Stepping on the Gas for Fuel Rewards

Over the past few years, as the price of gasoline has soared while the economy has sputtered, the concept of fuel rewards has found an almost perfect environment in which to flourish. And food retailers are stepping into the fray.

At their own fuel centers or in concert with other fuel providers, retailers are increasingly rewarding shoppers — in what may seem like manna from heaven — with lower prices at the pump in return for reaching spending thresholds. The more they spend, the more reward points they accumulate, and the greater the fuel savings, up to a free tank of gas in some cases.

“As long as fuel prices remain high, fuel [discounts] will be a very attractive reward — one that will create repeat purchases,” said Bill Hanifin, president of Hanifin Loyalty, Fort Lauderdale, Fla.

For retailers, repeat purchases are driving significant same-store sales increases and widening the appeal of these programs. This month alone, two Texas-based food retailers — Reasor’s and Brookshire Grocery Co. — finished rolling out fuel reward programs while a third, United Supermarkets, wrapped up a two-month promotion.

Meanwhile, Excentus, Dallas, the third-party company that helped launch the fuel reward phenomenon a decade ago, is expanding its own Fuel Rewards Network nationally next month in collaboration with Shell, while marketing fuel rewards systems separately.

However, Excentus, which acquired the patents on the technology that rolls back the price at the pump from AutoGas in 2008, has complicated the landscape by bringing patent infringement suits against retailers who have pursued fuel reward programs independently, including Safeway (with whom it settled) and Kroger (still pending).

This month, Excentus filed a patent and trademark infringement lawsuit against QuikTrip — the c-store operator Reasor’s has partnered with — software provider Midax and several companies operating Price Chopper stores. “We’re going to defend our IP [intellectual property],” said Scott Wetzel, vice president of marketing for Excentus. Nonetheless, retailers like Reasor’s and Stop & Shop/Giant-Landover continue to operate independent fuel reward programs.

In any event, as more fuel reward programs emerge regionally and nationally, some are wondering whether they are beginning to undercut each other. Cash-back rewards for debit cards “went from innovative to [commonplace] in five years, and the same is happening with fuel rewards,” said Hanifin. “If you’re a grocer, and everybody’s offering the same thing, how do you differentiate yourself?” But the fuel reward programs do vary (see chart below) and some retailers have amped up the rewards to separate themselves from their competitors.

National Network

Excentus is both the operator of fuel reward programs (the Fuel Rewards Network/fuelperks!) as well as a provider of fuel reward technology through its Centego division. In addition, the company licenses its IP to grocers who want to develop their own fuel reward system and their own host. Safeway chose this route as a result of the settlement it struck with Excentus following the latter’s patent infringement lawsuit against the retailer in 2009.

Beginning next month, Excentus is merging its fuelperks! program into its Fuel Rewards Network, and rolling out the network nationally. The network thus far includes Winn-Dixie, Bi-Lo, Roundy’s and Save Mart on the grocery side, and Shell on the fuel provider side, with 10,000 to 12,000 Shell stations to serve as redemption centers nationally by the end of the year, said Wetzel.

The network also features an online mall at www.fuelrewards.com with 700 locations, including the likes of Gap and JCPenney, where purchases will also count towards fuel rewards.

The network plans to add food and other retailers, as well as a dining component with 11,000 locations nationally, said Wetzel. “We are talking to lots of other types of entities, from travel & leisure and financial services to utilities.”

The combined effect of shopping at participating food retailers and other outlets in the network, and generating points that can be loaded on one card, will provide “significant savings,” he said. “Customers redeem 35 cents per gallon on average now, but we expect that to go through the roof.”

Excentus will introduce a card for the Rewards Network in June that can be used at any participating retailer.

Within the network, grocers are given regional exclusivity and are allowed to set their own rewards and expiration periods, though 30 gallons is the maximum amount that can be discounted. Also, there is no limit on the discount. “We want people to get free gas all the time,” said Wetzel.

In most fuel reward scenarios, the retailer reimburses the fuel provider for the cost of the price rollback, though sometimes the retailer may arrange to pay a little more or less, Wetzel noted. Under the Excentus network, retailers pay Excentus a transaction fee, which Wetzel declined to disclose.

Excentus serves as the IT host in its network, linking the retailer and fuel provider and settling the funds transfer between the two. Retailers interface with the system through their loyalty card system. “The hardest thing to do [technologically] is to connect to the fuel stations because their dispenser technology is often old and outdated,” he said.

