Abstract

The narrowing of the differential between the prices of independent and major retailers suggests that the rapid expansion of independent sites cannot continue. This is related to both the ending of price maintenance and an increasing recognition by retailers that price is an important part of the marketing mix. Moreover, the major brand retailer has a wide margin, which places him in a better position than formerly to use price as a competitive tool. Also, the very success of independent retailers in the past few years means that there is less opportunity for new entrants. Because the number of mixed sites available to switch to independent brands has fallen, much of the competition now must be in the form of one independent retailer versus another, rather than independent versus major dealers. The operations of those independent distributors buying from domestic refiners have also become less profitable, as their margins have narrowed as a result of wholesale prices being held relatively constant despite repeated retail price reductions. This situation has been alleviated somewhat as new major entrants have supplied independent distributors while gaining initial volume.