Nov 30, 2022

Service Station Readiness for the Changing Business Climate.

The world is changing rapidly, and those who don’t adapt will ultimately stagnate, and the service station business is no exception. Instead of seeing these changes as insurmountable obstacles, rather view them as opportunities worth exploiting. The service station as a business must pivot to meet consumer’s needs, rather than waiting for the world to go “back to normal”. This is the new normal.

Fluctuating demand, liquidity, and workforce challenges are all major considerations for any dealer. Luckily, analysts can examine the trajectory of the markets and provide appropriate advice on how to adapt. We look at current challenges of the fuel retail industry and advise on the best way forward as your partners in growth.

Fuel Demand fluctuations

Since the COVID 19 pandemic, Dealers faced demand fluctuations in the forecourt as consumers buying patterns changed dramatically. Sharp rise in fuel costs due to the Russian invasion of Ukraine in 2022, further exacerbated forecourt challenges. Many corporates opted for either hybrid working model or complete remote work to minimise the impact of travel expenses for their workforce.

Interestingly there is a positive to this. According to KPMG’s Fuel Forecourt Retail Market report, there has been an unprecedented rise in demand for food and other convenience items in the Convenience Stores. Some service stations incredible stock turn ratio even in departments that are traditionally low turns. With these indicators in mind, one can conclude that consumers are utilising some of their travel spend savings in Convenience Stores. Therefore it is imperative for Dealers to understand that customers in of the future will not see their establishments as just service stations but more as Convenience Centres.

Workforce challenges

The Association for Convenience & Fuel Retailing predicted that labour would be the biggest challenge for fuel retail in 2022. Throughout 2020, the main challenge was to maintain employees and customers health and safety through adherence to Covid-19 protocols.

While health and safety are still a priority, reduced profits have led to the retrenchment of forecourt staff, says Reggie Sibiya of the Fuel Retailers Association (FRA). Sibiya cited the retrenchment of 3 658 employees during the pandemic, due to the economic pressures of rising oil prices, and the July 2021 riots which further impacted negatively on Service Stations.

Liquidity implications

These ongoing challenges affect Dealer’s profit margins. Hard knocks on the economy can make lenders even more selective about providing much-needed capital. Dealers need to be savvy when managing cash flows. There has been a noticeable growing number of fuel retailers that find themselves placed on ‘hard cash’ by oil companies and banks are also beginning to return debits uncatered for. Fuel Guarantee insurers are having to pay out millions of rands owed to oil companies for default payments.

Change in long-term fuel buying patterns

The final challenge fuel retailers face at the moment is the permanent change in long-term buying patterns resulting from the COVID pandemic. KPMG’s Fuel Forecourt Retail Market report explains that the lockdowns altered consumer behaviour, increasing online shopping and making more intentional choices for their health and safety.

Additionally, Google trends analysis in South Africa shows that customers are now more likely to try new brands rather than maintain loyalty, and prefer brands which are invested in sustainability and social inclusion.

Looking to the future: Adapt

These challenges of the ‘now’ are opportunities for the future. Growing to meet consumers where they are can help service station owners thrive in the shifting economy. As the Convenience offering is more crucial than ever; Dealers need to strategically invest in and differentiate their forecourt and convenience store from their competitors. The updates should address consumer expectations around convenience, sustainability and making each customer visit a memorable experience; an ‘instagrammable’ moment.

Adapt your business to become more agile by removing barriers to implementing new strategies. Use the new freedom to update the offerings in the convenience store to evolve with customer behaviour.

Dealers need to think out of the box on foot traffic drives: service stations without a strong convenience offering are likely to be impacted by the challenges listed above.

KPMG’s Fuel Forecourt Retail Market report, based on international success stories, recommends:

  • Increasing retail space

  • Adding seating for customers to eat on the premises

  • Adding to the menu, keeping up-to-date with consumer preferences

  • Providing local healthy snacks, drinks, deli options, and fresh produce

  • Consider launching your own private label of fresh food or coffee to increase profit margins and differentiate yourself

Increase Operational Efficiency

PetroCONNECT has a team of experts; Operational Excellence Advisors who can sit with you, look at the current challenges your service station is facing and help you implement business growth and sustainability strategies. Operational Excellence is relevant for both new entrants and established Dealers. The operational Excellence programme ensures that all day-to-day operational efficiencies are solid and aligned with the site’s growth strategy.

Operational Excellence Objectives:

  • Transfer business skills and knowledge to the Dealer.
  • Help the Dealer to be sustainable and achieve growth year on year.
  • Assist the Dealer to achieve their business objectives.
  • Ensure sound financial controls and accountability.
  • Assist the Dealer to manage cash flows for the business.
  • Business development through the day-to-day operational efficiencies of the business.

Manage stock effectively

While you manage the high-level strategy, allow PetroCONNECT to step up and assist with office management services, like stock auditing.

Our stock audit solutions will ensure that:

  • All stock is correctly and fairly valued.

  • All stock has been captured correctly into the system.

  • Costing is correct and all items are scanning correctly.

  • All stock has been counted and there are no discrepancies in the system. In the event of a sale of a site, this gives comfort to both parties in terms of the valuation.

  • There is a third party that is verifying all stock and valuation thereof so as to uncover any theft.

  • Stock files on the system are correctly adjusted after the monthly audit is done to ensure the accuracy of values used in your accounts.

  • Staff are trained on best practices with regards to merchandising and the procedures around receiving goods.

  • Theft hot spots within the store are identified and monitored so that goods can then be strategically re-shelved.

As your forecourt evolves with the times, your systems and staff will be kept up to date, easing the change. Take advantage of the PetroCONNECT stock audit service.