The Centego system gives retailers more latitude to set up their own proprietary program, said Wetzel, who added that a number of Supervalu independent grocers have chosen this path. “All the marketing is left up to the grocer.” Under Centego, retailers install routers that connect them to the Centego host.

Brookshire Grocery, Tyler, Texas, is an example of a company that uses the Centego software to drive its new fuel reward program. “It is one piece of a multi-layered program that allows [Brookshire’s] to offer points and fuel rewards to our customers,” said Sam Lanier, spokesman for the chain.

Under Brookshire’s YourPoints program, customers shopping with a registered Thank You Card at 118 Brookshire’s stores earn one point per dollar on most purchases, including gift cards for other retailers; every 100 points saves 10 cents per gallon on fuel in a stackable fashion across trips, with no points limit per transaction, but a 30-gallon fuel limit. (In Louisiana, however, points are not stackable and discounts are limited to 10 cents per transaction.) Points expire two calendar months from the last day of the month in which the points were earned.

Shoppers can register their YourPoints card online, via Brookshire’s smartphone app or at an in-store kiosk.

Shoppers redeem their points at Brookshire’s own fuel centers, available at most stores, as well as at the company’s Super 1 Foods fuel centers, its Fresh by Brookshire’s store, three Express Lane convenience stores in Texas and one Zippy B convenience store in Louisiana. Customers also have the option of redeeming 500 points for a 5% discount on groceries.

Independent Operators

Other chains are operating programs independently of Excentus. For example, Reasor’s, Tahlequah, Okla., which operates 15 supermarkets (with two more to come this year) and two Lil’ Reasor’s fuel centers, launched a chainwide fuel reward program this month in partnership with QuikTrip, Tulsa, Okla., the subject of the recent Excentus suit. The new program replaces a 5-year-old pilot at the two Reasor’s stores with an adjoining Lil’ Reasor’s. Reasor’s fuel reward software was co-developed by the chain and Retalix, Plano, Texas.

Reasor’s decided to partner with QuikTrip rather than build fuel stations at its other 13 stores. “It made a lot of sense from a capital expenditure standpoint to find someone who was similar to us in the way they went to market,” said Steve Lehto, vice president and chief operating officer, Reasor’s. He declined to comment on the Excentus suit.

Shoppers who sign up for the new Reasor’s Rewards Card earn five points for every $50 spent on most items, accumulating points over multiple shopping trips. They can use their card to redeem those points (within 60 days) at more than 70 Oklahoma QuikTrip locations or the Lil’ Reasor’s outlets, with every five points cutting the pump price by five cents per gallon. The discount can add up to the entire price of the fuel (shoppers would then be charged 1 cent per gallon) for a maximum of 20 gallons, with remaining points carrying over to the next transaction. “We anticipate that our customers will save upwards of $3 million on fuel in the first year alone,” said Jeff Reasor, chairman and chief executive officer.

Reasor’s decided to roll out a fuel reward program based on positive feedback from customers at its two pilot locations and on the observation that other retailers with successful programs experienced “a 7% to 8% increase in same-store sales,” said Lehto, who learned of one chain’s results from an ex-division manager. Reasor’s also saw “very encouraging” same-store sales data from a fuel reward retailer in the Kansas City, Mo., area supplied by Reasor’s wholesaler, Associated Wholesale Grocers; its program is also with QuikTrip.

Lehto estimated that Reasor’s needs a several-million-dollar annual sales boost, which he thinks is fairly attainable, for the fuel program to pay off. “I’m comfortable that if we get a reasonable sales lift, it becomes beneficial,” he said. “Even with a sales lift at the low end, all of our other expenses take a smaller percentage piece [of sales] almost immediately. The numbers on a total P&L start looking better.”

Gas reward programs were effective even in the early 2000s when gas prices were much lower, noted Lehto. Today, with prices much higher, the programs “have every consumer’s attention and the ability to give a maximum benefit to customers and to us.”

Another Texas-based chain, United Supermarkets, Lubbock, has taken a different approach to fuel-based rewards, offering its program periodically on a short-term basis; its current program runs from March 28 through May 22. “Ironically, we launched this and prices came down a bit,” said Eddie Owens, director of communications and public relations for United, which runs 50 stores under three formats. The program was developed internally, he said.

“Everyone knows fuel is a loss leader, especially during promotions,” Owens said. “But it hopefully eases the burden for people who regularly shop our stores.” Store surveys indicate the program is “extremely well received” by shoppers, he added.

