This guy 100% misses the boat and is clueless on how the real world works. Such naivete it's painful to read.....
The reason gas stations run aggressively on cash is because they're running two different sets of books a majority of the time.
Same for laundromats, motels, etc...
Now guess which group of people runs these businesses?
I used to ask my father why we didn't go get a "Brown" loan from a group of Indians and then go open a small business.
My father replied "We don't break the law."
He sat me at a Denny's across from a gas station, he told me to watch the people going into the store and count the items they walked out with. He explained to me that there are Indians who don't pay the tax man and pocket the cash and asked me to never be one of those.
To this day, if I want to get a low or zero interest crowdsourced loan from a squad of Indians to go open a gas station or small convenience store, I should have no trouble doing so. I've never bothered.
Years later, after sitting down with my father, I got access to cell phone movement data overlaid on gas stations. It was very revealing when combined with CC transaction data that was also purchased.
2 different sets of books and the author of this doesn't even bother mentioning it.
That may be the case for some gas stations but it is hardly the case for the vast majority of them. The majority of them are run by law abiding citizens who want to follow the law. They want no legal trouble.
I am Indian too, with a father that owned and ran a gas station. (My dad's shop was among the top gas-volume stations in America during his time, I forget exactly how much, but he had a few trophies from the company for it).
They preferred cash during his time because the 2-3% charge was a significant dent in margins. When credit cards started becoming popular, dealers still did not want to take it. So the company encouraged dealers to accept it by promising to refund the charges for a time.
I don't dispute that cheating like what you described happens. I dispute the implication that cheating the IRS is why most businesses prefer cash instead of credit.
> The majority of them are run by law abiding citizens who want to follow the law.
What’s your basis for this?
Logically, it seems to fit that the reason cash is preferred is for the illegal aspect of tax dodging/money laundering. Because the numbers don’t add up otherwise.
It’s great that your family is honorable and did the right thing, but it’s just an anecdote, like OP’s. But it doesn’t explain why so many businesses would be able to stay in business doing so.
> The reason gas stations run aggressively on cash is because they're running two different sets of books a majority of the time.
I do not know about this. Every single gas station that is cash-only, they also allow debit cards which you cannot be used for tax evasion. The main reason is station owner doesn't want to pay processing fees for credit card transactions since margins are so thin.
But if they have a store they will enable CC, Apple Pay, Android Pay, and all other things. This is where the money is. This is my anecdotal experience (from talking with an owner) and this article confirms that.
You admit to having never run a gas station and you are making unsubstantiated claims. Most small store, regardless of ethnicity of owners,prefer cash as credit cards take a bite out of their margins.( I have never owned a store but I had worked as a cashier in a family store. ) Your father and you need to see a therapist if this is what you thing all (tax fraud)Indian owned stores are doing.
> Still heavy cash transactions for the bootstrapped <15 location gas station franchises.
What counts as "heavy"? 5%? 15? 50%? Based on my observations it doesn't look like it's happening at a significant enough scale for it to meaningfully make a dent on gas station profitability numbers.
>ATMs, etc...
Why would someone use an ATM to pay for stuff? I don't think I ever saw a gas station that didn't accept debit. If anything gas stations offer a free "ATM" in the form of "cash back" transactions.
I don’t understand how being Indian gives the OP any special insight on the business model of gas stations just because they’re also run by Indians.
As far as I’m aware neither is gas station business model knowledge hereditary nor is it taught in Indian school textbooks or part of Indian cultural learning.
Considering that he didn't mention that his father owned a gas station, I'd going to say that what he got from his father is hearsay at best. It's not any more any reputable than "my indian friend told me that his cousin said...".
I don't try to stereotype, but i've heard that the culture in India encourages getting free stuff or paying as little as possible to get the most stuff.
Just because you find your culture tends to shady things does not mean that others do.
I worked at a service station in the early 90s, the owner was honest but going broke. We made $0.10/gallon on average, the sales of cigarettes, chips, and soda kept that station going. We had service bays but as more cars became proprietary and needed dealer service we had less service business. When the US invaded Iraq it really removed any profit that small station owners made from gas.
That station no longer exists, it was removed and in the space is now a small medical office.
The idea that all the Indian run businesses in the US do shady stuff is beyond fiction.
If this random HN guy knows this, you can bet the IRS and a variety of state agencies would also know this and target them very effectively.
