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Speedbumps For Fuel & Grocery Rewards Programs?

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Speedbumps For Fuel & Grocery Rewards Programs?
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The budding alliances between fuel & convenience retailers and grocers are among the hottest trends in the market.

Consumers are always looking for an edge in their fuel purchases and enjoy turning their grocery shopping into free gas. Grocers fighting for market share and seeking to differentiate from the competition have noticed, and are taking advantage of some neat technology to enable customers to accumulate points on grocery rewards cards and redeem for fuel discounts or even free gas at the pump with the same card.

Several of the major fuel retailers have jumped in the game with Kroger and Shell launching Fuel Points in early 2010 and BP becoming a redemption partner for Fuelperks! at about 90% of its 8,000 sites. Irving Oil Override runs a closed loop program in the Northeast linking Shaws and Dunkin Donuts among other merchants to bring good value to customers. Override has even rolled a test program into Canada with Sobeys supermarkets.

Two speedbumps are rapidly approaching which could derail the promise of fuel & grocery partnerships.

  1. The grocery market is more fragmented than retail fuel in the US. If this was a dance, the vast majority of grocers would be left as wallflowers while the more outgoing landed a clinch with one of the major oil companies.
  2. The technology and the business process that defines the redemption of rewards points for fuel discounts is largely controlled by one company, Excentus, which owns a series of patents and vigorously defends its turf through litigation.

Over the summer, Excentus acquired its main “competitor” Metrosplash while Override “transferred its operations” to the same group. Safeway elected to retire its PowerPump rewards program following litigation by Excentus for patent infringement. It is not clear if Kroger and Shell have similar liability as a result of their program design.

On the partnership front, there are only so many fuel retailers around to link up with grocers as redemption sites and once the full development of this market is complete, consumers may discount fuel as a reward just like another low-level perk in a grocery “price club”.

More competition in this market would be positive for consumers as further consolidation by the patent holder will likely add costs to the programs and dilute value for consumers. What must have seemed like a no-brainer decision for grocery marketers one year ago now requires some head-scratching.

The cycle of new product development from innovation to industry standard is becoming shorter all the time. Wise grocery marketers should already be looking further down the road for the next best thing to fuel as a reward.


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