Issue link: http://read.dmtmag.com/i/626797
28 Oil Prophets 28 Oil Prophets card conversion came up in almost all conversations. But in addition to the cost of converting equipment, today's marketers are also concerned about the high cost of credit and debit swipe fees. We seem to be rapidly moving to a cashless society. Today's younger generations are more comfortable with non-cash payments and in many cases, the fees associated with these payment vehicles exceeds the net profit earned by the retailer. Many of today's jobbers are also concerned about their relationship with their major oil company supplier. Contract minimums continue to rise, putting more and more mid-sized jobbers at risk. With no protected territories many jobbers continue to see their major brand allow competing marketers (oftentimes larger volume distributors) to brand locations, and I quote; "right under our noses" which reduces the smaller jobber's opportunities for growth. Jobbers are finding that the only way to grow is to take volume from another company which often comes at the expense of margin. In addition, changes in payment terms from at least one major oil company will even further dampen smaller jobber's cash flow. In January 2016, Shell will change their payment terms from 1% 10-days to 1.25% 3-days. While the percentage discount does increase, in the short run jobbers will have to pay down approximately 70% of the money owed to Shell. In the case of one of my members who sells 1.2 million gallons per month, this will require his company to pay down their account by $350,000. While technically not an additional expense, this does dramatically impact cash flow. Consider this example: Many jobbers supplying dealer accounts offer terms of 1 cent per gallon over rack price and the jobber keeps the payment discount offered by the supplier. For the sake of this example, let's say jobber A sells 1 million gallons per month to dealer accounts. He earns $10,000 on his 1 cent per gallon over rack pricing and he gets the benefit of the 1% discount provided by his payment terms with his supplier. Let's assume for the sake of this example that last year at this time the wholesale price of regular unleaded was $3.50. That price times 1 million gallons yielded a "discount" of $35,000 but with today's wholesale price of say $1.50 per gallon the value of the discount drops to $15,000. That's a loss of $240,000 annually to the jobber's bottom line. Who knows when retail prices will rebound? Maybe the experts at the Lundberg Survey, but not jobbers in Alabama!! Big box retailers continue to present challenges to traditional jobber marketers. I recently saw a survey that found the gasoline "brand" with the highest level of customer satisfaction was....Costco. In Alabama we are fortunate to have one of the nation's most successful below cost sales laws. Since its passage in 1984 the Alabama Motor Fuel Marketing Act has withstood several challenges and has been successfully upheld in numerous lawsuits across the state. But the big box retailers know how far they can push the envelope and there are often times when retail margins are break even at best. Small to medium size jobbers are often too small to compete with the big box retailers and yet too big to compete with the "mom and pop" independent dealers. In this "Goldilocks" scenario it's often hard to find the niche that is "just right." And as family businesses, many of which are currently going through a generational change, there are unique challenges. One member I spoke with said that; in his opinion, "the current new generation of family members have not known what it is like to "struggle." As parents strived to provide their children with a better life than they themselves had experienced many have sheltered their children from hard work, providing the "Country Club" lifestyle. He went on to say, "to my boys, stress is when the internet goes down. They can't create a real solution to a problem without consulting Google!" With many jobberships moving to the 3rd generation of family members, statistics show that the failure rate skyrockets. This causes stress as parents are reluctant to pass the baton on to the next generation fearing their retirement nest egg may be at risk. Along with market driven issues, today's jobber faces a wide range of legislative and regulatory challenges at each level of government. At the highest level, the EPA just implemented changes in the federal UST regulations which will phase in over the next three years; they Trilby Lundberg, Bart Fletcher, Robin Anderson Trilby Lundberg