Why Walmart plans to aggressively open more gas stations over the next 5 years

“I would call this year one of a pretty aggressive growth strategy,” DeSerio said. “I want to stair-step it so that we don’t sprint while we’re still learning how to run, and I think it’s really important. I want to do it right.”

DeSerio, a longtime C-store executive, joined the company at the beginning of 2018 after having served in COO positions at Tennessee chain MAPCO Express and Spinx in South Carolina. Before that, he had been director of store operations for Wawa and was with that company for almost two decades.

A couple years before DeSerio joined Walmart, the company decided to end a 20-year relationship with Murphy USA where Murphy had built and operated gas stations in the big-box retailer’s parking lots. Walmart then began building and operating its own gas stations next to stores.

“It’s about traffic,” DeSerio said. “It’s about making sure that people have one place to shop, so that if they come into our lot to buy their groceries, they can also fuel their vehicle and save time. That’s a really big factor in people’s lives, for all of us, to not have to go all over the place.”

DeSerio joined Walmart at a time when it had slowed its growth in fuel stations while building up its digital business but was thinking about the next generation of its stores. That gave DeSerio’s team some time to analyze the first few hundred locations it had already opened and plan out how they’d want to grow moving forward.

‘You’re not going to out-low-cost Walmart’

The gas business adopts the same thesis Walmart has adopted in its big-box stores, offering quality products at the lowest prices possible.

“If competitors match, that’s fine, but we will be in the low [end] of the market,” DeSerio said.

DeSerio explained that in his decades in the industry, it wasn’t typical for him to be so focused on price. Typically, it would be about gross profit, or cents per gallon — making as much as you can and still taking care of the customers. Instead, Walmart’s goal is to hit higher volume and lower margins while still being profitable.

“Everybody has a different pricing philosophy. But for the majority of fuel retailers, you start with your gross profit — how do we get to a number? — and then we’ll figure out how to take care of a customer,” DeSerio said. “How we’ve won is by following exactly the methodology this company uses, just applied to a different segment. Our competitors don’t always operate that way, and we see that in our pricing.”

Walmart could be creating a significant competitor in the space that has potential to pull demand from other gas stations and convenience stores, especially on cost.

“Walmart is well known for being a low-cost leader because of just amazing efficiencies and logistics,” said Jeff Lenard, vp of media and strategic communications for the National Association of Convenience Stores. “Anytime you’re competing against Walmart, it’s something you want to pay attention to,”

Unsurprisingly, a 2024 survey from NACS shows that 58% of American adults prefer a certain gas station or chain because it usually has lower prices. Still, the big-box stores and their attached gas stations are often more out of the way than a gas station sitting along a highway, and 48% of adults said they prefer a specific gas station because of location.

“Price is always important,” Lenard said. “What’s equally important for most consumers is: How easy is the right hand turn? … It has to be on their way.”

Lenard said that with the uncertainty going on overall and in the financial markets, and with Walmart expanding its presence in the space with a focus on low prices, other gas chains will need to find other ways stand out to customers.

“You’re not going to out-low-cost Walmart, whether in reality or reputation,” Lenard said. “So what do you do well? Lean into that and tell your customer. It could be great people, great experience, great food, easy in and out — it could be all of those. It could be something else, but it has to be something beyond price.”

Why Walmart’s gas growth spurt is happening now

Like other specialty businesses Walmart has entered like auto care and pharmacy, DeSerio said the company has had to take time to learn the gas business and hire the right people.

“We wanted to learn it and do it the best we could,” he said.

Another reason Walmart wanted to add more fuel stations at this moment comes from the fact that members of its paid subscription service, Walmart+, receive another 10 cents per gallon off their gas at Walmart stations, as well as Exxon, Mobil and Murphy stations.

“It just builds another layer of loyalty and trust,” DeSerio said. “Man, that is a loyal customer. They go out of their way because they’re there and they’re paying for a subscription.”

That doesn’t apply just to gas; the products in the attached C-stores are at the same prices that would be found in a Walmart big-box, as well, according to DeSerio.

“We’re just an extension of the building,” he said. “It’s convenient because it needs to be. It should be clean, it should be fresh. But it can also be at the Walmart pricing, and that is a point of differentiation for us.”

DeSerio said Walmart’s cost-focused strategy especially makes sense after the average U.S. gas price finally hit $5 for the first time in 2022. It has since fallen back down to about $3.14, according to GasBuddy.

“While [customers] weren’t happy that in certain parts of the country, they had to pay $5, they knew they could trust us to approach it from an [everyday low price] strategy,” DeSerio said.

“We don’t pivot from how we price and we don’t pivot from how we focus on our customers, and I think that just gives us a different approach to the business. Not that others don’t do a great job, they do, but I feel like we just have this uniqueness about us that many could never replicate.”