The reality is that in a business where gross profit margins are around 2% at best, you don’t need to go to tax evasion to understand why they would choose to encourage a payment method that does not incur a 2.6% + 30c cost on every transaction.
Also wanted to point out that if you have a brand name gas station franchise, that brand name has a lot of say in what you do. You will be taking their credit cards, and pretty much any other card, etc.
The brand name wanted the station to close the service bays and turn that space into a junk food store. The station owner believed in the service bays but really couldn't pull in the business. Had it become a junk food store it would probably still be there.
Right, the implication that cash based businesses, particularly Indian based businesses, are doing the wrong thing is offensive. Yes, its makes sense for some businesses to be mostly cash based for valid reasons beyond cheating the system.
> The reason gas stations run aggressively on cash is because they're running two different sets of books a majority of the time.
This is why I get annoyed when I hear people say "the 'rich' aren't paying their taxes." In fact it's the "poor" -- or rather the people who purport to be poor -- who aren't paying their taxes. Every dime I earn the Government knows about.
But every time I have to do business with a someone who will only accept cash, I see much evidence of shady bookkeeping.
The idea that the IRS (actually state tax agencies since a lot of gas and sales taxes go to states) don’t know about and aggressively target small businesses is fiction.
In fact, the likes of small gas stations falls squarely in the tax evasion targeting sweet spot because they are large enough to draw enough money from in a tax evasion case, but not large enough that they will use up government resources in never ending lawsuits.
Not sure how much to trust an article where most key data comes from National Assoc of Convenience Stores. The data at http://blog.opisnet.com/retail-gasoline-price-margins?hs_amp... looks more reliable and data-driven and discusses gross margins of 10 to 40+ cents per gal.
It’s been a long time since I was close to the numbers but there are a lot of variables. Independent stations have much higher margins - you pay heavily for branding.
When I did the books margins were 0.075/gal for regular and 0.013/gal (edit: should be 0.13/gal) for premium. I could see those as double for an independent station.
This should not be surprising at all. Consumers are incredibly price sensitive and will drive 19 min to save $0.05/gal (save $0.75 and burn $0.60 of gas in the process). The supply chain for gas captures margins, not the gas stations. I would get calls from corporate for $0.03/gal adjustments several times a day if gas prices were volatile.
It all came down to in store sales where mark ups were 50-100%. Youd be surprised how many people paid $5 for a bottle of mustard they could buy for $2 at Safeway. Cigarettes were the other huge sellers.
On a holiday weekend we’d sell 12,000 gal of gas on a Friday, make $800 on the gas and $30,000 (after COGS) on in store sales.
I agree that c-store sales are huge. But I take issue with your numbers... are you sure premium gas has 80% lower markup than regular? The people who buy premium gas tend to be wealthier and less price sensitive, further, premium gas is far less likely to posted on the sign. The difference between regular and premium used to be 20 to 30 cents in my experience, now usually 40-50 cent difference.
I also question whether big brands have lower margins. People seem to gravitate to the Wawa and RaceTrak and Sheetz and Love's, often due to cleanliness as much as the store, and they usually appear to price their gas a few cents above no-name competitors and still be much busier.
80% lower? My numbers are about ~90% higher? (I’m dumb! I put an extra zero). Typically premium was sold at a 10% premium so percent margin was maybe 70-80% higher?
But I also acknowledge that gasoline sales are very location dependent. Where I was the major brands took most of the sales. But again, you’d sometimes find an independent in a prime location who must have been making $500k per year. I did books at a very busy station where the owner made ~$200k in today’s dollars
Major disclaimer that what I observed may not apply to other markets.
I have no doubt that owning a gas station can be hugely profitable. Those independents making 500k made more money because they could get away with charging more for gas, being in a great location. Not because of lower costs. And also because, despite anecdotes, most people are not super price sensitive.
Costs are lower for independents though. No franchise fee, you can source your own goods (franchisees often have to buy from one supplier). The franchiser can squeeze a lot of margin from the station.
Of course being independent is much harder, but also potentially more profitable.
Some gas stations where I live operate on the Location Location Location business model. Being the only gas station in the vicinity that also happens to be in between a freeway exit and entrance. You can find that their gas is 25 cents per gallon higher than a station ½ mile away. When I find myself in that situation I usually buy 2 gallons and leave for a cheaper station. They likely do ok on gasoline profits. Also seems like here in Texas gas convenience stores are doubling as a pharmacy of sorts for ED CBD and vapes.
