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IS Fuelman Worth It?
A personal opinion

No.

1. Let's start with information that a client gave me today June 27, 2005.
2. Today the dealer is selling Shell regular gasoline at $2.099, so a hundred gallons sells for $209.90.
3. Since Motiva will no longer disclose cost of gasoline to Fuelman, Fuelman has informed dealers that from now on they will discount the gasoline 3.5%.
4. 3.5% of $209.90 is $7.35.
5. The dealer now gets $202.55 ($209.90 - $7.35 = $202.55).
6. The dealer's cost today for 100 gallons of regular is $201.15.
7. So the gross profit of the dealer's gasoline is $1.40.
   Fuelman's argument
8. But, on that sale of $209.90 on which the dealer makes $1.40, the driver making the purchase might personally purchase the following:
   1. $100 in cigarettes, a gross profit of $15
   2. $68 in vending, a gross profit of $27
   3. perhaps $61 in beer, if he drinks on the job, a gross profit of $15
   4. So, add $57 gross profit to the $1.40 if the driver drinks on the job, add $42 if he does not.
9. If this were so, it might be a reasonable rationalization.
10. Dealers have told me that the drivers do not come inside to make the normal purchases that the average customer does. They estimate the purchases as hardly more than a pack of cigarettes.
11. When we apply the overhead expenses to the sale of this 100 gallons of gasoline for this average dealer, he looses about $29.
    The "Added-Income" argument
12. There is a textbook argument that favors Fuelman in this discussion.
13. One sees this reasoning most often on cruise ship advertisements. Textbooks commonly refer to the airline industry.
14. It goes like this:
    1. A ship sells 550 of it's 600 cabins for $1,200 each.
    2. The ship could sail with those cabins filled and make a profit of $260,000 or $472 per cabin.
    3. The first 550 passengers have already paid the expenses of all 600 cabins and provided the profit.
    4. So, for no additional cost, the cruise ship can sell the remaining 50 cabins for only $500 per cabin, a real discount to the last 50 passengers and an even profit for the cruise ship.
15. This may be true for a cruise ship or an airline discounting its remaining unfilled seats, but this argument is a weak argument in our discussion.
16. The difference is that the additional fuel that Fuelman buys has a cost that is not paid for by previous or other customers! This textbook argument does not apply.
    The "aggravation factor"
17. This dealer as well as others I have spoken with over the years complains about the inconvenience of Fuelman sales.
    1. paperwork,
    2. confusing calculations,
    3. electronic equipment down.

18. Is it worth it?
19. I say no.
20. Spend the extra time and effort on the customers who generate more profit, not on the ones who generate less profit.

Copyright © - 2005 Dutch Hawkins Mandeville, LA USA - All Rights Reserved

June 27, 2005