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New Straits Times
a day ago
- Business
- New Straits Times
Petrol dealers' hidden burden
KUALA LUMPUR: Petrol station operators nationwide are seeing their profit margins from petrol and diesel sales increasingly eroded. A major cause for the margin erosion is the fees charged by banks and e-wallet companies on card transactions, according to an industry observer. While an increase in the national minimum wage to RM1,700 per month and rising energy costs are cited as among key contributing factors, the observer said the Merchant Discount Rate (MDR) imposed by credit card companies and e-wallet platforms may be quietly inflicting the greatest damage. MDR is a non-discretionary expense beyond the control of petrol dealers but it is not present in the original Automatic Pricing Mechanism (APM) of 1983, making it a substantial external burden, said Rahim Kamil Sulaiman. Rahim, who worked in the oil and gas sector since 1977, claimed that this trade practice denies retail entrepreneurs a fair share of profit. He shared that the issue is particularly pressing as digital payments now account for more than 90 per cent of fuel transactions. "For a credit card that charges one per cent per transaction, the MDR cost for RON95 at the pump price of RM2.05 per litre is 2.05 sen per litre. Since petrol is a controlled item, banks cannot impose the MDR cost on the consumer, as the pump price is the final price." At present, however, the burden falls on the station operator, cutting their margin by 2.05 sen per litre, or 13.7 per cent, the second-largest after direct labour costs, he said. Rahim said the erosion of 13.7 per cent of sales commission income is exceptionally high because this single cost item excludes operating costs such as direct labour, electricity and working capital. "These discretionary operating costs already reduce commissions by 48.1 per cent. Fixed costs, including management, administration and various other expenses, will further add to the business's overall cost. "High fixed costs and diminishing margins will mean that, in 2025 and beyond, the majority of stations will break even at rates higher than 70 per cent, with low-volume stations losing money every month at break-even points exceeding 110 per cent." He added that it is likely that the low-volume stations will deplete their hard-earned reserves within two years. Five months ago, Bumiputra Petroleum Dealers Association (Bumipeda) reportedly warned that over 75 per cent of Peninsular Malaysia's 3,500 petroleum station operators could lose more than RM100 million in 2025. Bumipeda cited a minimum wage increase to RM1,700 per month effective February this year and a potential increase in electricity tariffs in July as primamry reasons. Bumiputera entrepreneurs manage around 70 per cent of the national retail network, which includes both dealer-owned-dealer-operated (DODO) and company-owned-dealer-operated (CODO) stations. Cash Flow Trap Rahim noted that the petroleum retail industry, worth around RM60 billion annually, is a strategic component of Malaysia's political economy, with Bumiputera dealers controlling at least 70 per cent of the network. He said most station operators replenish stock with cash before or on delivery without receiving credit from oil companies or banks. "The dealer's cost is RM1.90 per litre, after deducting a 15 sen per litre margin as mandated by the government under APM, enforced under the Price Control and Anti-Profiteering Act (PCAPA). "The station operators need between RM100,000 and RM250,000 in working capital, depending on the station sizes. Banks (credit card providers) do not finance the operators' working capital or any other business operations to justify charging them a fee," he said. Rahim added that the government mandates petrol stations to keep sufficient stock to guarantee uninterrupted fuel supply at all times. He also noted that stock replenishment occurs frequently, typically every four days, which results in higher MDR costs for stations with greater sales volumes due to more frequent restocking. Rahim said to understand how station commissions are being eroded by the credit card system, consider the typical cash-to-cash cycle for a petrol dealer - the period between purchasing stock and receiving payment through sales - which averages just four days. "Given that MDR charges are typically around one per cent transaction, this translates to an effective daily rate of 0.25 per cent (1.0 per cent ÷ four days) applied to the pump price of RM2.05 per litre. "However, dealers only earn a fixed commission of 15 sen per litre. When the MDR is applied against the full pump price rather than the dealer's actual commission, the burden becomes disproportionately high. "Specifically:(0.25 per cent x RM2.05) ÷ RM0.15 = 3.41 per cent per day, which translates to 1,260 per cent per annum. "This means dealers are effectively absorbing an interest rate of over 1,200 per cent annually, despite having no control over the transaction fees or the retail price they must adhere to under the APM," he explained. By contrast, banks typically charge consumers less than 20 per cent per annum for credit card balances, with most base lending rates hovering around 12 per cent. "In this context, the rate borne by station operators is not just excessive - it borders on exploitative, especially considering the low risk to