The successful forecourt retailer of tomorrow will be the one whose ethos is that of adaptation and acceleration making ‘change’ the cornerstone of its strategy — installing new and improved concepts will be the real game changers, writes Niall Savage, KPMG’s Retail and Manufacturing Lead.

As the pace of disruption accelerates in the forecourts, and with the continued presence of COVID-19 in our lives, fuel and forecourt retailers need to reimagine themselves. The trends that are re-shaping the industry are centred around the increase in importance of the Convenience Retail proposition, Adjacent Services and Mobility.

The market leaders are investing their time and resources, in technology and innovative concepts to become more future-ready. It is vital for retailers and suppliers to understand that forecourts are now not seen only as petrol stations but rather as convenience stores, selling fuel.

The future of forecourts is very much linked to the future of transport.

How is COVID impacting the fuel and forecourt market?

On the fuel front, the industry is being hit by falling prices and demand, driven by extreme lockdown measures and voluntary social distancing. This has led to a number of challenges for Forecourt Retailers including demand fluctuations, supply chain disruptions, direct store operating expenses, liquidity implications, workforce challenges and a change in long term buying patterns. 

Forecourt retailers must now focus on store image to address consumer expectations around health and safety, network rationalisation, product mix offerings, partnering with third parties. Fuel stations without a strong non-fuel offering are likely to be impacted more.

Evolution of forecourts

Forecourts’ product and service offerings are continuously evolving, driven by customer demand for convenience — contribution of fuel retailing will continue to decline while non-fuel retail offerings will gain prominence. Per HIM report 2020 — only 19 percent of forecourt shoppers cite fuel as their main reason for visiting a forecourt. Fuel has gone from being 90% of the reason to visit the forecourt to 50% and experts predict that this will reduce to 20% over the next 10-15 years when Retail and Adjacent services become the main attraction. 

In a bid to capitalise on the convenience trend, forecourt retailers are investing in convenience retail offerings. Moreover, the margins on convenience-retailing are significantly higher than fuel. In the US, non-fuel revenues accounted for 32 percent of outlet revenues and 63 percent of gross margins. Independent UK forecourt retailers are significantly investing in their stores in areas of food-to-go, refrigeration, shelving and store signage. 

The total market size of the forecourts is predicting to reach $274 billion by 2029.

Digitalisation is creating operational efficiencies for Forecourt retailers while also presenting new challenges

Store data can enable forecourt retailers to design CRM campaigns, design new products and identify up-sell and cross sell opportunities. Forecourt retailers benefit from efficient price strategy, accurate marketing insights and labour cost savings. These benefits have added challenges for the retailers including barriers to entry and regulatory requirements such as GDPR. 

Adjacent services – What’s in it for forecourt retailers?

In addition to the expansion of product portfolios and ranges, forecourt players are focusing on new and innovative services to cater to multiple customer needs beyond those of their car. The most prevalent services today are the car wash and repair offerings. Other potential adjacent services include prescription collections, cash machines, co working space, pick up point for click and collect orders and aerial drones for local distribution. These offerings create an advantage for retailers as they harvest attractive profit pools and continually evolve service propositions to differentiate themselves from peers. 

Adjacent services – What’s in it for forecourt retailers?
Other potential adjacent services

Forecourt players are focusing on new and innovative services to cater to multiple customer needs — beyond those of their car

Global mobility megatrends are transforming the industry

Megatrends include electric vehicles, connected and autonomous vehicles and mobility as a service (MaaS). A move towards cleaner fuel driven by increasing pollution and the increasing need for a sustainable environment has increased the preference for electric vehicles among both manufacturers and consumers. Stringent emission regulations/standards and an imminent influx of electric vehicles has led to a change in fuel mix, which in future will also comprise electric charging points and alternative fuels such as hydrogen and biofuels.

Three disruptive forces: electric vehicles, connected and autonomous vehicles and mobility as a service
Global mobility megatrends are transforming the industry

Global mobility megatrends are transforming the industry

How are forecourt retailers responding today?

Forecourt retailers are consolidating in a bid to maintain or improve their market position. Continued single site acquisitions by group operators is being witnessed; moreover, oil companies have also been acquiring pure-play EV terminal manufacturers.

The landscape is changing due to pressure on profitability, significant investment requirements and more demanding customers. Retailers need to focus on performance improvement and cost reduction, revenue optimisation and diversification, increase customer experience and to pursue strategies that prevent them becoming obsolete in the future.

How should forecourt retailers respond in the future?

Brace themselves for disruptive trends. Customer spend at forecourts will continue to shift from fuel purchase to convenience retailing, increased focus on adjacent value added and entertainment services and the rise of car-sharing along with ride-sharing are a few of the strongest trends emerging in the market. 

In preparation for tomorrow’s world retailers must respond to new trends by building compelling retail propositions, efficiently managing infrastructure and operations, and re-shaping strategic objectives. Immediate actions such as partnering with e-commerce and logistics companies, focusing on workplace employees in tandem with customer safety and reinventing the customer relationship using digital and mobile technologies will ensure you don’t get left behind. 

Forecourt retailers must continue to reinvent themselves to stay relevant. Fuel retailers need to reimagine themselves in the face of current disruption. A two pronged business plan, whereby forecourt retailers continue to focus on fossil fuel but start to pivot towards electric car charging technology is ideal in the short run while a long term strategy should be centred around customer experience, service based offerings and digital solutions. 

Get in touch

For information on how your business can adapt to the changing face of the forecourt retailer, contact Niall Savage, Retail & Manufacturing Lead.

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