That article says that typical stations make perhaps $15k/year on fuel after expenses and occasionally have months, when fuel prices are dropping and customers aren’t as cutthroat, where they make another $10-15k. So perhaps $20k/year and that’s if their operations are scaling well. That’s the same thing the c-store industry is talking about.
It estimates 11,400 per month (not year) in gross profit. Sure there are additional expenses -- credit card fees, utilities, rent, labor -- but those would seem to be attributable more towards the convenience store part of the business.
I read it. It estimates $10k of operating expenses right after $11.4k gross margin on fuel. Why would you think I hadn’t factored that whole paragraph into my $1500/mo?
To your point in the other thread, you’re right that some of typical operating expenses happen because of the convenience store. It’s possible to run pumps with no store partially unmanned and make money (you see this at some rest stop gas stations on interstates, for example, or some grocery store lots.) However, those are blessed due to unusual location and not attainable for most owners, so they need to run a more complex and attractive operation.
I've never owned/managed a gas station - but I'm thinking that just selling gas carries some serious overhead. Santa Claus did not bring, nor install, the large underground storage tanks, pumps, & related infrastructure. The local property tax authorities probably know how much that's all worth. Then there's the maintenance, inspection fees, insurance, etc. on it...
> large underground storage tanks, pumps, & related infrastructure.
That's CapEx. Plus, somebody built the store, too. How about labor? When was the last time you saw an employee OUTSIDE at a gas station, not inside the convenience store?
I never said the gas station part has no costs, just that the store likely has more, and when a article from "The Hustle" attributes ALL OpEx to the gas, it's the readers being hustled.
Interestingly enough this may mean that the electric car revolution may not hurt gas stations as much as you might think - as the convenience store aspect will still exist. It’ll be interesting to see (and I wonder if there’s been any studies on this).
Movie theaters don't make much of their money from the actual tickets, but if they stopped showing movies no one is going to pay them $20 for a popcorn.
Gas stations might not be quite as drastic as that, but still seems like the same principle applies.
Although conversely the convenience stores at fast charge stations probably do a lot better. If you have to wait for 30 minutes anyway might as well go in...
I think there is a huge win here for a first mover. Let's say McDonalds works out a deal to have EV chargers at all restaurants with a parking lot. You know have a known location to EV charge anywhere in the country. And as you say, might as well go get something to eat while you wait. Seems like a win-win. I think this is the thing that could take make gas stations less relevant. If I have to wait 30 minutes, I may want more than a candy bar or bag of chips. Obviously the EV transition is going to take quite a while so I expect convenience stores to slowly add "subway" style made to order subs, etc.
I wouldn't be surprised if they're already on this. On the highway, I don't recall ever seeing a pitstop that didn't have both a gas station and a McDonalds.
I realize that is anecdotal since I haven't been to all that many pitstops. But the competition for pitstop restaurant space is pretty clear.
It’s possible in rural America to have no-services at interstate exits, or to only have one gas station. I’m thinking about Montana, Wyoming, and southern Utah. McDonalds is not a guarantee at any single rest stop.
I think Target is the biggest first mover here. They're the most common to have a ton of Tesla superchargers and often a little Starbucks/Pizza Hut/Food place inside.
>Movie theaters don't make much of their money from the actual tickets, but if they stopped showing movies no one is going to pay them $20 for a popcorn.
The more common version of the fallacy is, "Pharmaceutical companies produce nothing of value because look, most of their money is spent on marketing, not on discovering miracle cures."
Yes, they spend on a ton of money on marketing to eke out whatever they can from a given discovery ... but that all depends on having a legit discovery to begin with.
Our theater did exactly that during covid - open on Friday concessions only for takeout. Popcorn prices aren’t as insane as $20 (the large bucket is $6) but it seemed people took them up on it. I know I did.
I wonder if revenue/liquidity also makes a difference. That is, making X in fuel, Y in other sales, would leave you with X+Y revenue, even if net income is some fraction Y (more or less)?
They're different facilities though, and in different places.
Gas stations are situated near population centers, because you tend to run out of gas wherever you're driving, and you drive where you live.
