Fuel
retailers have been advised to prepare for an emerging future by modernizing their service stations to
support electric vehicles, supply biofuel as well as capitalize on their real
estate, and zero in on sustainable practices, in a new report by Boston
Consulting Group (BCG), a leading global management
consulting firm.
A new report from BCG, titled A New Era for Fuel Retailers, explores a fuel retail landscape
that is evolving at a faster-than-predicted pace and the strategies fuel
retailers must implement to survive and thrive in the face of monumental
threats.
The fuel industry has long been facing
disruptive forces, and these have only accelerated since the beginning of the
COVID-19 pandemic: electric vehicles
(EVs) and alternative fuels have gained significant traction, mobility usage
and attitudes have evolved, and customer behavior has changed dramatically.
According to the report, which is
based on a survey of 33 executives from 20 leading global retailers, operators with robust retail businesses found
that in-store sales and online offers during the pandemic offset sharp declines
in gasoline and diesel sales volumes. More recently, as geopolitical
uncertainty and volatility have placed upward pressure on oil prices, many operators
have realized that retail is a matter of business resiliency. As such, some
70% of leading retailers are planning to expand their network in the coming
years.
Oluseun Solanke, Partner and Associate Director at BCG Nigeria, said, “The latest innovations in
mobility and renewable power technology is encouraging stakeholders in the
Nigeria’s energy and automotive industries to develop and deploy solar-powered electric charging
ports and expand gas stations in response to the growing fleet of electric and
gas-powered vehicles.
“These initiatives, which are part of the
pilot project of National Automotive Design and Development Council (NADDC),
will open more opportunities for investors to boost profitability and
decarbonise the environment; encourage retail stations to expand their
offerings and automobile technicians to upgrade their skills, when deployed at
scale.
“Beyond extracting the most value from
their traditional core business, fuel retailers’ survival depends on investing
beyond the pump,” said Mirko Rubeis, a Managing Director and Senior Partner at
BCG and a coauthor of the report. “They need to make ambitious moves into new
digital businesses while also adapting the service station to support EV and
other alternatives fuels, capitalize on their existing real estate, and zero in
on sustainable mobility.”
Leading Trends in the Fuel Retail
Landscape
In the past few years, five trends in
the fuel retail industry stand out:
·
Alternative fuels are no longer optional. Sales of EVs are rising—in some
regions, even outpacing those of internal combustion engine (ICE) vehicles. BCG
projects that by 2030, more than 50% of new light-duty vehicle sales in the US
will be EVs. Demand for biofuels is also increasing, and regional partnerships
in Europe, China, and the US are being created to enable the mass market
rollout of hydrogen-fueled heavy-duty transportation (e.g., long-haul trucks;
buses). As a result, 95% of fuel retailers are either already offering or
planning to offer EV charging, and 55% are offering or planning to offer
alternative fuels. (See the exhibit.)
· Advancing mobility forms are changing usage patterns. The pace of technological development
in advanced mobility will change the kind of vehicles—and the type of
customers—that show up at the service station. The pool is diversifying from
purely self-driven vehicles to autonomous fleets and from ICE-only to EVs.
·
COVID-19 has changed consumer behavior. Convenience store (C-store) sales in
the US are increasing among those fuel retailers that have adapted their
offerings to meet rising consumer expectations around convenience. 65% of the fuel
retailers surveyed now plan to invest more in their C-stores to enhance the
customer experience and improve site efficiencies.
·
Digital technologies are expanding retailers’ capabilities. Around 60% of retailers are using big
data analytics to customize their offerings within and beyond the service station.
Digital technologies have also enabled individual stations to use dynamic pricing—an
important tool for keeping margins high during COVID when volumes plummeted.
·
Sustainability is taking root. Regulators are adopting more
stringent measures to control CO2 emissions, and price parity
between alternatives and fossil gasoline is becoming a reality. More EVs are
becoming available at prices comparable to ICE vehicles, while in some regions
renewable diesel is approaching the same price point as petroleum-derived
diesel.
An Agenda for Action
These developments point to the need
for fuel retailers to reorient themselves: away from fossil fuel and toward
alternatives, and away from the vehicle and toward the customer.
The opportunities for growth are
significant if retailers pursue four strategic avenues:
·
Rethinking their future network for a world in which hydrocarbon
fuels no longer dominate
·
Reimagining the station as a mobility and convenience hub
·
Revamping their loyalty and personalization programs
·
Driving new growth areas beyond the service station
“The possibilities for fuel retailers
are numerous, but time is in short supply,” said Stuart Groves, a managing
director and partner at BCG and a coauthor of the report. “Retailers that
embrace these imperatives, seriously and swiftly, will not only retain their
relevance in the low-carbon economy, but can also look forward to an expansive
future.”
Download the publication here.
Media Contact:
Eric Gregoire:
+1 617 850 3783
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