Card Cuts Thefts at Gasoline Retailers

In Myrtle Beach, S.C., police fed up with gasoline thefts stepped in and pressed for a city ordinance forcing motorists to pay for their fuel up front.

In Las Vegas, Phoenix and Chicago, city officials dont need to pass such laws: After years of losing money to gas thieves, retailers pinched by tight profit margins are abandoning policies that assumed a level of trust with customers. Motor-ists in those cities are hard-pressed to find gas stations that dont require payment in advance.

Now, industry leaders predict, Kansas City could be next.

QuikTrip the areas largest gasoline retailer is bringing to Kansas City a prepayment approval system aimed at those who routinely pay with cash, about 30 percent of all customers. After the convenience store giant introduced a similar, highly successful program in Tulsa, Okla., last year, competitors quickly jumped on the prepayment bandwagon.

Those that werent were just getting hammered by thieves, said QuikTrip spokesman Mike Thornbrugh.

Gas theft is a problem almost as old as the internal combustion engine, but industry officials believe escalating gas prices are a key factor in the recent increase in drive-offs. The scope of the problem, however, remains ill-defined because retailers and industry organizations vary widely with estimates of losses, and only a fraction of the crimes are reported to police.

QuikTrip, for example, reported that drive-offs cost it $3.6 million at its 70 Kansas City area stores last year a 20 percent surge over losses in 2003. Thats an average of more than four drive-offs a day at each of those stores, 365 days a year.

National organizations place the number of drive-offs at approximately one in 1,100. Regardless of the rate, tight profit margins of as little as a penny a gallon mean a retailer must sell an extra 3,000 gallons of fuel to offset the loss from a single $30 theft.

Customers will see these rapid increases and punish retailers by having a new wave of theft, said Jeff Lenard, spokesman for the National Association of Convenience Stores.

The thieves, he said, have the wrong target.

In reality, you're punishing the guy who is least responsible for high gas, and is probably hurting already from high prices, he said.

There are downfalls aside from eroding customer loyalty to the prepayment requirements, Lenard said. Increased credit card use puts a healthy dent in a retailers profits.

Credit card fees are one of the largest expenses at the store level, Lenard said. As prices have increased, the rate of customers paying with credit cards has gone from 54 percent to 70 percent in one year, Lenard said.

Customers use credit cards for convenience. But also, he said, some either dont have the money in their wallet or want to defer the bill.

With razor-thin margins for retailers selling motor fuels, the credit card associations often make more profit on a gallon of gasoline than the retailer selling the gasoline, Lenard said.

Tom Palace, executive director of the Petroleum Marketers and Convenience Store Association of Kansas, points out that the prepayment requirements often hurt small retailers who cant afford to retrofit their pumps with credit-card readers.

But if experiences in other markets are any indication, Palace said, its only a matter of time before the thieves once hitting QuikTrip move down the street to the next retailer not requiring prepayment.

Lenard said the convenience store association has pushed deterrent programs that involve everything from surveillance to something as simple as greeting customers over the intercom when they pull up to the pump.

QuikTrip has tried several tactics, but nothing has worked as well as a new approval system it has tested at 19 stores in Kansas City for the past year before recently expanding it to all 70, Thornburgh said. In Tulsa, the approval system reduced the number of gas thefts by 95 percent.

That reduction is significant, Thornburgh noted, given that the company was lucky to prosecute one of 100 suspects.

Police admit that prosecution is difficult, at best. Officers usually need a license plate number and physical description of a driver in order to investigate the crime. Because of that, many drive-offs arent reported.

That might help explain why local police agencies said they havent noticed a sharp increase in reported gas thefts recently.

Lenard agreed that it is hard to determine the exact number of gas thefts each year. His company releases figures for the entire United States, but most experts agree that the figures dont come close to telling the story for a metropolitan area with easy access to interstate highways for escape routes.

Even when theyre caught, Lenard said, the first thing theyll say is, I forgot. The increase in theft is directly related to price increases and probably not related to memory loss.

Many states have stiffened their laws to help deter thefts, but retailers said the laws havent defeated the problem.

Thornbrugh pointed to a gas-theft sting in Tulsa, where it turned out that many thieves didnt mind losing their drivers licenses.

Over a third of them didnt have a drivers license anyway. Its not a deterrent, he said, adding that several of the thieves had arrest warrants for other crimes.

In Myrtle Beach, the new city ordinance has virtually ended gas theft, said Mark Kruea, city spokesman.

Local police officers pushed for the law, which makes it illegal to pump gas without first paying the bill. They came up with the proposal because of the time involved with taking reports for cases that had no chance of prosecution. Each case took at least 30 minutes of police work. With several gas thefts each day, the effort wasnt worth the result, Kruea said.

Surprisingly, most of the retailers supported the idea. They didnt want to be the first to do it on their own, he said.

Since then, some stations outside the city limits have changed their policies as well. A few have posted copies of the ordinance that blames Myrtle Beach for any customer inconvenience.

QuikTrips program requires prepayment with a twist. The free PumpStart card is available for those who prefer to pay in cash, but dont want to make two trips into the store. Customers sign up for the card in advance and agree to provide the business with their drivers license number.

Customers swipe the PumpStart card outside and pay with cash when they walk inside. The business deactivates the card if a customer drives off without paying. QuikTrip then has the option to call police or the customer. They havent had to call police yet, Thornbrugh said.

The good news is, were stopping it, he said. The bad news is, theyre not going to stop stealing gas. Theyre just going to go somewhere else to steal it.

While each community looks for an answer to what industry leaders say is an increasing problem, QuikTrip is pleased with the results of PumpStart. The company issued 130,000 cards in its Kansas City division. So far, customers havent seemed to mind the filling out the paperwork and handing over their drivers license numbers.

In fact, Thornbrugh reports most customers have said: Its about time. We knew it was going to happen.

Paying cash for gasoline after you pump it could become a thing of the past. To combat gas thefts, QuikTrip is implementing a prepayment approval system in the Kansas City area. Experiences in other markets suggest that competitors will follow suit.

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