Stations hope you fill up with more than gas

Some decide it's not worth the bother. A station in Bushnell, Fla., stopped selling gas entirely a month ago after its owner determined he couldn't make money on it. He's not alone; many refiners have cut back on gasoline production in recent weeks due to low profit margins.

But most stations view gas as a loss leader — something they're willing to take a loss on, or accept a very small profit for selling — under the theory that it will bring people into their store or shop.

Competition between stations is becoming increasingly cutthroat as demand for gasoline falls. Energy Department data shows gas consumption has fallen about 1 percent over the last 9 weeks, compared to the same period last year.

"High prices are pressuring consumers to conserve," said Tim Evans, an analyst with Citigroup Inc. in New York.

Unlike other industries, which might run a sale or slash prices when demand for their main product is falling, there isn't much gas stations can do to pump up demand. Most are reluctant to cut prices.

"We don't do that and most don't because you just start a price war," Ricker said.

"You really can't reverse a trend if people are driving less," Lenard said. "You have to steal someone else's customers."

To get a competitive edge, many station owners are investing heavily in other things. Rutter's Hartman says he makes more selling a cup of coffee than a gallon of gas, and is operating his stations with that in mind. He's emphasizing convenience, building bigger stations and investing over $1 million in bathroom upgrades, "more like you would find in an upscale restaurant."

The idea is to build a base of customers who could get gas anywhere, but choose to buy it at Rutter's because there's always an open pump and the bathrooms are nice and clean.

"That builds you a regular repeat kind of customer," Hartman said.

Ricker, who operates 30 stations throughout Indiana, advertises heavily at the pump. Signs touting fountain drink and sandwich deals are prominent, and Ricker is also experimenting with pump-top televisions advertising goodies inside the store.

Douglass Distributing, a Sherman, Texas-based company which distributes fuel and owns a chain of gas stations, is incorporating post offices and Subway sandwich shops into its convenience store designs. Owner Bill Douglass also offers a customer loyalty program that gives repeat customers discount cards and deals on certain products, much like a grocery store, and heavily promotes the availability at his stations of products such as propane, biodiesel and racing fuel.

"It's not a fun place to be, but it's manageable if you're working on it," Douglass said of the gas station business.

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