Used to be, a motorist would pull into the corner service station and Smitty, the grease-stained pump-jockey, would come out from under the car he was working on to fill the customer's order of "wipe the windows, check the oil, and gimme a dollar's worth of gas."
Today, Smitty more often than not sits clean and comfortable in a kiosk that's surrounded by a dozen or more gas pumps. He's often selling bread, milk and cigarettes while making change for the customer who has just wiped his own window, checked his own oil, and pumped his own gas.
Spiraling increases in prices, flattened gasoline demand, changes in driving habits, new technologies and evolving market strategies in the past decade have wrought profound changes in the way gasoline is sold, and oil industry officials and analysts say more changes are down the road.
And while many of the new wrinkles in gasoline marketing have yet to appear in the Washington area, the driver setting out for a long-distance trip this summer is likely to encounter such new gasoline-buying experiences as 7-Eleven convenience stores with gas pumps out front, and electronic pumps that dispense gasoline and automatically bill the purchase to the customer's credit card or bank account.
Motorists can't expect to always find a favorite brand of gasoline on that cross-country trip, either. Rising costs and falling market shares have caused most major oil companies to stop selling gasoline in some regions.
Meanwhile, the number of service stations continues to dwindle; from 290,000 at the industry's peak in 1970, the number has shrunk to 185,000 as the changes have forced many stations to close shop.
That shakeout was necessary and overdue, according to industry officials. "There were just too doggone many service stations," says Ron Hall, senior vice president for marketing at Gulf Oil Corp., who adds that the shakeout "is good for everybody, and it's got to continue."
The changes in gasoline marketing also reflect a change in philosophy at the oil companies, which once saw gasoline retailing as a way to get rid of a petroleum product that wasn't as profitable as many of the others that came from a barrel of crude oil. Advertising, sales promotions and games of the 1960s notwithstanding, the kind of aggressive marketing that is going on now is a relatively new development as spiraling prices and increased competition have forced oil companies to reevaluate their gasoline-selling operations.
Perhaps the biggest development in gasoline marketing is self-service. More than two-thirds of the gasoline sold in the United States is pumped by motorists, up from 12 percent less than a decade ago. Self-service pumps now are legal in every state except New Jersey and Oregon, and experts expect their percentage of the market to increase. Even though some motorists still will be willing to pay a premium for full service, self-service eventually is likely to be available at virtually every station in the country.
The principal reason is price. Self-service gas usually costs about 20 cents a gallon less than full-serve gas, and the American motorist, shocked by two price-spiking oil shortages in less than a decade, is sensitive to gasoline prices.
Customers also like the speed and convenience of pumping their own gas, moving in and out of a station in an average of 4 1/2 minutes, according to Shell Oil Co. studies, which also frees up the pumps faster for other customers, boosting volume and profits. Exxon Corp. found that, when it tested self-serve and full-service gasoline at the same price, most customers still drove to the self-service islands.
The popularity of self-service led to a new kind of gas station design--the high-volume "pumpers," with a dozen or more pumps and a booth for the cashier. Oil companies discovered that a location that once sold 50,000 gallons of gasoline a month through two or three pumps out in front of the repair bays could just as easily move three times that amount when turned over exclusively to gasoline pumping.
As a result, most of the stations built in the past few years, or on the drawing boards, are pumpers. And many of them are augmented with some other form of business--convenience stores, car washes or, in an ironic throwback to Smitty's corner service station, car-repair facilities.
"A piece of real estate that sells gasoline only is going to have a very difficult time competing in the marketplace," observes John Adkins, manager of retail services and advertising at Exxon USA, the domestic refining and marketing arm of Exxon Corp. "The more revenue streams you've got from a piece of property, the lower you can price your gasoline."
Although they once scorned them, virtually all oil companies now are experimenting with convenience-store gasoline stations--known as C-stores--such as Arco's AM-PM Mini-Markets. Selling bread, milk, sundries and other basic items in a small space, C-stores add revenue without significantly increasing overhead or labor costs. "You almost get the gasoline portion of your labor free," says Gulf Oil's Hall.