banks and the short cash recovery cycle involved," he said. Calls for Reform Rahim believes that the MDR cost should be borne by either the oil companies or the consumer, as both are effectively involved in the transaction. He said the government ought to revisit the fuel subsidy rationalisation programme in consultation with key stakeholders such as oil companies, petrol station operators and the price controller under Domestic Trade and Cost of Living Ministry, which holds sole authority over price setting under the Price Control and Anti-Profiteering Act. He added that the act should empower both the price controller and the Price Advisory Council to reassess the APM, particularly in light of major shifts in the petroleum retail landscape and currency fluctuations. "Fortunately, the present government has successfully strengthened the ringgit, which will countervail commodity price increases. "This positive note could facilitate a thorough review of the APM and fiscal measures necessary to target subsidies to those in need in a manner that addresses the economic problem most effectively, rather than imposing financial technology as a solution," Rahim said. Business Times has reached out to Petrol Dealers Association of Malaysia and The Association of Banks in Malaysia for comments. Meanwhile, an economist suggested that the issue of margin pressure by low-volume petrol stations due to MDR fees could be addressed by having credit card companies and e-wallet providers temporarily subsidise a portion of the fees. Universiti Kuala Lumpur Business School economic analyst Associate Professor Dr Aimi Zulhazmi Abdul Rashid said the temporary concession could be for two years, with the subsidy gradually reduced over time. "The providers aim to grow transaction volumes, so it is only fair they subsidise MDR costs using gains from the higher and rising volumes in urban areas," Aimi said. He added that smaller petrol stations actually benefit from cashless transactions by reducing risks such as handling petty cash, counterfeit or damaged notes, and employee theft. "From that perspective, the slight margin reduction that the petrol stations need to absorb may be worthwhile in view of the risks mentioned above," he said.
Yahoo
24-05-2025
- Business
- Yahoo
Fleet Farm honoring Memorial Day with Taps Across America
(KCAU) — A department store with a location in Siouxland will be honoring service members this Memorial Day. On Memorial Day, Monday, May 26, Fleet Farm will be hosting their 'Fleet Farm Salutes Taps Across America.' 'This event allows communities across the country to come together in remembrance of our fallen service members on Memorial Day. We're deeply moved by our customers' enthusiasm to participate in this tribute and preserve its vital legacy,' said Fleet Farm President Nick Widi. The event starts with a moment of silence at 3 p.m. followed by a bugler playing taps. Additionally, military servicemen and veterans will be given 10% off their purchase that day. Copyright 2025 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
Gizmodo
11-05-2025
- Business
- Gizmodo
Forget Prime Day, Govee's Smart Floor Lamp Just Hits Its Lowest Price on Amazon
This is not just a smart lamp. If you've been waiting for the 'perfect' moment to upgrade your home lighting, now is the time: Govee's Smart RGBIC Floor Lamp is currently at its lowest price ever on Amazon. It just dropped to $64 which is a massive 35% savings from its usual $99. This is a very rare opportunity, as Govee (which is the undisputed reference in smart lighting) seldom offers discounts outside of major events like Prime Day or Black Friday. See at Amazon Add Energy to Your Home The RGBIC Floor Lamp is a great example of why Govee is so popular: Despite its high-tech credentials, this lamp is very simple to use. The setup is quite straightforward: you just have to assemble the lamp, plug it in, and connect it to your Wi-Fi. From there, you can control everything using voice commands through Alexa or Google Assistant or with the intuitive Govee Home app. Switching colors, brightness, or switching between dynamic scenes takes seconds, making it simple even for smart home beginners. What is unique about this lamp is the way it succeeds in changing the mood of any room without ever appearing kitsch or out of context: The low-profile, matte black, premium and minimalist design blends in with contemporary decor. It is not a gadget but a proper decorative item that adds to the beauty of your living room, bedroom or gaming room. The lamp's 1000-lumen output is bright enough for daily use, and its RGBIC technology (which you can customize) allows it to display multiple colors at once for effects that are absolutely unique. With 16 million color support and 58 pre-set scene modes, you can tailor the ambiance to suit any mood or occasion. The DIY mode in the app enables you to create your own color combination and the music sync feature takes immersion to a whole new level-the lamp reacts in real time to your favorite music or movie, making every moment more vibrant and engaging. It's an easy way to add personality and energy to your home. Govee's reputation for quality and the improbability of such a deep discount make this deal especially interesting. Amazon is the only retailer which offers such discounts on this premium brand, and you should make sure to get yours before it runs out of stock. See at Amazon
