If gasoline has such a low profit margin, then why the huge difference in prices?

[Rich Engelhardt]

I constantly see someone or another say that gas stations struggle because of the low profit margin on gas.

Then I see the prices and wonder who are they trying to kid?

The three stations a half mile from me is selling 87 octane for $3.55 a gallon.
Meanwhile, the Get Go station that's 4 miles away is selling 87 octane for $3.19 a gallon when I swipe my "loyalty" (yeah right! ) card and get a $.03 a gallon discount.

That's a $.36 a gallon difference - or - 11%.

Just another lie from the oil industry I guess.

[Art Mann]

The oil industry does not set prices at local stations. Also, 11% is a tiny markup compared to many things you buy without giving it a secon thought.. I would not be surprised to find that tool stores mark up their products 40% or more. Caskets are often marked up 300% or more as your punishment for dying.

[David Cramer]

The oil industry does not set prices at local stations. Also, 11% is a tiny markup compared to many things you buy without giving it a secon thought.. I would not be surprised to find that tool stores mark up their products 40% or more. Caskets are often marked up 300% or more as your punishment for dying.

I worked for a Home Center. Black & Decker, Makita, etc...make the bulk of the profit. A 14.4V DeWalt drill was sold for $221 around the year 2000. The store itself, Builder's Square, paid $207 making a profit of $14. I know this for a fact because I worked there and could actually see the store's cost on the computer for each and every item in the store. Tool stores don't mark up their products 40% or more.

Now, in 2014, the profit isn't much better, but the volume of drills that they sell is more, a lot more.

For what it's worth Art, I used to think the same thing, until I had a short stint there 15 years ago.

Another example: Costco had a pair of Calvin Klein jeans that they bought for about $22 (it may have been $24) and sold each one for a $1 profit. How could they do that?

They sold over 20 million pairs of those jeans in their many stores throughout the world, making a very good profit on the sheer volume of their sales. I got that directly from a Costco employee while we discussed their store policy of no more than a 15% mark-up on everything sold in their stores (there were 2 or 3 exceptions with jewelry being one of them). A tv that they sell for $400 has a maximum profit of $60 (15%) that Costco makes, but it's usually less. The volume that they sell is huge.

We buy their gas and save 4% at the pump every time that we use it. Every February we get a check of about $250 back ($265 last year). Their price is already lower than any gas station around, and then with an additional 4% more off for our business membership, we can't beat it...even though gas is still toooooo high, in my humble opinion.

Sorry, I know my post wasn't mainly about gas, but I just thought it was worth pointing out.

[Rich Engelhardt]

Small world...
I too worked at Builder's Square back in the mid 1980's.

Horrible place to work.

[Brian Elfert]

Deleted. Posted to wrong thread.

[David Weaver]

I worked for a Home Center. Black & Decker, Makita, etc...make the bulk of the profit. A 14.4V DeWalt drill was sold for $221 around the year 2000. The store itself, Builder's Square, paid $207 making a profit of $14. I know this for a fact because I worked there and could actually see the store's cost on the computer for each and every item in the store. Tool stores don't mark up their products 40% or more.

Now, in 2014, the profit isn't much better, but the volume of drills that they sell is more, a lot more.

For what it's worth Art, I used to think the same thing, until I had a short stint there 15 years ago.

Another example: Costco had a pair of Calvin Klein jeans that they bought for about $22 (it may have been $24) and sold each one for a $1 profit. How could they do that?

They sold over 20 million pairs of those jeans in their many stores throughout the world, making a very good profit on the sheer volume of their sales. I got that directly from a Costco employee while we discussed their store policy of no more than a 15% mark-up on everything sold in their stores (there were 2 or 3 exceptions with jewelry being one of them). A tv that they sell for $400 has a maximum profit of $60 (15%) that Costco makes, but it's usually less. The volume that they sell is huge.

We buy their gas and save 4% at the pump every time that we use it. Every February we get a check of about $250 back ($265 last year). Their price is already lower than any gas station around, and then with an additional 4% more off for our business membership, we can't beat it...even though gas is still toooooo high, in my humble opinion.

Sorry, I know my post wasn't mainly about gas, but I just thought it was worth pointing out.

Costco is a different model, though. The last time I heard a description of their cost structure, they said they set the prices on the goods to cover their expenses, and rely on the membership fees for profit.

Hartville tool used to run a cost+10% summer sale each year, which really gave you an idea of what things cost them. The few things I ordered from the US barely changed in price - maybe 10% on average. The import accessory stuff cost about a quarter to a third of what it cost at their regular catalog prices (some far east lumber rack kits, etc).

It's not hard to figure out why all of the home centers want to take away legitimate tools and fill the racks with garbage accessories from china, and then play goofy games with coupons while jacking up the remaining legitimate tools.

[Art Mann]

I worked for a Home Center. Black & Decker, Makita, etc...make the bulk of the profit. A 14.4V DeWalt drill was sold for $221 around the year 2000. The store itself, Builder's Square, paid $207 making a profit of $14. I know this for a fact because I worked there and could actually see the store's cost on the computer for each and every item in the store. Tool stores don't mark up their products 40% or more.

Now, in 2014, the profit isn't much better, but the volume of drills that they sell is more, a lot more.

