June 26, 2018
READING TIME ~
It is the question that every independent retailer asks themselves:
“How can I maximise my fuel margins whilst maintaining or increasing my volumes?”
Many retailers feel that their options are limited. Fuel margins are typically thin and your replacement cost may vary depending on your fuel supply contract. The pole price you decide on is not only influenced by your cost price, but can be squeezed by nearby competition.
Since the start of 2017, EdgePetrol have been talking to UK independents about these challenges and how you overcome them. There are two consistent problems that retailers face:
1. Low data-visibility in real-time hinders important decisions such as pricing and stock-ordering
2. Business reporting and management information is unreliable and involves time consuming manual calculations
One of the retailers facing these issues was Highway Stops Retail Ltd, a Top 50 independent with 11 sites. Tony Head, Development Director, was on hand to discuss some of the issues he faces.
“Immediate Data visibility was a little behind the times, particularly in terms of live blended fuel margin achieved by both platts and margin share supply deals across our network.
Historically, to find out our actual blended gross margin involved a lot of manual labour across various different supply terms with different fuel suppliers, which involved physically pulling out the cost prices across 11 sites with 4 grades. This is now fully automated.
We needed a way to make sure we were on track in real-time in terms of sales and actual blended fuel margin, so we could act.”
By securely integrating with both your fuel supplier and your EPos, EdgePetrol captures the price and volumes of the grades you are selling and calculates the weighted-and-blended cost of the fuel remaining in your tanks. This means you can access your volumes and your margins from anywhere in the world, in real-time, from one source of truth. Independents like Highway Stops are already seeing the benefits.
“We received an alert at the end of August from the MyEdge product stating our volumes spiked up considerably at two of our eleven sites. It turns out these sites were in areas of low affluence and that pay-day was driving demand. This gave us the knowledge to either lower the price to drive volumes or increase the price to drive margins, depending on market needs. This also allowed our commission operator to adjust his dry-stock offering around the increased demand.”
It doesn’t stop there. EdgePetrol’s intelligent model constantly learns about your sites, meaning that if they are influenced by anomalies such as pay-day, local events, traffic and weather, EdgePetrol can accurately forecast stock cover days and ullages by grade. This means you aren’t relying on sales data and cost price to make purchasing decisions. Cheaper fuel means further flexibility on pricing to drive margins and volumes. In the not-so-distant future, you will be able to receive accurate and intelligent optimal order form recommendations.
The EdgePetrol data science team is also working on building a model to recommend optimal pricing, not only based on fuel sales data, but considering site-specific characteristics and dry-stock offering. Gideon Carroll, Founder of EdgePetrol is realistic about their timeline.
"We have been careful with our recommendations to clients at the early stages of their MyEdge subscription. Retailers know their sites better than anyone as they have years of experience working on them and there are so many variables that can influence the volumes of a specific site at any time. You have internal factors that the owner or site manager themselves can influence, such as the forecourt layout, shop offering, brand and pricing, but then you have external factors such as weather, traffic etc. Everyone knows they impact volumes, but it is important to be able to understand them on a site-specific level before offering an optimal pole price. Getting it wrong is not an option.”
Around game theory, the MyEdge product shows your competitor pricing in real-time for other subscribers to show how your site performance is affected. If you share your live price you will receive the live prices of other subscribers. Toby Butterworth, Product Manager at EdgePetrol explains the thinking here. “MyEdge gives the retailer the choice to share their live pole sign price with other retailers on the platform. If you share your live price, you will receive the live price of other users, meaning you no longer have to rely on outdated pricing information when making decisions on your marker sites. We will continue to work with and collaborate with petrol retailers in 2018 to build a relevant and specific product for the needs of the market.”
By working and building software in collaboration with UK independents, EdgePetrol has already solved some of the industry’s problems, but one thing is for sure; there is a lot more to come.