January 19, 2021
Some live by it. Some refute it.
I’ve spent three short years in the fuel industry and my impressions have been changing since day one.
Before fuel, I never really gave stations much thought. I am not the price sensitive type and filled up based on convenience. I knew the big brands and I guess- owing to their proximity to my home- I had a soft spot for BP.
Entering an industry that you have been a customer of for many years is an odd experience.
To learn that my local BP station was not owned by BP but instead a small family business was a real eye-opener! Even things as simple as understanding where all the fuel comes from (I had never noticed a tanker on site before) were new to me.
When you enter this industry, the one thing you’ll notice is that people don’t tend to leave it. Most of the people I’ve met over the last few years have been in this industry in one way or another since they first started working. I am three years in. A puppy at best.
So, in a market that has been selling the same product for 100 years with largely the same people, how creative is it and where does that creativity come from?
This is an important question in these times. The market will need to adapt to the new world order and creativity could well be the difference between success and failure.
Even as a puppy I’ve witnessed some great creativity over the last three years and wanted to share two examples with you:
Effectively all retailers sell the same product. Okay, there are some differences in quality, octane and additives, but to the majority of consumers the product does not really vary.
This is why NACS tells us that in 2019 59% of consumers look at price first to determine where they will fill up. Fuel is a commodity after all and commodities are price-driven markets.
But this number has fallen from 71% in 2015. COVID changes aside, consumers have become less price-sensitive. Decisions can also be based on location, convenience, food offering, brand and customer service.
But the best I’ve seen comes from Scottish operator GHSL. When I went to meet them in their station opposite Ibrox stadium (for non-football/soccer fans, this is where Rangers- one of the most decorated teams of all times- plays), I was greeted with 42 different flavours of Slush! That’s right, almost their entire shop was filled with these machines. I chose cola-cube flavour (remember those sweets). It was awesome.
The owner told me that whilst they are a seller of fuel, the main profit is in the Slush. The lowest variable cost, highest margin item one could think of. And it draws people in from all over Scotland just to get one. If you’re at a station, the chances of then putting fuel in your tanks is higher.
To add to this, they had decided to create a dessert bar in the additional space they had. Fantastic.
I’ll leave this one anonymous as he ‘claims’ to hate the public eye, but we were lucky enough to meet a three site operator back when we first started in 2017. His objective for a differentiator: run the business through the use of data insight to gain a competitive edge.
This retailer now has almost forty stations (that is over 10x growth in less than three years) and has contributed heavily to our product development, the brainchild of our ‘net margin’ which takes into account the impact of card fees on the margin, LIVE.
This is a totally different type of innovation. Don’t get me wrong, this operator also prides themselves in other differentiators - great customer service, great in-shop offerings (the traditional British fish and chips is one), but at the end of the day the data insight (of which EdgePetrol is only part of) is giving them the ability to sweat their assets and increase profits.
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