In practice, consumer EVs almost universally charge at home[1] and "never" just "run out" of charge. You're car is always charged, there's little value to topping up at the shopping areas or whatever. Instead, you need DC fast charging where you travel: on the long distance arteries where your car can't otherwise reach.
To be clear: you need gas there too. But rural highway gas stations represent a small fraction of all gas service. Most gas stations won't be able to shift to EV charging and keep their business model.
[1] Though there are growing pains with apartment facilities being slow to install AC charging. Right now an EV works much better in a home with a garage, though that seems likely to sort itself out. Cheap electrical work is cheap, it's just a question of how to get people to pay for it. Some regulation is likely to be needed.
whats the solution for millions of renters that dont have access to ev stations at home though? even if the charging station is a mile away would you expect someone to walk 1 mile every charge cycle?
There are workarounds mentioned by sibling comments but the fact is that EVs are, and will continue to be, very inconvenient for those who don't own a home.
I think "very inconvenient" is stretching it. The pessimal case is that you are 100% reliant on fast charging and have to spend 20 minutes once a week at your local shopping mall or wherever your convenient fast charger is. That may not correlate well with the shopping you want to do, but it's hardly a disaster. In practice it's only a little worse than gassing up, and it smells better.
> ”whats the solution for millions of renters that dont have access to ev stations at home though?”
The solution is to get chargers installed wherever you park the car. May require legislation if your landlord is uncooperative.
In the mean time, charging at a public charging station isn’t so bad provided it’s convenient and reliable. If you can combine charging with shopping or dining etc it’s not much different to topping up at a gas station. Probably cheaper too!
Here in Alaska, people commonly plug in their normal cars in the winter so they will start after a cold night (these are heating units that are spliced into the engine's hoses to circulate and warm the engine coolant). Just about every private parking spot has an electrical outlet for each parking space, even at quite downscale apartment buildings. It's usually controlled by a switch inside the unit. You can flip it on when you wake up so the car is warmed up enough to start by the time you leave for work.
I remember many years ago that having one of these outlets was a bullet point for apartment listings, but nowadays it's just expected.
So the market worked in that case.
EV charging stations are going to be more expensive than a basic 20 amp outlet (a quick web search indicates $700 to $2,000, not including installation), but not all that expensive, compared to the other capital expenses involved in being a landlord.
Even $700 seems expensive for a basic wall charger. I see them as low as £225 (USD $310) here in the UK[1], so expect them to get cheaper as the market develops. Of course, the real cost is in the installation and wiring.
For permanent installation in parking lots, they need to be weatherized, rugged enough to make at least a token resistance against people running them over, and so on.
The ones I was seeing were built into bollard-like posts.
Yes. Note that the one I linked to is weatherised (IP65), and claims "Corrosion resistant & fire retardant,
Impact resistant design" ... so it should be rugged enough to survive in typical apartment parking lots.
Obviously bollards will cost more, but something like this would be suitable if you have parking spaces up against an existing wall.
There's a block heater for the engine, just to get the oil to a sane temperature. Pretty much every single parking spot in apartment buildings has an 8A/230V socket for it.
If you remove the default 2 hour timer from it, you can use the exact same socket to charge 100-200km of range to an electric car over night.
Especially for a long range teslas. 300-400 mile range plus 250kW charging is pretty close to the gas vehicle experience. It’s doable to do exclusively supercharging, although you’re missing out on some of the biggest benefits of EVs.
I highly doubt it will be legislated. Heat waves regularly kill hundreds of people, yet few states require rentals to be air conditioned, even in the south.
What Tesla does: Co-locate fast DC chargers at grocery stores (Meijer, Kroger, some Targets, etc). You charge when you go grocery shopping, and the shopping trip typically takes longer than the charge (in my experience).
This is a stop gap until legislation requires EV charging be provided at apartments and workplaces (similar to handicap parking mandates).
My question is whether or not Tesla chargers can work with other EV cars. If not, then isn't it that all of Tesla's efforts are just helping their own brand instead of helping the EV push as a whole?
In the US the Tesla plug is their own invention. In Europe they've moved on to CCS.
In theory it should be possible to open up Superchargers to other brands, but it's more of a marketing/business issue than any technical problem.
