The American retail landscape is witnessing a significant shift as major retailers intensify their push into the gasoline market. Walmart and Costco are leading this charge, strategically expanding their fuel station networks to capture more consumer dollars and drive store traffic.
Recent data from the National Association of Convenience Stores shows fuel retailers operating on razor-thin margins of just 10 to 15 cents per gallon. Yet major retailers are aggressively expanding in this space, with Walmart announcing plans to add 1,000 fuel stations to its network over the next several years, potentially doubling its current footprint.
I’ve been tracking this trend for the past decade, and what we’re seeing represents a fundamental shift in how Americans buy gas. The integration of fuel purchasing into the broader shopping experience is creating new competitive dynamics that traditional gas stations simply can’t match.
“Fuel is increasingly becoming a loss leader for large-format retailers,” explains Neil Saunders, managing director at GlobalData Retail. “It’s not about making money on gas—it’s about getting customers onto their properties and into their stores where the real profits are generated.”
The numbers tell a compelling story. Costco, which currently operates about 670 gas stations across its warehouse network, has seen fuel sales become a major traffic driver. According to the company’s financial reports, approximately 50% of Costco members buy gas at their stations. Once on site, these customers frequently continue into the warehouse for additional purchases.
Financial analysts at Morgan Stanley estimate that Costco’s gas business generates about $20 billion annually, representing roughly 10% of the company’s total revenue. The retailer’s membership model allows it to sell gas at prices that average 20 to 30 cents below market rates in many locations.
For consumers, the expansion creates more options in a market long dominated by traditional gas station operators and oil companies. In interviews with shoppers at a Walmart Supercenter in suburban Chicago, I found most cited convenience and price as primary motivators for fueling up at retail locations.
“I save about $5 each time I fill up here,” said Maria Hernandez, a regular Walmart shopper. “Plus, I can grab groceries right after without making another stop.”
The strategy extends beyond just Walmart and Costco. Dollar General has been experimenting with fuel offerings at select locations, while regional grocery chains like Kroger have long used gas discounts to boost customer loyalty.
Industry experts note that these expansions could potentially reshape the U.S. fuel retail market. Currently, traditional convenience stores sell approximately 80% of the gasoline purchased in America, according to data from the Energy Information Administration.
“The traditional gas station model is under threat,” says Frank Beard, retail analyst at GasBuddy. “Major retailers have the advantage of scale, brand recognition, and the ability to use fuel as a customer acquisition tool rather than a profit center.”
The timing of this expansion is particularly interesting given the ongoing transition toward electric vehicles. While EV adoption continues to grow, with the International Energy Agency projecting EVs will account for 35% of new car sales by 2030, retailers appear to be betting on a prolonged transition period where traditional fueling remains essential.
Walmart has begun installing EV charging stations at select locations while continuing its gas station expansion. This dual approach suggests the retail giant sees both as complementary rather than contradictory strategies.
“Smart retailers are playing both the short and long game,” explains Sarah Mendelsohn, energy transition analyst at BloombergNEF. “Gas stations will remain relevant for decades, but building charging infrastructure now positions them for the future.”
For traditional fuel retailers like 7-Eleven and Circle K, the expanded competition presents significant challenges. These operators typically rely on in-store purchases of high-margin items to offset thin fuel margins. As big-box retailers capture more fuel customers, convenience stores may need to reinvent their value proposition.
The competitive landscape is further complicated by regional differences in regulation. Some states have restrictions on below-cost fuel pricing or require separate entrances for gas stations attached to retailers, potentially limiting expansion in certain markets.
Looking ahead, consumers can expect more integration between fuel purchasing and retail loyalty programs. Walmart+, the retailer’s membership program, already offers discounts on fuel, while Costco’s gas stations remain exclusive to members.
The expansion also raises questions about market concentration. As major retailers capture larger shares of the fuel market, pricing power could become increasingly concentrated among fewer players, potentially affecting long-term competition.
For the average American driver, however, the immediate impact is likely to be positive, with more options and potentially lower prices. The question remains whether traditional gas stations can adapt to this new competitive reality or if we’re witnessing the beginning of a major restructuring of how Americans fuel their vehicles.
What’s clear is that gas stations are evolving from standalone fueling locations to integrated components of broader retail environments. For retailers like Walmart and Costco, fuel isn’t just another product—it’s a strategic tool in the battle for consumer loyalty and spending.
