Home' Convenience and Impulse Retailing : February 2010 Contents FORECOURT
www.c-store.com.au | C&I | February 2010
On 2 December 2009, the Hon Dr Craig
Emerson, Australian Government Minister
for Competition Policy and Consumer Affairs,
called on the ACCC to investigate possible
anticompetitive petrol pricing practices. The
inquiry is to assess whether coordinated
activity among major oil companies is
affecting the pattern and height of the regular
price cycle to the detriment of motorists.
The industry should be dismayed that the
Australian Government has again called for
a narrow investigation into petrol retailing.
The proposed examination, aimed solely at
the retail end of the industry value chain, fails
to recognise the importance of interactions
at the refining, terminal, wholesale and
Some of the public may see this as a
milestone on the path to cheap petrol; but
this inquiry is yet another cheap policy trick.
According to previous analysis by the
ACCC, "...the most important factor [in]
determining the retail price generally is
the wholesale price at which the retailer
purchased the fuel." (Report of the ACCC
inquiry into the price of unleaded petrol,
I agree with the concerns raised by the ACCC
in that report, namely:
• The industry is concentrated at the
refining and wholesale levels;
• There is extensive trading in petrol at
the wholesale level between the refiner--
• There are impediments to the large-scale
importing of petrol by an independent.
This suggests that a closer look at
transparency and competition at the
terminal gate is more likely to reveal any
Comments by Dr Emerson imply that
access to information about competitors'
fuel prices is the only determining factor
when competitors set board prices. Fuel
retailers know that this is not the case. A
board price is based on a number of factors,
including buying price, site throughput,
traffic direction and intensity, stock level of
fuel in underground tanks, cost of finance
and customer behaviour.
How customers respond is also related
to a number of factors. How much fuel do
I have? Where am I travelling? Do I have
time to purchase now? Do I have enough
money? Therefore, when the two sides of the
transaction come together, a fuel purchase is
the result of a complex dynamic process.
The ACCC (in its December 2008 report)
stated that "... retail [fuel sector] has active
price competition", finding that the level of
profitability was not high in comparison to
other industries. The ACCC estimated the
average retail margin, including distribution
(in the five major cities in 2007--08) at 5.1cpl
Below cost selling
Dr Emerson has called for an investigation
into possible anticompetitive petrol pricing
practices in the setting of retail petrol
prices in the hiking phase of the weekly
cycle. However, it is my view that the
anticompetitive behaviour occurs at the
bottom of the price cycle. What observers fail
to appreciate is that most days the retail price
is below the wholesale cost of fuel. The public
have difficulty accepting that a business
would regularly sell product at a loss; but in
reality, this has often been the case over the
Below-cost selling is destroying
independent operators. These 'maverick or
aggressive retailers' -- as the ACCC describes
them -- are supposed to continually nip
at the heels of major oil companies and
supermarket retailers. However, the major
retailers take the discount phase of the
petrol price cycle to a price well below the
independents' wholesale price of fuel.
The recent responses by the ACCC to
the proposed Caltex--Mobil merger and the
second round of Coles 40cpl discount offers
suggest a concern that there could be a
material effect on competition in the retail
market had these actions been approved.
What seems to be a change in the ACCC's
assessment of the public benefit verses
public detriment needs to be clarified before
any inquiry takes place.
With a federal election on the calendar
this year, it looks like -- yet again -- politicians
are motivated by the belief that talk of cheap
petrol equals votes.
or cheap policy
By Nic Moulis, General
The Doggy Delight Dogwash is a lockable,
prefabricated, camera fitted enclosure
option that can be added with minimum
disruption to almost any site.
This makes it an ideal profit centre for
convenience stores, service stations,
garden centres, pet stores, vet clinics and
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The unit can be set up with minimum
disruption to your business. The retailer
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connect to 15amp single phase power point
and to a town water tap and waste water
disposal, he said.
Additionally, Mr O Keeffe explained that
the retailer s profits are not eaten up by
wages as the need for staff involvement is
For further information call Terry
O Keeffe on 0418 363 057.
*Based on 60 sales per week.
The profit equation:
4m2 - $30,000 sales = 90% profit *
Narva has redesigned its flat 7 pin trailer
plug and socket to simplify trailer wiring
The new design utilises a threaded cap
that can be unscrewed by hand: This
allows the top and bottom outer casings to
separate and provide ease of access for
wiring up. Each unit also features clear
circuit identification markings.
Narva says the new Quickfit trailer
connectors provide excellent sealing
against dust, grime and moisture; they
manufactured to the highest standard
using quality ABS housings and nickel
plated brass terminals. Both the plug and
socket comply with all relevant ADR s.
A report prepared by the Australian
Competition & Consumer Commission
(ACCC) finds that the weekly fuel price cycle
is getting bigger and more regular.
The then Minister for Competition Policy, the
Hon Dr Craig Emerson said: The Report of
the ACCC into the prices, costs and profits of
unleaded petrol in Australia, and a separate
confidential report to me, raise concerns
about price signalling among major petrol
retailers during the price-hiking phase of the
However, it could be that some price-
sensitive motorists buy their petrol mainly
on heavy discounting days of the cycle when
petrol is supplied at or below cost.
According to the ACCC, the oil majors
(BP, Caltex, Mobil), supermarket retailers
(Coles Express and Woolworths) and large
independent retailers (including 7-Eleven)
then seek to recover losses during the price-
hiking phase of the cycle.
The ACCC s evidence suggests that in each
capital city one of the major petrol
retailers usually leads the market up
sharply after the bottom of the price cycle
Available in clam shell blisters or 20 piece
bulk packs, part numbers for the Socket is
82141BL and the Plug is 82042BL. For bulk
pack part numbers substitute BL with /20.
For further information call (03) 9730
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and the other major retailers follow in the
knowledge they won t be undercut by rivals.
Vital real-time price information is
transmitted through the Informed Sources
website, to which the major petrol retailers
The report suggests that this enables
major petrol retailers to know what price
each other is charging within minutes of
the first weekly price rises occurring. The
majority of independent retailers are not
subscribers to Informed Sources, making
their pricing decisions harder to observe.
According to the ACCC, it is usually the
independent retailers and Woolworths
that lead the market down each week. In
markets where independent retailers are
more prevalent the fuel price cycle is far
less pronounced. This is not a criticism
of Informed Sources. In its absence
alternative vehicles for conveying real-
time price movements could be relied
The ACCC finds that in 2008-09 petrol
companies actually made a net loss but
that in profitable years they typically make
a net profit of 2 to 6 cents per litre.
Quickfit makes it quick & easy
Comment by Dr Craig Emerson
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