As gas and food prices skyrocket, consumers are seeking out retailers that assuage some of their cost concerns with targeted deals and rewards.
In May, gas prices rose 466% more than consumer prices overall year over year, and fuel oil prices inflated 12 times as much as prices for items across categories, according to data from the Consumer Price Index for All Urban Consumers (CPI-U), reported by the U.S. Bureau of Labor Statistics (BLS) last Friday (June 10).
Specifically, while the price of all items rose 8.6% compared to 12 months prior, the price of gasoline of all types rose 48.7%, and the price of fuel oil rose 106.7%. In fact, prices are even rising markedly month over month, with May’s gasoline prices up 4.1% compared to April and fuel oil prices up a whopping 16.9%.
Kroger, the United States’ top pure-play grocer, for one, is using its fuel rewards program to draw customers in the door in the face of mounting inflation concerns.
In addition to expanding its private label offerings to appeal to cost-conscious consumers while boosting margins, the grocer is also seeing the benefits of this rewards program, as evidenced by record-high engagement, Rodney McMullen, the company’s CEO and chairman, told analysts on a call Thursday (June 16), discussing the grocer’s first quarter 2022 results.
“Our loyal customers are using our fuel rewards program now more than ever and, in fact, more than 600,000 incremental households engaged for the first time this quarter,” McMullen said.
Additionally, these fuel rewards leverage one of consumers’ top concerns to get them to engage with Kroger’s loyalty offerings, which in turn gives the grocer valuable insight into their purchasing behavior and enables the grocer to better personalize their offers going forward.
Kroger is not the only brand leveraging offers on gas to drive enrollment in programs that create more value for the retailer. The grocer’s top competitor, Walmart, the world’s largest grocery retailer, has been offering members of its Walmart+ program 10 cents off per gallon of gas at more than 14,000 fuel stations across the country in a move to drive subscriptions.
While Walmart announced this strategy in April, Kroger launched a fuel rewards program with Shell as far back as 2010. In November 2021, the grocer began testing a two-tier membership program in three of its divisions, double the fuel points and free delivery for a set annual fee. The demand for fuel rewards has been helping this program draw in members.
“We are encouraged by the number of new members in the four current pilot divisions,” McMullen said. “Importantly, delivery sales increased significantly compared to non-Boost divisions, and delivery retention improved approximately 600 basis points. Because of this early success, we are proud to announce today that Kroger Boost is launching nationwide beginning in the next few weeks.”
Major grocer Albertsons similarly offers gas rewards.
“The fuel rewards are incredibly powerful,” Albertsons CEO Vivek Sankaran told analysts on a call in April discussing the company’s Q4 2021 results. “It has always been one of our best returns and one of the biggest drivers of stickiness.”