Over the Canada Day weekend there was a common theme discussed around many patios and docks: the impact of inflation. Many of our customers feel like they are Running on Empty. What many of them don’t realize is that this phrase also depicts the operations of many convenience retailers – the primary sellers of motor fuels – from coast to coast.
It’s a common misconception that retailers’ profits increase as the price of fuel goes up. That’s not the case and is most apparent in Atlantic Canada where the price of fuel as well as margins are regulated.
In New Brunswick, for example, with the volatile price of regular gas hovering above $2 per litre, many retailers are selling gas at a loss because their margins remain fixed, at just 7.3 cents per litre. Undoubtedly, overall profitability hinges on volumes, but the pandemic has taken a huge bite out of that as well. COVID-19 has created a perfect storm for the retail fuel industry as expenses skyrocketed while fewer Canadians were commuting, causing a decrease in both traffic and overall sales as a result.
Exacerbating this problem is the increase of “touchless” payments and the growing hidden cost for retailers in processing credit cards. After real estate and payroll, credit card fees are the next highest cost of conducting business.
Today, credit card and tap payments are the norm, accounting for approximately 75% of fuel purchases. In an effort to remain competitive and keep prices lower for consumers, these fees are usually absorbed by the retailers rather than passed onto customers.
CICC advocating for action by governments
As inflation continues to push up gas prices and lower profits, CICC has been advocating for governments to take action.
And we have been gaining traction.