Sebastian Delgado von Euw
May 14, 2019
READING TIME ~
Heading into the summer we continue to see fuel prices increase, with the national average for unleaded increasing 3.38ppl vs the past month while diesel went up just 2.09. Meanwhile, EdgePetrol stations seem to be faring well maintaining an average margin above 6.50ppl.
Following on our findings from the previous EdgeIndex issue (read it here), this month we seek to evaluate how the same stations behave in terms of volume sold. The question we are asking this week is:
Why do we care about volume? 🤔
We have already established that stations close to supermarkets suffer from low margins. But is that always a bad thing?
Not necessarily, if your station has low margins and large volumes you could still be better off compared to a station with better margins and low volumes. Therefore it could be the case that stations close to supermarkets also operate in a larger market with more demand and therefore do not need to match non-SM sites on margin in order to cover their costs.
In order to test this theory we reuse our existing sample of 74 forecourts over the months of November 2018 to February 2019. Within this sample we have:
We again produced a histogram (in appendix) that compared the volume distributions of both groups. Our initial assessment finds that both groups are very closely related in terms of total volume.
The worst performer in terms of volume for both groups is close to 400,000L while the best performing station in both groups is around 3,500,000L. The average total volume sold during our observation period for both groups was ~1.4 million litres. A statistical test also concluded that there was no significant differences between both groups .
We looked at three key metrics from our stations: Margin, Total Volume and Gross Profit from fuel. The work showed us that:
Looking further into this we plotted our three metrics against the number of supermarkets close to each station and found a slight negative linear relationship between each of the metrics and the number of supermarkets present. With an increasing number of supermarkets all metrics tend to decrease. This might be a good indication of how competitive their local markets are. But we should take this result with a pinch of salt since we have very few stations that are close to 3 or more supermarkets.
Sebastian Delgado von Euw is EdgePetrol’s Data Scientist. He previously worked in the finance industry and studied Economics at the University of St Gallen with a specific focus on econometrics, financial mathematics and statistics.
In this graph each plotted point is one of the stations on our sample. Black dots are SM-forecourts and green dots are non-SM forecourts. The dots allows us to see how each station behaves in terms of different metrics. While the three plot on the diagonal show how each of the metrics is distributed: