spent. Shoppers can receive smaller discounts if they spend less than $50. Falcone said Shop N' Save owners are paying for the discounts, with the hope that customers will become more loyal and do more shopping in the store. It's too early to say what effect the program is having on sales, but "customers are very happy," he said. Marc's, Speedway team Marc's, a Cleveland-based discounter, started its gas card program Aug. 1, partly because of what grocery store chains are doing, said Day Armelli, company marketing director. She said Marc's has no interest in building gas stations, so it teamed with Speedway, which also is based in Ohio. One of the competitors that food retailers in the region must watch is Giant Eagle, which has stores throughout the Mahoning and Shenango valleys. It has been offering fuel discounts at its Youngstown area stores since 2004. The Pittsburgh-based chain increased its discount weapons this year. In some areas, it has been doubling its discounts to 20 cents off for every $50 spent. In the Youngstown area, it started a bonus program in July. The program was going to end last week but was extended to Sept. 9. It provides additional fuel discounts of between 1 cent and 20 cents on selected items that are corporate brands of Giant Eagle. "These programs increase customer loyalty by giving them a reason to enter our stores more frequently and to buy more frequently," said Dan Donovan, a Giant Eagle spokesman. For shoppers, the merging of grocery stores and gas stations is part of an overall retail trend to make shopping more convenient, said Greer of the Food Marketing Institute. For retailers, the advantage is getting customers to see value in a store's loyalty card, he said. "Any service that generates repeat business is always an effective marketing tool," he said. shilling@vindy.com

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