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Critical Gas

Janet Pinkerton
October 1, 2008

For custom retailers with delivery and installation fleets, the rising cost of fuel is a double whammy, one that drives up expenses while eroding consumer confidence and depressing sales.

To cope, c-tailers are scouring their P&L statements, trimming costs, leveraging efficiencies and upping fees and warranty prices to restore margin.

Operating its fleet of more than 200 vehicles, Abt Electronics & Appliances is in a unique position. It handles its own fueling and maintenance in-house, enabling the Glenview, Ill., company to maintain, wash, fuel and store its fleet on premises.

"We save about 15 cents a gallon by having our own pumps, and we save a lot of time since the drivers don't have to make special stops for fueling," Mike Abt explained in an e-mail interview.

For several years, Abt's big trucks have run on a biodiesel fuel mixture in the summer months (earning the company Illinois' "Green Fleet" designation last year). In addition, Abt fleet manager Charles Metoyer is adding flex-fuel vehicles that run on e85 (a fuel mixture of 85 percent ethanol and 15 percent gasoline) with an eye towards building the number of flex-fuel vehicles so Abt can stock its own e85 fuel on site.

At press time, the nation's average retail prices of gasoline and diesel fuels Had started to decline slightly from a record-setting summer.

For the week of Sept. 22, the average U.S. retail price of gasoline was 371.8 cents per gallon, and the average diesel retail price was 395.8 cents per gallon. Both were up significantly over last year.

Asked, via e-mail, whether the company expected to face $4-and-rising per gallon gasoline costs when it began greening its fleet, Mike Abt wrote back in all capital letters: "NO".

He stated: "We've seen fuel costs more than double in the last two years." To mitigate the increased expense, he said Abt routes its trucks more efficiently, places heavy emphasis on routine fleet maintenance and fuel conservation (see sidebar), and encourages customers to buy online.

Abt Electronics still doesn't charge for local deliveries, but Mike Abt says that policy will get ongoing review: "At some time, it may change."

Vance Pflanz, president of Pflanz Electronics in Sioux City, Iowa, has been in business for about 50 years, but said, "I've never seen things change so fast. You have to monitor it very closely today. We're way over budget on our vehicle expenses."

With TV deliveries and installations up to 80 miles away from its store, Pflanz Electronics traditionally charges both a delivery fee and a mileage charge. Vance Pflanz admits the fees haven't kept pace with actual expenses.

So Pflanz Electronics mileage fees are increasing-from 50 cents per mile at the end of 2007, to a dollar a mile in April to a planned $1.25 per mile rate in August. Pflanz now plans to review its fee structure on a quarterly basis.

At World Wide Stereo in Hatfield, Pa., President Bob Cole reported "big arguments" over whether to add a fuel surcharge on deliveries. Instead, the company opted to raise installation rates to cover fuel costs-an increased fee a customer pays if their job is a block away or 40 miles away.

"It would be a happier conversation if we were talking last year," when World Wide Stereo saw good profits and double-digit growth, said Cole. "Right now, the increased rates are also helping us cover the decrease in business."

World Wide Stereo also installed GPS in its company vehicles, which World Wide Stereo allows employees to take home at the workday's end as a perk. GPS has "made everything a lot more efficient, operationally and in terms of tracking management," said Cole. In addition, as vehicle leases end, World Wide Stereo is moving from Ford Econoline 250s to Dodge Sprinters, which Cole estimates will save him about 20 percent in vehicle costs long-term.

Classic Stereo & Video in Grand Rapids, Mich., upped its trip charge from $50 to $75 and bills hourly for installation jobs. In addition, owner John Higgs said Classic upped its labor rates by $10 an hour to cover the increased cost of fuel. "Nobody said a word to us about it either," said Higgs.

For now, Higgs sees no vehicle alternative to the heavy duty Ford Econolines his company uses. "I can't get by with little minivans," he said, adding that they don't have the reliability and longevity his company needs. However, he said, Classic uses a fleet maintenance company to get the best mileage it can out of its vans.

At 6th Avenue Electronics in Springfield, N.J., 30 vans handle deliveries and service calls, traveling 15 to 20 miles from each store, and sometimes as much as 40 miles to clients' summer homes at the New Jersey Shore. President of Operations Tom Galanis estimates the rise in fuel costs has resulted in a three to four percent increase in expenditures over last year.

To recoup margin, he said, 6th Avenue this spring raised the price of its warranties by about 5 percent. In addition, 6th Avenue is promoting and advertising home efficiencies through control and automation and has seen a bump in its lighting and systems control business.

Home Entertainment Source (HES) Executive Director Jim Ristow reports a larger percentage of HES members are adding fuel charges on their service bills "so far with little to no resistance from consumers-that's a positive sign. Consumers are aware of or expecting those types of (charges)."

HES' ExpertWarehouse in 2008 has, Ristow said, worked to "maximize all our efficiencies"-"not just having inventory in stock, but having inventory in the right warehouses.

"So far, the efficiencies have outpaced the rising fuel costs," he added. CR

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