
Is There a Future for Service Stations?
Powerful forces—including the rise of electric vehicles and changing consumer expectations—are buffeting fuel retailers. Companies must adapt or risk becoming irrelevant.
There are three primary emerging trends in the commercial fuel sector today that will have an even greater impact in the near future: evolving customer expectations, emerging digital technologies, and the rise of advanced mobility. Moreover, the oil market is extremely dynamic, with frequent price swings, requiring high-level attention on downstream channels in order to capture strong margins and gain market share.
Selling refined petroleum products to business and commercial customers has moved higher on the business agenda as digital technologies have pinpointed where and how to create value. The traditional binary choice—whether to own service stations or franchise them—has been replaced by a complex array of strategic channel choices driven more by regional supply and demand fundamentals and netback analyses.
The average fuel and convenience retail consumer has specific expectations and attitudes that should be top of mind for every oil retail business. According to BCG research, fuel consumers care most about:
To turn the shifts in consumer attitudes into future opportunities, retailers must reinvent the customer journey, launch digital solutions, and harness the power of innovation in fuel retail.
Players must embark on a digital transformation in order to create sustainable competitive advantage in oil retail. There are four primary ways in which retailers can use digital to revitalize the customer journey and bring lasting impact:
Mobile apps can help to increase the number of transactions, encouraging customers to visit specific gas stations and establishing an interface for loyalty programs. Mobile apps have the potential to increase retail EBIT by 1% to 2%.
Digital solutions can help to open new revenue streams. Targeted advertising, promotions, and offerings from retail partners have the potential to bring in additional revenues of $15 to $30 per customer per year.
Improve the margin of transactions by incentivizing customers through mobile technology, loyalty programs, and other digital offerings to pay by debit card—thereby reducing credit card fees. Such incentives can shift 5% to 15% of customers away from using their credit cards.
Use big data and analytics to increase revenue per customer. Targeted promotions, such as cross-selling convenience store offerings and car washes to fuel consumers, can lead to an increase in retail EBIT of 2% to 4%.
The implementation of a personalized offering system is one of the most sophisticated marketing tools available for oil retail fuels marketing:
While technology and changes in consumer behavior are enabling new business models in oil retail, there are other major disruptive forces—autonomous vehicles, battery technology, and the sharing economy, among others—that are changing how people consume fuel. The consumer habits of millennials could also have a strong impact on the future of fuel retail.
Winning fuel retail businesses will be prepared for these disruptions. As the number of electric vehicles rises dramatically around the globe in the coming decades, for example, retailers can offer fast charging options at fuel stations.
Digital technologies create significant opportunities on the B2B side, as companies can leverage the wealth of existing data to better understand and serve clients in fuels and lubricants. For instance, companies can use advanced analytics to vastly optimize how they structure their fuel pricing strategy for fuel contracts. Most contracts for fuels and lubricants use a pricing formula, but few optimize and target the pricing mechanism for each client. By combining typical supply analysis with client clustering through advanced analytics, it is possible to segment clients and tailor the pricing and implementation strategy for each segment.
Digitization in Oil and Gas: Transforming the Customer Experience
BCG partnered with a national oil and gas company in Asia to harness digital technology to transform the way it engaged with customers.
Powerful forces—including the rise of electric vehicles and changing consumer expectations—are buffeting fuel retailers. Companies must adapt or risk becoming irrelevant.
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