In the most significant endorsement of the C-store concept, Southland Corp., owner of the huge 7-Eleven chain, is spending more than $1 billion to purchase the refining and marketing operations of Cities Service Co. from Occidental Petroleum Corp. The acquisition will guarantee Southland a gasoline supply for the 2,800 7-Eleven stores already selling gasoline, as well as allowing expansion. Gasoline already accounts for about 25 percent of total 7-Eleven sales.
Oil companies also are adding car washes to stations as low-cost revenue producers. And in the past couple of years, there has been a trend toward adding service bays to new stations, allaying fears that the self-service, high-volume pumpers would make auto-repair outlets extinct.
The oil industry argued that the proliferation of specialized car-repair operations--muffler and transmission shops, for instance--was reducing the need for service bays at gas stations. In addition, many gas station grease-monkeys weren't particularly good mechanics, industry officials concede. "That's an area, no matter how hard we tried, the oil industry didn't do a very good job in," Hall observes.
But in its search for additional revenue for the new self-service stations, the industry is returning to the car-repair business--and trying to beat the specialized shops at their own game. The new stations that include car-care facilities feature highly trained mechanics and expensive, high-technology diagnostic equipment.
"There's no reason in my mind that you can't run the service facility and still sell a lot of gasoline if you do it properly," says William J. Bittles Jr., vice president of retail sales for Shell Oil Co.
Technology also is changing the way gasoline is sold. The electronic digital gas pumps that seem light years away from the old clicking mechanical pumps are just a precursor. Test marketing already has begun in some areas on pumps that dispense gasoline when a customer inserts a credit card. Farther down the road is the use of debit cards, similar to bank-machine cards, that will take the cost of a fill-up directly out of a customer's bank account.
"I think that's coming very fast," Adkins says. "The customer can come in, put his credit card in, get his gasoline, and never see a human soul."
"We're all looking toward gasoline stations being more and more automated," says Richard R. Dickinson, senior vice president of marketing and transportation at Texaco USA, Texaco Inc.'s gasoline marketing division. "If you look at the long-term future of the gasoline station, some type of card is going to be very important."
In another phase of their strategy, oil companies are sounding retreat. Companies once strove for some semblance of national coverage for their gasoline brand, but most now have pulled back to concentrate on particularly profitable regions.
The timing of these retrenchments has coincided with the lifting of government controls on gasoline sales, including requirements that companies hold to traditional marketing patterns. But the withdrawals reflect basic market realities.
For years, the gasoline industry could count on remarkably steady growth in sales, which fueled the construction of more and more service stations. But that growth stopped with the 1973 oil embargo and the run-up in prices that ensued over the next decade. With the reduced number of stations, higher prices and changed driving habits, the amount of gasoline being sold today is little changed from a decade ago.
"You could count on gasoline [consumption] going up 2 to 4 percent a year," recalls Exxon's Adkins. "The pie was getting bigger and bigger for everyone to split."
Now, however, the pie is shrinking, so companies have left markets that were not profitable, or marginally so. "We've gotten out of those sections of the country where we had basically small market share, high transportation costs, high distribution costs," Dickinson of Texaco explains. "There's kind of a minimum market share--if you don't have somewhere around 10 percent as a market share, you're at kind of a disadvantage."
Because many major metropolitan areas are near refineries and offer a lot of sales potential, they have been affected less by the withdrawals than have many rural areas.
Customers in upstate New York have been particularly hard hit. Citing high costs and low market shares, Gulf, Amoco, BP, Shell, Texaco and Exxon have pulled out of the area, leaving the bulk of the market to Mobil, as well as a smattering of independents and other marketers.
As a result of the retreat, many travelers are having trouble finding familiar brands, but officials deny that competition is disappearing. The companies say that their presence in the markets they've abandoned had been so small that their departure had little effect on competition, and in many cases their stations were taken over by other companies or independents.
"It's hard to find an area in which there isn't a lot of competition," Bittles says. "I don't think that a person in any major area today would have any trouble buying a variety of major brands."