How satisfied were you with your most recent trip to the gas station; Do you expect to return to the same place next time?
If you answered "very" and "yes" to those two questions then it's a safe bet that you drive past a few gas stations on your way to a totally different type of retailer to buy your fuel.
A survey recently polled Americans on their favorite places to shop for gas and returned this key finding: people refill at regular gas stations because they're convenient, but it's the grocery stores and warehouse clubs that are earning customers' repeat business these days.
The winners and losers
Convenience store 7-Eleven came in last out of 16 national chains ranked in the survey by customer loyalty. The bottom of the list is full of traditional gas stations, including Valero, Chevron, and BP.
As for the survey's winners, QuikTrip was America's third favorite refill spot. Second place went to Costco (NASDAQ:COST), which is a bit of a surprise since the warehouse retailer can be counted on to have the lowest price for fuel in its area. The top rank instead went to grocery giant Kroger (NYSE:KR) because it nailed the two things that consumers most value in a gas shopping experience: convenience and price.
It makes sense that Kroger and Costco would be leading their grocery store and warehouse competition on this list. Both companies have a huge retailing presence, with roughly $100 billion in annual sales. And they both have been delighting their customers across the board lately. Costco's member renewal rate just ticked up to a record 91% last quarter. It's no wonder then that the warehouse retailer is crushing its retail competition. Costco's sales growth was 7% last quarter, as compared to the 0% gain that Wal-Mart's Sam's Club managed.
A similar competitive story is playing out at Kroger right now. Thanks to contributions from its surging natural foods business and its recent acquisition of Harris Teeter, the grocer just posted its 43rd straight quarter of comparable-store sales growth. And that 5% comps gain was good enough to push Kroger ahead of Whole Foods for the first time.
How Kroger came out on top
So, Kroger and Costco are both doing well in their respective retailing businesses, which is driving more happy customers toward their fuel pumps. But how did Kroger manage to edge Costco out as the favorite place to refuel?
The answer isn't value, as Costco has an absolute lock on that feature. In fact, 83% of the survey's respondents said that Costco had the most competitive pricing around. There doesn't seem to be any doubt that if you're a Costco member and you have a warehouse nearby, then that will be your go-to refueling spot.
Instead, what pushed Kroger ahead was convenience and, to a lesser extent loyalty cards. Shoppers named Kroger's loyalty program, which lets you rack up points that you can apply as discounts to future purchases, as a key reason to buy gas there.
But the real differentiator for Kroger is having more convenient locations. Only about 400 of Costco's warehouses have gas stations, which is no match for Kroger's 1,300 location footprint. Fuel shoppers do travel in order to find the lowest prices, but that's not the most important factor they consider when buying gas. According to the survey, convenience is.
The best retailers find a way to create loyalty by consistently delivering what customers value most. And that's as true for gasoline purchases, which no one looks forward to, as it is for luxuries. Kroger and Costco are both soaking up market share by making the refill transaction a little more convenient and a little less expensive, which is more than enough reason for shoppers to drive past a number of traditional gas stations on the way to their favorite fueling spot.
John Mackey, co-CEO of Whole Foods Market, is a member of The Motley Fool's board of directors. Demitrios Kalogeropoulos owns shares of Costco Wholesale and Whole Foods Market. The Motley Fool recommends Costco Wholesale and Whole Foods Market. The Motley Fool owns shares of Costco Wholesale and Whole Foods Market. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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