Card Cuts Thefts at Gasoline Retailers

By changing how people pay for fuel, retailers drive down the number of drive-offs

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.

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