“Fueled for Thought” By Joe O’Brien, Source North America Corporation
In the early 1990s, there were over 200,000 gas stations in the United States. Since then, the number of gas stations steadily declined during the past 15 years or so to include approximately 140,000 gas stations. However, there are signs that the contraction has plateaued, and there are even indications of possible growth. What does this positive industry development mean for today’s fuel retailers?
Past, Present and Future of Fueling
A symbiotic relationship exists between retail fuel and C-Stores that is having a direct impact on the success of both enterprises. Although the retail fuel market contracted over the past 15 to 20 years, the U.S. c-Store industry has experienced significant growth—increasing from 90,900 stores in 1985 to more than 154,000 in 2016, according to NACS. With over 80% of convenience stores also selling motor fuels, it is reasonable to conclude that the C-Store growth is contributing to the relative stabilization of the retail fuel industry.
In addition, the data show that fueling remains consumers’ primary impetus for visiting a retail fuel site and c-Store sales drive profits. According to NACS, the convenience store industry is America’s leading source for fuel, with more than 80% of c-stores selling fuel.Not surprisingly, more fuel marketers are adding convenience stores and c-stores are adding retail fuel to their sites for the mutual benefit of each side of their operations. For today’s time-starved consumers, this combination helps promote a one-stop-shop customer experience.
As the retail fuel landscape—and consumer preferences—continue to evolve, fuel marketers should carefully consider the investments they make to their site in order to contend in an increasingly competitive market. Will investing capital in gasoline and diesel infrastructure pay off long-term? Maybe, maybe not.
While we can’t project with any certainty the longevity of traditional fuels, customer experience has been shown to be a key contributor to establishing repeat business. Therefore, it is essential that fuel marketers determine what will inspire their customers to choose their site over that of their nearest competitor.Both new fuel retailers and longtime fuel marketers should take a look at industry trends and identify potential revenue opportunities that can boost their margins. Here are a few to consider.
1. Keep an eye on emerging fuels. Although the alternative fuels market is still maturing, E15 and biodiesel, in particular, are showing indications of growth.
According to data from the U.S. Energy Administration, consumption of biodiesel has increased more than 450% from 2010 to 2015, and for the month of January, biodiesel consumption almost doubled from 2015 to 2016. Bolstered by higher renewable fuel volume obligations for 2016 and 2017, biodiesel is poised to take off.
In addition, E15 is showing signs of growth. Growth Energy, a nonprofit organization that promotes the ethanol industry, reports that E15 is now being offered at convenience stores in 26 states. Kum & Go, Sheetz Inc., MAPCO, Murphy USA Inc., Thorntons Inc., Cenex and Protec Fuel are among the retailers already offering this alternative fuel. Growth Energy projects that more than 700 fuel sites will be selling E15 by the end of 2016.
Adding one or both of these fuels to your forecourt will likely attract new customers. With equipment compatibilities for alternative fuels on the rise and numerous funding incentives currently available for blender pumps, retailers who begin offering these emerging fuels now will position themselves to capture profits as consumption grows.
2. Implement sophisticated marketing platforms. If backing a particular alternative fuel still seems too risky, investing in marketing equipment that is shown to grow sales is another strategy to consider. With the majority of retail fuel customers never stepping foot inside the store, media-rich dispensers that drive in-store traffic through engaging promotions help increase sales and boost profits from the forecourt. Investing in proximity marketing systems, which utilize location technologies such as NFC or Bluetooth to engage customers through an app on their smart device, not only resonates with young consumers, it provides highly targeted promotions that can be tied to purchase histories and yield high conversion rates.
3. Add mobile payment/ordering technology. One of the takeaways from the c-store success story is the industry’s response to meeting consumer’s changing preferences (i.e. increasing fresh food offerings). While still an evolving platform, more consumers are embracing mobile payment technology, with millennials and higher-income households leading the way. With EMV authentication processes slowing transaction speeds, annoyed consumers may begin to shift to mobile wallet technology just to avoid traditional card-based transactions altogether. Diversifying your payment platforms may not only attract customers with more disposable income, it may reduce your site’s credit card fees and increase customer throughput.
4. Capitalize on today’s powerful software programs. From environmental compliance management to competitive fuel pricing strategies, retail fuel is much more data-driven than it was just 15 years ago. Today’s back-office, fuel management and POS programs not only automate traditional bookkeeping and reporting procedures, they significantly simplify data analysis. By presenting actionable information that managers can apply to improve operations, these programs help reduce operating costs and increase profits.
5. Remember the power of branding. As the retail fuel market is on the precipice of a rebirth, existing and new station owners should not underestimate the value of branding. One study of 10,000 fueling customers showed that regional stations that leveraged corporate branding by presenting a consistent image in order to maintain a welcoming, familiar and tidy appearance increased customer loyalty. Aligning your station with a corporate partner that values and supports brand recognition is a proven method for increasing customer throughput.
Mind the Details, Big and Small
As the number of gas stations shows signs of growth, fuel marketers need to proactively respond to changing consumer preferences in order to remain competitive—ranging from the fuel offered on the forecourt to the payment services offered through mobile phones. And don’t underestimate the impact seemingly small details can have—a worn-out squeegee can be a real turn-off to a motorist who really needs it. Taking care to diligently maintain those forecourt fundamentals is essential to maintaining customer satisfaction.
Whether supplying the day-to-day accessory items that keep customers happy or providing leads on blender pump financing, petroleum equipment consultants can help fuel retailers profit from their operational improvement strategies. In touch with the challenges facing fuel marketers, trusted fuel equipment advisers will keep retailers operational goals in mind, help identify equipment investment opportunities that are in alignment with those goals and help retailers develop strategies for implementing them. It’s a partnership that will help marketers position their fuel site for a profitable future.
About the Author:Joe O’Brien is Vice President of Marketing at Source™ North America Corporation. He has more than 20 years experience in the petroleum equipment fueling industry. Contact him at [email protected].