By Mari Hansen The parking lot is the first thing you see. The parking lot outside a mid-tier supermarket in suburban Dallas was perhaps two-thirds full on a Tuesday afternoon. This may seem normal, but it used to be a place where people would circle twice in search of a spot. Right now, grocery retail is experiencing a stagnation that no one wants to publicly identify. Carts travel more slowly. The aisles seem to go on forever. Once a surefire impulse buy, the candy display by the register is largely untouched.
Despite their claims to the contrary, the executives in charge of these chains are aware that gas prices are negatively impacting grocery margins. BJ’s Wholesale sold regular gas at $2 per gallon for a single day when it opened its first Texas location this week. This price was so much lower than the state average of $3.60 that it served more as a confession than a promotion. You don’t entice customers with inexpensive fuel unless you have a thorough understanding of the fuel’s deterrent.
| Topic | The Empty Aisle Reality: Gas Prices and Grocery Margins |
| Region Covered | United States, with comparative UK data |
| Average U.S. Gas Price (current) | Roughly $4 per gallon nationally |
| Texas Average | About $3.60 per gallon |
| Key Retailers Watching Closely | BJ’s Wholesale, Albertsons, Kroger, Walmart |
| Promotional Benchmark | BJ’s one-day Texas stunt: $2/gallon |
| CMA Finding (UK) | Fuel margins “broadly unchanged” since Feb 28; some retailers under review |
| Historical Reference Point | WTI at $90/barrel in October 2007 yielded $2.82/gallon vs. $3.73 today |
| Most Affected Demographic | Lower-income shoppers per Albertsons CEO Susan Morris |
| Industry Response | Fuel rewards programs, selective price adjustments, promotional events |
During the company’s earnings call last week, Susan Morris, the CEO of Albertsons, revealed something. She acknowledged that the grocer is “trying to improve the value perception where it changes behavior” and that customers at the lower end of the income spectrum are displaying signs of stress. In essence, we’re lowering the cost of the content that people actually watch in the hopes that they won’t realize that we’ve held the line elsewhere. It’s a tactic. It also acknowledges that the math has become more challenging.
This spring, Kroger took a different approach, quadrupling fuel points on grocery purchases over the course of two weekends. Theoretically, it makes sense to buy more groceries and get cheaper gas, but it relies on consumers having the funds to do so in the first place. Even though the prices on the receipts are rising, it seems like the basket sizes are getting smaller when you walk through any big chain right now. Customers are purchasing either the produce or the chicken, not both.
In early April, John David Rainey, the CFO of Walmart, stated at a J.P. Morgan forum that he is “more constructive on the consumer than what one would glean from reading the headlines.” Perhaps. Walmart’s size allows it to absorb things that smaller chains are unable to. However, there has never been a greater disparity between what executives say during earnings calls and what shelf-stockers see during their morning shifts.
The structural issue predates the present. The average price of gasoline at the pump was $2.82 when WTI crude first surpassed $90 per barrel in October 2007. The pump price is now closer to $3.73, and crude has returned to around $90. The discrepancy, which is nearly a dollar per gallon, has been attributed to a variety of factors, including wages at convenience stores, dwindling cigarette sales, and fuel subsidies offered at extremely narrow profit margins. While overall fuel margins were “broadly unchanged” since late February, a small number of retailers had subtly increased theirs, according to an investigation conducted across the Atlantic by the UK’s Competition and Markets Authority. It was described by the watchdog as proof of “continuous concern about a lack of competitive pressure.”” Simply put, that expression indicates that something is broken and no one is rushing to fix it.
The events taking place in American grocery aisles are not dramatic enough to be featured on the front page. There isn’t a closed store, a viral video, or a villain that can be quoted. Just a gradual accumulation of decisions made by those who can no longer afford to drive across town for the cheaper milk, slightly thinner margins, and slightly emptier carts. It’s still unclear if the chains adjust quickly enough. It’s difficult to avoid thinking that the story isn’t really about gas at all as you watch this develop. It concerns everything that gas comes into contact with while traveling to the register.