Tacked to a bulletin board inside a tiny office behind the cash register at one of the cheapest gas stations in the Bay Area is a letter congratulating its manager for an “absolutely tremendous achievement.” A figurehead at BP sent Mike Shamsian the memo in June 2002, after his Arco in Mill Valley sold more than a million gallons of gasoline in a single month for the first time. (It was one of three Arco stations to reach that milestone at the time.)
Since then, with some exceptions during the pandemic months, Shamsian’s gas station has maintained this status. So many drivers are accustomed to peeling off Highway 101 into the Mill Valley Arco in their pursuit of cheap gasoline. The station’s pumps are in such demand that it’s not unusual for a line of cars to back up onto the highway. In exchange for the time spent waiting, drivers are rewarded with a price per gallon that can sometimes be a whole dollar less than what nearby competitors are charging.
It wasn’t easy for this Marin County gas station to earn a reputation as one of the cheapest pumps in the region — a quirk in a county typically known for its wealth. Shamsian took a risk with the low prices after taking over the station in 1995, and drivers didn’t immediately recognize the deal. However, as the owner of multiple previous businesses, he understood one of the basic tenets of economics: High sales volume leads to strong profits on thin margins — a strategy another bulk supplier uses every day.
“It’s the same thing that Costco does,” Shamsian said. “With Arco … the average monthly volume is way over other stations because they work on a different business model. They’ll sell 100,000 gallons at a dollar profit. Arco doesn’t do that; we’ll sell 200,000 or 300,000 gallons at a margin.”
Born and raised in Iran, Shamsian left in 1976 and earned his master’s degree at the University of Southern California. After moving north, he ran a few promising businesses in San Francisco, including a restaurant called Primavera on Sacramento Street, but repeatedly hit a dead end after landlords didn’t resign his leases.
Shamsian started researching enterprises with more security for leaseholders and learned that gas stations are subject to a law that strengthens protections for retailers. He started looking for a pump to take over, and it was his wife Fariba who first learned that the Mill Valley Arco was about to hit the market. Shamsian started managing the station in 1995 (Arco’s owner, Marathon Petroleum, is still the landlord) and quickly saw that he’d have to take a risk if he was going to succeed.
“I just had to go and sacrifice pricing,” he said. Using personal savings to keep the station afloat, Shamsian started slashing the price for a gallon of gas. His thinking was that if he kept selling a gallon at a price close to what he paid for it, but with volumes at their utmost peak, his profit would be consistent.
“I went on a margin for a year,” he said. “Another station would say ‘Is he out of his mind — is he crazy?’ But that’s what started building this. For a year or so I was hardly making any money. But a couple of good things happened: Prices were at the $1 range. I was the one that dropped below the dollar, and people started going crazy when they saw gas selling for 99 cents a gallon.”
By the end of the decade, his Arco was selling so much gasoline that it was running out.