I really don't see Volkswagen/Audi/BMW making a deal with Tesla to integrate their systems with the Tesla backend. Would you want your customers to use a competitors tools? =)
Superchargers only currently work with Tesla’s due to technical constraints (although Tesla is changing that now that there are significant numbers of non-Tesla EVs with a big enough battery and 100kW charging ability).
However Tesla destination chargers which are lower speed and three have been available for both Tesla cars and non-Tesla EVs.
If you have a place to park your car (not roadside parking), it's perfectly possible to install an AC charger in there.
A 3.7kW one will be more than enough for people working 9-5. The car will be sitting there doing nothing for 10+ hours anyway, why not charge at the same time.
Nothing will change without legislation though.
In Finland we changed the law so that if an apartment building has "major renovations", they MUST install EV charging capability for all parking spots. (No need to install a charger, it just needs to be possible).
I think the solution is to charge when shopping. Fast charging once per week for 30-45mins while you are in a supermarket is convenient and is probably adding enough range for the whole week.
Charging stations at more and more public parking is coming. If you drive to work you'll almost certainly be able to charge there. Every time you go to the mall or food store, you'll be able to charge for an hour. Basically in few years half the 'public' parking spaces you leave your car at will have charging opportunities meaning the only time you'll need to seek out charging is during longer road trips (just like people who can charge at home)
One thing I noticed in Norway too was on street parking meters that also had electric charging cables. Tap your card, pay for parking and the minor electricity cost just gets added to the parking charge.
Many chains (QuikTrip in the midsouth and Wawa and Sheetz in the Mid-Atlantic for example) are clearly preparing for this future by emphasizing the convenience store/deli/coffee shop/fast food aspect above the gas. They want you to come in for the food and sundries and only incidentally grab some gas too while you're there, not the other way around. It's working.
The kind of mediocre little shops that you mostly only stop at for gas and only go into the store if you really need something though will suffer.
Adding electric charging station to an existing parking lot is much cheaper/easier than adding a gas pump. In a few years every hotel, mall, restaurant and food store parking lot will have charging stations, making 'dedicated' charging stations basically obsolete.
The only places I see dedicated electric 'gas stations' surviving is in rural locations along major highways.
Assuming you have the underground tanks in place already, I don’t see why a gas pump would cost more than an electric charger. A charge point charger costs $7-10k, add in sawcutting/trenching/pipe/wire/txformer and you’re at $20k+
I’m not sure how much gas pumps cost, but you’d still need the sawcutting and trenching, along with pipe. Probably about the same cost.
I think the GP’s statement was predicated on the owner not having an underground gas tank for storing the fuel. If you can charge your EV at the grocery store, McDonald’s, and at home, why would you ever go to a gas station that’s been converted to a charging station?
Exactly. Did a couple of road trips this summer and while I don't have an electric car, I did notice that half the hotels I stayed at had charging stations in their parking lots that allowed overnight charging. So had I had an electric car it would have meant I started each morning with a full 'tank'. I can only see that number growing.
I went on a long Tesla road trip with about half of the Supercharger stations at places like Sheetz. But sure, urban gas stations will suffer. And good, because they are health menaces when in dense locations near housing.
A hotel charge point will never be $7-10k a piece, for that you can get 10-15 chargers (22kW AC).
The electric work on top of that isn't that much, any parking garage should have more than enough electricity for lighting etc that can be tapped into.
The needs of an electric charging station vs a petrol filling station are quite different though.
And also consider that electric vehicle users can charge overnight at home, so those people driving 50-100 miles per day may not need to use a charging station at all, apart from long journeys - which is likely to impact the favorable locations significantly.
Even with super fast chargers, you're looking at 15-30 minutes for 100-200 miles of range, vs 5-10 minutes for 400-600 miles of range.
Assuming a limited amount of space for vehicles, a traditional liquid fuel filling station can probably handle 4-6 times as many customers, so the electric charging station will need more physical space to serve a similar amount of customers.
Users are going to want to do something for that time, so that convenience store will probably expand to add sit down food/drink facilities.
In short, I suspect that in 10-15 years time, filling stations will have evolved into something completely different.
Or maybe electric charging will be a bolt on to anything that has a car park, and dedicated charging locations will be relatively rare.
Or maybe electric charging will be a bolt on to anything that has a car park, and dedicated charging locations will be relatively rare.
