Wal-Mart has now decided to operate its own gas station after 20 years allowing its parking lots used by another company to build and open gas stations. It tries to obtain more profits from the division that has been run by Murphy USA Inc. before.
According to Nasdaq, Wal-Mart executives has informed Murphy USA Inc. that it will run its own gas station. Murphy will keep operating its existing gas stations in more than 1,000 areas close to Wal-Mart stores.
Since its first gas stations in 1997, which was built in front of the Sam's Club's warehouse chain, Wal-Mart already has a few hundred in its 4,500 stores locations. However, it is still much fewer than the gas stations operated by Murphy. Therefore, Wal-Mart is planning to build its own gas stations when new stores are constructed.
The movement is an indication that Wal-Mart CEO Doug McMillon is trying to squeeze out benefit from each side of the business. The company has spent billions to boost e-commerce sales to compete with Amazon.com Inc, and enhance more store sales. In order to improve customer service, it also increases its hourly workers' wages. There are at least 150 stores in the U.S. that have been shut down, and Wal-Mart might lose 12 percent of its profit in the fiscal year starting this month.
By building gas stations in its parking lots, Wal-Mart is expecting to attract shoppers to buy more goods in the stores, and gain higher profits. Having its own gas stations means that Wal-Mart may be able to get some more amounts of margins themselves.
As stated in Gas Buddy, it wasn't a surprise for Murphy to hear the news that Wal-Mart was going to run its own gas station, as confirmed by OPIS's Donna Harris. Murphy USA will now have more flexibility to plan extension on their conditions. Meanwhile, Wal-Mart will hope to combine "a larger convenience store to future Wal-Mart gas station sites on Supercenter grounds."
At the first corporation between Wal-Mart and Murphy, Wal-Mart gave space for Murphy to open gas stations in its stores' areas. Consequently, Murphy would get the advantage of brand acknowledgment from being attached to the retail giant, and the traffic from it. However, the partnership wasn't always convenient. Murphy was not allowed to close its underperforming gas stations, so it was hard for them to make up losses in the areas where sales were dropping.
Meanwhile, president and CEO from Murphy USA Inc., Andrew Clyde, said as mentioned in CSP Daily News, "We have seen this fork in the road coming for some time. This decision, while surprising to many people for different reasons, has not taken us by surprise. We've been preparing for this and we are ready to execute our plan."
He also stated, "The Walmart leadership team has been very forthright and transparent from the beginning in saying regardless of where they ultimately decided to go with this decision, we're going to have to work together and grow and enhance the customer offer to our joint customers where the existing stores are."
As Wal-Mart is going to push more profits from its future gas stations, Murphy will still gain revenues from the existing gas stations it has been operating until now.
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