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April 10, 2025These 3 Movement Mistakes Are Made by Millions – and They’re Costing You Health and Energy
April 10, 2025In late March, Walmart announced plans to add 45 new gas station and convenience store combinations to its existing network of approximately 400 locations. This move appears aimed at enhancing customer convenience and strengthening membership retention in the face of growing competition, particularly from Costco. However, this initiative raises questions about its long-term strategic value and alignment with Walmart’s core strengths.
Retail Expertise Meets a Different Business Model
Walmart is widely recognized for its leadership in physical and online retail. In contrast, fuel retail represents a fundamentally different business model, one that is capital-intensive and operates on narrower margins. Companies specializing in energy, such as Shell, benefit from vertically integrated operations and decades of expertise, allowing them to maintain more sustainable profit margins. For example, in 2024, Shell reported a net profit margin of 5.57% for the quarter ending September 30, significantly above the industry average of 1% to 2%.
While Walmart has seen its share of the U.S. gasoline market grow — from 0.97% in 2017 to 2.1% in 2024 — it remains a relatively minor player. Its current position, ranked 18th in the market, suggests that further expansion into fuel retail may present considerable challenges, especially given the complex logistics and regulatory environment of the industry.
Potential Operational Risks
Expanding into areas beyond its traditional scope may expose Walmart to increased operational complexity. Supply chain uncertainties, management challenges, and intensifying market competition are all potential risks. While diversification can offer growth opportunities, it also requires significant investment and expertise to achieve scalability and efficiency — particularly in sectors where Walmart does not have a strong legacy.
Are Convenience Stores a Justification?
Some observers argue that the adjacent convenience stores could offer Walmart an attractive supplemental revenue stream, potentially improving the return on investment of the new fuel locations. Convenience stores typically yield higher gross margins — around 5% to 10% — compared to other retail formats. However, Walmart’s current scale in this area remains modest, with only about 400 such locations across the country.
Given Walmart’s total annual revenue exceeding $600 billion, the contribution of these convenience stores, estimated at around $600–800 million annually based on industry averages, accounts for less than 0.15% of its total revenue. Additionally, the company’s current inventory and turnover model is not fully optimized for the fast-moving, small-format nature of convenience retail, which often requires real-time logistics, cold-chain infrastructure, and labor-intensive service.
Alignment with Sustainability Goals
The continued investment in fossil fuel-related infrastructure also raises questions about Walmart’s environmental commitments. In its 2023 ESG report, Walmart emphasized its vision of transforming global supply chains to be regenerative and aligned with sustainable practices. However, the expansion of gasoline stations may be perceived as inconsistent with these goals, especially as electric vehicles (EVs) gain traction in the U.S. market.
By 2024, nearly 19% of new light-duty vehicle sales were hybrids or EVs, and hybrid sales alone grew by over 30% year-on-year. As demand for gasoline gradually shifts, investments in traditional fuel infrastructure could face long-term demand headwinds and invite scrutiny from stakeholders who prioritize environmental responsibility.
The Question of Customer Loyalty
One rationale behind Walmart’s strategy may be to enhance the value proposition of its Walmart+ membership, positioning it closer to rivals like Costco, whose membership model includes gas discounts, tire centers, and food courts. However, membership dynamics differ considerably between the two retailers.
Walmart+ was launched in 2020 and had approximately 20 million members by 2023. Costco, by contrast, reported 129 million paid members during the same period. More importantly, Costco’s membership benefits are deeply integrated and designed to reinforce customer loyalty through an ecosystem of exclusive services. Research from McKinsey in 2022 indicates that only loyalty programs perceived as highly integrated and exclusive yield significant returns in terms of customer retention and ROI.
Walmart’s retail model, which focuses on low prices and transactional efficiency, differs fundamentally from Costco’s subscription-driven approach. As such, attempting to mirror Costco’s offerings may not necessarily align with Walmart’s strategic positioning or consumer expectations.
Strategic Considerations Going Forward
Walmart’s intent to improve customer experience through the expansion of gas station and convenience store offerings reflects a desire to diversify and enhance value-added services. However, this move exists somewhat outside the company’s established strengths in large-scale retail and e-commerce.
In the short term, this strategy may deliver incremental value for some customers. Yet in the longer term, it could introduce operational inefficiencies and dilute focus from Walmart’s core competencies. Additionally, the changing energy landscape and growing consumer preference for sustainable practices suggest that this investment may face both market and reputational risks over time.
While Walmart’s entry into the gasoline and convenience sector may result in minor shifts in competitive dynamics, its current scale and expertise are unlikely to substantially alter the broader industry landscape. Similarly, while the expansion may influence consumer perceptions, its effect on competitors like Costco is expected to be limited due to the distinct nature of each company’s business model and customer base.