I think it will be both. Anywhere in and around a town or city will have electric charging at most normal parking spaces and basically no dedicated charging stations. Along major highways you'll see a lot more large dedicated charging stations like the ones you describe.
The vast majority of EV charging is and will be done at home. Not everyone can feasibly charge from home today, but that'll be a transition. At home, the chargers don't have to be fast or operate during peak grid usage times.
Even many commercial fleets won't have a need for stopping there as it'll be cheaper to charge wherever they're parked when not being driven.
Fast chargers will be necessary when traveling, but that's a small fraction of what gas stations see now. And even then it might look different (big trucks require a lot of space to park while charging, consumer traveling is concentrated in bursts based on time of the year).
Here in Finland the two largest charging networks are owned by ... grocery store chains.
Why would you stop at a janky gas station selling overpriced crap and day-old hot dogs, when you can take a 5 minute detour and go charge at a supermarket? Which usually has at least one fast-food place, maybe a restaurant and the snacks are orders of magnitude cheaper.
Also just by plugging in to an AC charger (11-22kW) when doing your shopping, you usually get back home with more charge than you left. The EV parking spots are usually at the best spots too, so that's an additional incentive.
I don’t see any reason why this wouldn’t kill all these gas stations. We don’t need that many electric charge stations. And definitely not in these locations.
In fact we want them dead. Gas stations are usually occupying very nice commercial land.
> I don’t see any reason why this wouldn’t kill all these gas stations
Because they'll just put in fast chargers. There is a need for many more DC fast chargers than are currently available and gas stations are installing them:
Indeed there will be people who have to inconveniently stop at one of these locations. But they’ll endeavour to avoid it whenever possible.
Furthermore, the fast chargers popping up everywhere near me are simply parking spots in more interesting commercial areas like Walmart, fast food, Home Depot, etc. Why would we have dedicated plots of land for just chargers? Install them in existing parking lots.
I’m convinced these gas stations are mostly going away.
Anecdotally, one gas station around here has put in chargers, but I never see anybody using them. However every time I go to the grocery store I see a dozen cars plugged into the charges in the parking lot there.
I have to believe locations will often be different.
If I had an EV and couldn't charge at home, I'd be charging at the chargers next to one of my local supermarkets. I'm not going to go to one of the gas station locations around where I live and twiddle my thumbs for 20 minutes even if they had charging.
I have been wondering why some haven't figured this out. Market is probably still too small.
From the research I've done, cost to open fast charging EV station is expensive but no more so than building a new gas station from ground up.
1) EV charger margin is higher when you compare the kWh rate they charge drivers to the local electric rates (sometimes 10c/kWH spread)
2) EV charging is 20-40min so they have more time to shop
3) EV owners are on average higher income, so should have more disposable income to spend
Probably some sort of Starbucks x Pret-A-Manger x fancy convenience store model would do well.
Except that (in the UK) 99% of charges are made at home or at the workplace. I imagine the numbers will be a little lower in the US since the average travelled distance is longer but as range improves it'll decrease too.
This has been true for decades. When my dad ran a gas station, the profit came from selling goods like food and cigarettes, or repair services. But he stopped selling cigarettes in the early 1990s when my mom, a nurse, thought it was not right to be selling poison. My dad had a few angry customers, who asked him, "What kind of gas station doesn't sell cigarettes?"
I was so fascinated by the business and life lessons he taught me. There are unscrupulous ways to make money, but fortunately these are not done by the majority. A gas station dealer has to buy gas from the company at a set price. Often times, there is a "black market" of gas, sometimes mislabeled, sometimes stolen, that is offered to dealers by unscrupulous people. You can buy this gas for cheaper and make more money on the margin. If the company catches you - and they have every incentive to catch you since you are not buying from them and selling an inferior product with their brand - you are in trouble.
There are things like loss leaders and subsidies that are designed to create a funnel for customers, which you then convert into higher margin item sales. The popocorn at movies is a great example. Warranties and online shipping fees are another one, as they are almost pure margin. Sure, you may make a 10% unit margin on your $20 tchotchka (e.g $2), but you make 80% margin on your "shipping cost" of $10, so your gross margin selling tchotchkas is really $10 (or 50%). It's same as how printers are just a way to sell ink in cartriges, which has probably a 50x markup, or 5000% margin. This is only slightly different from the old music business, where you paid $30+ for a $0.10 blob of plastic wrapped in cardboard with a marketing machine on top of it.