For what it's worth Art, I used to think the same thing, until I had a short stint there 15 years ago.

Another example: Costco had a pair of Calvin Klein jeans that they bought for about $22 (it may have been $24) and sold each one for a $1 profit. How could they do that?

They sold over 20 million pairs of those jeans in their many stores throughout the world, making a very good profit on the sheer volume of their sales. I got that directly from a Costco employee while we discussed their store policy of no more than a 15% mark-up on everything sold in their stores (there were 2 or 3 exceptions with jewelry being one of them). A tv that they sell for $400 has a maximum profit of $60 (15%) that Costco makes, but it's usually less. The volume that they sell is huge.

We buy their gas and save 4% at the pump every time that we use it. Every February we get a check of about $250 back ($265 last year). Their price is already lower than any gas station around, and then with an additional 4% more off for our business membership, we can't beat it...even though gas is still toooooo high, in my humble opinion.

Sorry, I know my post wasn't mainly about gas, but I just thought it was worth pointing out.

Big box stores and Costco are not what I would call tool stores. The kinds of places I am referring to are Woodcraft, Rockler, Highland Hardware and similar and the products I am referring to are table saws, jointers and other similar stationary equipment.

[David Cramer]

Big box stores and Costco are not what I would call tool stores. The kinds of places I am referring to are Woodcraft, Rockler, Highland Hardware and similar and the products I am referring to are table saws, jointers and other similar stationary equipment.

Sorry Art, my bad. I totally misunderstood.

As for Woodcraft, I truly don't know but I'd be surprised if it was anywhere near 40% for the big tools. But...I may be all wet as I've never worked there and am only guessing.

Respectfully,

David

[Scott Shepherd]

Depends when they bought the gas. If the $3.55 a gallon people paid $3.25 a gallon and their tanks are full, they probably aren't going to lower the price until the tanks are empty or close to it.

If you ran a store, and paid $3.25 for 30,000 gallons of gas and then the price dropped, would you sell it for less than you bought it for?

Oil companies (owned by you if you have a 401K program) are all publicly traded companies, you can see their margins in their financial statements.

There's a gas station here that's 60 cents higher than anyone else, always. Has been since the day they opened it. Does that one station owner represent the entire oil company? I don't think so.

[Wade Lippman]

There's a gas station here that's .60 cents higher than anyone else, always. Has been since the day they opened it. .

The nearest gas station to me is $0.50 higher than two others a half mile away. I have always wondered how he stays in business; I surely have never bought from him. Of course, he only has to sell a quarter the gas as the other guys to make the same profit; maybe there are enough really stupid people to make it worthwhile?

[Myk Rian]

A Speedway near here started charging $.15 more for each grade step. The only station doing that. I don't go there anymore.

Remember when the price would change only when the stations got a new delivery? I wonder what happened with that.

[Rick Potter]

Around here gas is higher than elsewhere. Usually around $4. Costco is generally the least expensive place to buy, and if you have their American Express card, you get back 3%. That would be about 12 cents off the normally cheapest gas in this area.

Back in the day, when there were numerous independent stations, they could charge what they wanted, and there were gas wars pretty regularly. In this area, most independents are long gone, bought out by the major brands, who are now trying to get out of the retail end. They prefer selling to chains, like 7-11, etc, and not dealing with the end customer.

That's how it was 'splained to me, anyway. 76 gas seems to be only in small chains now, I haven't seen a Texaco station in years (are they still around?). There are still some Chevron stations, but all self serve with convenience stores around me. Not too many service stations locally either. They have either dropped selling gas, or changed the service area to a mini market.

Progress, I guess.

Question of the day....Why do they still sell mid grade gasoline? Most cars take 87, some take premium 91, can't think of any that recommend mid grade 89.

Rick P

[Brad Schafer]

Question of the day....Why do they still sell mid grade gasoline? Most cars take 87, some take premium 91, can't think of any that recommend mid grade 89.

Rick P

<digression>

most 2 cycle engines require 89. local dealer told me 87 "burns up 2 cycle engines" ... and the saw manuals call specifically for 89. a nice stihl saw of mine lost an engine due to this. older 4 cycles don't care for 87 either (e.g. 1956 Ferguson 35 tractor).

</digression>

as for gas price fluctuation, welcome to the world of commodity pricing. cost is a complex problem - over-regulation, (goofy, IMO) EPA regs, artificial limits on acquiring/refining our own supply, political deals with [pick favorite entity], variable tax rates, etc. removing the effects of politicians and popular culture would go a long way toward changing this, but that requires some pretty massive change.

meanwhile, Gas Buddy is a pretty useful thing.

[Brian Elfert]

Locally, there are gas stations all over the place that have gone under since 2008. A number have been torn down and redeveloped recently. Strangely, the station closest to me closed their convenience store and moved the convenience side of the business into a tiny little side office in the same building. The convenience store area was relatively new and was very nice. No idea why a gas station would abandon the most profitable part of their business.

[Rich Riddle]

Down the street, there are three stations at the entrance/exit of an interstate. A few weeks ago the news did a story concerning why those stations charge an average of 40 or 50 cents a gallon more than other stations a couple of miles from them. Stations long ago stopped making the mythical 2 or 3 cents a gallon.