Unlike card-based programs, under United’s program shoppers earn discount vouchers per transaction that are good for only one fuel trip — i.e., they are not stackable. Shoppers start with a 5-cents-per-gallon discount for spending $40 to $60, up to a 20-cents-per-gallon discount for spending $150 or more, with a limit of 25 gallons, at a United Express fuel station available at 20 stores. The vouchers expire after 14 days.

Stop & Shop, Quincy, Mass., a division of Ahold USA, launched a gas reward program in 2008, with redemption limited to the 88 gas stations attached to stores. In 2011, the program, which is not affiliated with Excentus, was expanded to all 573 Stop & Shop and Giant-Landover, Md., stores and linked to local Shell fuel stations. With that move, “we exponentially extended our reach to consumers,” said Suzi Robinson, Stop & Shop’s manager of public and community relations.

“Gas rewards are very popular,” she added. “People appreciate it, and use them once or twice a week, like grocery shopping, so it’s a natural fit.”

Like many chains, Stop & Shop offers shoppers a chance to boost their fuel rewards by purchasing specific products, changing the offers weekly. In some cases, the chain added “Healthy Ideas” products considered to have higher nutrition content to the list of bonus items.

An interesting requirement in the Stop & Shop program is that to earn points on their loyalty card, shoppers must not object to Stop & Shop recording their purchases — an option the chain gives shoppers. “We want to know what’s in the customer’s basket; any retailer would,” said Robinson. “And in rare instances where a product is recalled, we know who to notify.”

Two of the more aggressive fuel reward marketers are Kroger and Giant Eagle, who compete in several Midwestern markets. Kroger allows shoppers to earn double — and sometimes quadruple — reward points on gift-card purchases, as well as 50 extra points for each prescription filled at Kroger. Shoppers who sign up for Kroger’s 1-2-3 Rewards Visa card receive an additional 25-cents-per-gallon saving for the first three months when they redeem 100 fuel points.

Giant Eagle, one of the first retailers to venture into fuel rewards a decade ago in concert with Excentus, offers a base reward — 10 cents per gallon for every $50 spent — that is twice that of many other programs (see chart, first page). Using a Giant Eagle fuelperks credit card earns a shopper an extra 4 cents per gallon. And the chain offers numerous bonus point opportunities for buying certain products. Giant Eagle is also one of the few grocers to reverse the program, allowing shoppers to earn grocery discounts by buying fuel at the chain’s GetGo fuel stations.

On the fuel reward redemption side, Shell has emerged as one of the most active fuel providers. It began in September 2009, collaborating with Winn-Dixie as part of Excentus’ fuelperks! network, and added Kroger the following year and Stop & Shop/Giant-Landover in 2011. Through the Excentus network, Shell is also serving as a redemption center for Bi-Lo, Save Mart and Roundy’s.

All told, Shell has launched fuel reward redemption for food retailers at 8,000 of its sites across 130 markets, saving shoppers more than $200 million since 2009, said Lori Van Ryan, Shell’s manager of marketing alliances. Shell is also poised to help Excentus expand nationally next month. “Our goal is to have grocer partnerships across the U.S. with premier brands,” she said. “We continue to look at adding grocery partners.”

Sidebar: Excentus Sues QuikTrip, Others Over Patent

DALLAS — Excentus here has filed a patent and trademark infringement lawsuit against QuikTrip, Midax and several companies operating Price Chopper grocery stores.

The other companies named in the suit are McKeever Enterprises, Bresette Foods, Four B., Queen Enterprises, Cosentino Enterprises and Associated Wholesale Grocers.

The suit, filed in the U.S. District Court for the Western District of Missouri for unspecified damages, alleges among other things that the Chopper Shopper Fuel Rewards program infringes on patents owned by Excentus as well as its federally registered “Fuel Rewards” trademark.

“QuikTrip contacted us regarding obtaining technology and services for the fuel discount loyalty programs they were developing for Price Chopper (Kansas City) and others, and we did our best to work with them to avoid this situation,” said Dickson Perry, founder and chief executive officer of Excentus, in a statement. “Since they have chosen to continue without a license for our patents or our ‘Fuel Rewards’ trademark, they left us no choice but to file this suit as we are very serious about protecting our intellectual property.”

QuikTrip and Midax declined to comment. McKeever Enterprises, Bresette Foods, Four B., Queen Enterprises, Cosentino Enterprises and Associated Wholesale Grocers did not respond to a request for comment.