Social media has more of a publishing model, where their tech is "free," as a way to attract viewers to the ads they sell to advertisers. Most consumer software has this publishing model these days, whereas most enterprise software is really a channel to convert customers to high margin consulting and support services on top of the loss leader amortization of the cost of software development - which is why most of it sucks so badly.
Like selling gas in stations, subscription revenue for tech is good, but it's monotonic based on users and inelastic, where what gas stations figured out is that their core "subscription" business was really just a funnel to get conversions for higher value users.
For this reason, I'd speculate that gas stations periodically sabotage their pay at the pump machines, probably toward the end of a quarter, as a way to get a bump in people coming to the register and driving conversions to high-margin sugar/water products there.
I've been told that few of those little "independent" gas stations own their gas pumps themselves; the operations get handled by a bigger outfit that pays the owner some pittance for the space. The insurance and environmental regulations on keeping a fuel tank, even without dispensing to the public, are often rather heavy and vary from town to town.
There are just off highway service plazas in many places which have various qualities of food. If I'm doing a drive, I might prefer to keep going but between rest and snack stops, something like this is better than a random convenience store.
The reality is that big oil squeezed these operators as well as they do with consumers. They need to buy the gas anyway, but by contract they can only do that from a major supplier. In other words, because they don't have pricing power, big oil took from them almost all profit associated to gas sales.
Either way, I don't imagine gasoline retail having high margins even under ideal circumstances. It sells very predictably and reliably and requires virtually no overhead anymore due to self-service stations. It's a stream of money on auto-pilot and any non-trivial profits would quickly get eaten away by someone else who sees it as a the automatic stream of money it is.
Gas stations have been in decline for several decades.
In 1995, there were ~195k of them in the US; today, that number is down to ~115k. Contributors are Natural Gas, Electric Vehicles, Real Estate
I think this leaves out the shift toward much larger gas stations with 2x-3x as many pumps. I'm generally okay with this trend. The odds of me waiting for a pump are low and we seem to have enough stations to compete on price.
Its pretty crazy to think about how the gas is delivered to gas stations: in trucks that themselves burn gas (diesel). Almost seems impossible. I wonder if those trucks could be converted to electric vehicles.
overall nice interesting article. the actual "why" part is less than 5% of the content.
TLDR: tight competition, highly price sensitive customers. most fuel stations have attached convenience store which brings in bigger profit margins. so they don't want to increase fuel price coz that will result in losing bigger profits from the convenience stores.
It seems to be consistently true that people are only price sensitive on some things. People stop for gas at a place that has a good price on gas, then pay stupid prices for candy or chips. Is it because that costs less than the gas, so they optimize for saving money on gas? Is it because stations advertise the price of gas, but don't usually advertise the price of chips?
Anybody know what's going on in our brains, that this works on us?
It's probably something along the lines of: You can easily compare gas prices and many/most people (correctly) consider it a commodity. So, while they may or may not go out of their way to find a cheaper price, it often makes sense to wait for a cheaper price so long as they have margin to spare.
Whereas the chips and cold soda are something of an impulse buy. People probably don't think about the price too much. It's something they want and, if they do think about the price, they figure (probably correctly) that it won't be cheaper at the next convenience store. And, even if a supermarket is handy, they're not going to spend 20 minutes dealing with that.
This guy 100% misses the boat and is clueless on how the real world works. Such naivete it's painful to read.....
The reason gas stations run aggressively on cash is because they're running two different sets of books a majority of the time.
Same for laundromats, motels, etc...
Now guess which group of people runs these businesses?
I used to ask my father why we didn't go get a "Brown" loan from a group of Indians and then go open a small business.
My father replied "We don't break the law."
He sat me at a Denny's across from a gas station, he told me to watch the people going into the store and count the items they walked out with. He explained to me that there are Indians who don't pay the tax man and pocket the cash and asked me to never be one of those.
To this day, if I want to get a low or zero interest crowdsourced loan from a squad of Indians to go open a gas station or small convenience store, I should have no trouble doing so. I've never bothered.
Years later, after sitting down with my father, I got access to cell phone movement data overlaid on gas stations. It was very revealing when combined with CC transaction data that was also purchased.
2 different sets of books and the author of this doesn't even bother mentioning it.