Cash for gas trend pleases customers, but not all dealers
Chicago — Sidling your car up to the right gas pump these days is no longer as easy as saying,''Fill 'er up.''
The array of choices at the neighborhood service station is growing fast.
Motorists must decide not only what grade of gas they want, with or without lead, and whether or not they want to pump it themselves. Now their choice of a pump may also be affected by their decision to pay in cash, often at a discount rate, or by credit card.
Faced with abundant supplies of gas and fierce business competition, many of the nation's service stations and oil companies have been trying to find ways to lower their prices and spread their costs more equitably among customers. For decades two-thirds of the nation's motorists who pay cash at the pump have in effect been subsidizing the higher administrative and collection costs incurred by credit card users. Hence the move toward a discount for cash sales.
The boldest step in shifting the price burden was taken in mid-April by Arco, a division of the Atlantic Richfield Company, which last year spent $73 million to support its credit program. Arco abruptly banned any further use of its credit cards and lowered the wholesale price of gas to dealers by 2.8 cents a gallon.
Many Arco dealers were able to lower the price to consumers by 7 to 9 cents a gallon, a price cut that put some of them below even independent dealers. Arco spokesman Al Greenstein reports that the 52 percent increase in volume sales since the move puts it in the category of a ''resounding success.''
Still, no other major oil companies are rushing to follow Arco's lead.
Consumer surveys suggest that many motorists would readily leave major brands without the oil company credit card as a draw. Yet most are also unwilling to pay an annual fee for the privilege as they now do for bank cards.
Most major oil companies have accordingly been reaching for other options to meet the rising cost of credit. In the process, some have stirred the wrath of the dealers they supply.
Both Exxon and Standard Oil of Indiana's Amoco Inc. have this summer expanded nationwide their new discount for cash programs. In Exxon's experiment, dealers cut prices to cash customers by about 4 cents a gallon. The overwhelming majority of motorists interviewed in the experiment felt the move was fair to both cash and credit customers. Amoco testing, under way since last fall, sparked a 10 to 20 percent increase in sales in most areas within a few months.
But the results to date are often confusing to dealers as well as to some consumers. Since federal law bars a consumer surcharge on credit card purchases, a number of major oil companies are instead charging dealers a percentage fee on such purchases. Many dealers are unhappy with that new development and insist that ultimately consumers must pay the cost.
Exxon and Amoco are charging dealers a flat fee of 3 and 4 percent respectively on credit purchases by customers. A few other companies which do not encourage their dealers to offer discounts for cash payments also charge dealers a credit fee. Texaco, for instance, was the first to introduce the idea last fall. Gulf Oil, which has been expanding its credit card program, intends to charge dealers a 3 percent fee.
The Service Station Dealers of America (SSDA), which represents most of the major brand dealers, plans to file a complaint soon with the Federal Trade Commission against Exxon and Amoco. The dealer group contends that advertising surrounding the cash discount and credit fee changes has been misleading and deceptive. The dealers argue that the effect is not so much a discount for cash payers as a price hike for customers in general.
''It's a smokescreen,'' charges SSDA executive director Vic Rasheed who says that the oil companies in question have urged dealers to raise gas prices before offering the discount for cash.''Instead of notifying the public that they will be paying more for credit card use, they're playing games by advertising a discount for cash and hoping no one will notice.''
An Exxon spokesman says that the company has not seen the specific charges and cannot comment on them. But he insists the discount for cash program is ''pro consumer'' and that all advertising material related to it complies with the law. He also notes that participation in the program by dealers is voluntary and that it is against the law for the oil company to tell dealers what they should do with respect to pricing.
''Our program has been a very successful solution for our dealers and our advertising has been compliance with existing laws,'' concurs Standard Oil of Indiana's Jim Fair.
Arco's Greenstein says that his company's decision to do away with credit altogether was an exceedingly tough one.
''We weighed all the options and decided ours was the simplest, cleanest, and most effective,'' he says. ''We think dealers will find managing both cash (discounts) and credit very cumbersome.''
In the effort to cut costs and remain competitive, many major oil companies are consolidating stations geographically in areas of their greatest strength. Just this week Exxon announced it would close 850 service stations in the Northeast and Middle West. This fall Amoco plans to withdraw from 11 states. And Texaco has plans to withdraw from some markets in all or parts of 19 states.
For dealers, the trend toward more self-service pumps and fewer employees continues strong. Voters in Oregon, one of the two states which still outlaw self-service pumps, will reconsider the ban on the November ballot. American Automobile Association spokesman Allan Wilbur notes that many gas retailers with an eye on volume now vow to sell at least 50,000 gallons a month and some aim at 3 or 4 times that total.
Also many stations are stepping up earnings by leasing some of their property for such varied enterprises as video game arcades, restaurants, parking garages, and automated teller machines.
But whatever other sources of revenue and cuts dealers find, they are sure to continue the search for a more equitable way to spread costs among their customers.
''If you make more customers happy then it's all worthwhile,'' says Kenneth Doyle, executive director of the Society of Independent Gasoline Marketers of America. ''But it (the new trend) does complicate things. It was much simpler when you just chose between three grades of gas.