Feb 8, 2022

Fuel retailers under pressure in the aftermath of the pandemic and July unrest

One of PetroCONNECT’s founder’s Mark Harper, was recently interviewed for IOL’s business report on the limited government support in the fuel retail sector. Read more about how fuel retailers are under pressure in the aftermath of the pandemic and July unrest.

Since the pandemic, fuel retailers have seen a significant decrease in both foot traffic and rand-value spent on fuel. Starting with hard lockdowns where only essential workers could move about, the fuel retail industry took a hard knock and hasn’t seen a great improvement since. As many South Africans set themselves up for hybrid and remote working, the number of individuals travelling on roads has decreased significantly alongside the usage of fuel. According to Mark Harper, “Customers choose to drive less, do less joy rides on the weekend, carpool where possible or they are not moving around at all.”

Outside of these factors, the 2021 July unrest in parts of South Africa resulted in additional pressures on the industry, as well as individual fuel retailers whose fuel stations were directly impacted during the course of events that took place. Between the pandemic and the social unrest causing job loss and other impacts, sales have flatlined for 85% of service stations across the country. As the volume of fuel sold decreases, the price per litre that the fuel retailer is responsible for increases and their profit margins are eroded in the process.

Mark Harper, co-founder of PetroCONNECT speaks on this topic - “Customers have not increased their spend or could not increase their spend to afford the fuel price. Many customers tended to still spend that R100 they always spent before the price increases, as their income had remained the same, dropped or disappeared due to retrenchment, or the business they were working for being burnt down or damaged and ceasing operation. This has led to a drop in volumes for the retailer, which erodes the ultimate profit margin,” says Mark Harper. The same rand-value has been received, but less volumes were sold, impacting the retailers.

Profit erosion for fuel retailers

As the fuel retail industry suffers, the banks, financial service providers and other service providers benefit as individuals lean on overdrafts, drawing from investments and sourcing other streams of income for fuel retailers to cover their increasing expenses.

Since December 2014, the Gross Retail Operating Expense (OPEX) Margin has increased by 59.4% taking the OPEX costs from R0.84/litre to R1.339/litre. And on top of this, the Merchant Service fee has increased by 56.7% since 2014.

Gross Retail Operating Expense (OPEX) Margin

In these tough economic times, managing your business well is critical to success. Every cent must be accounted for. Partner with PetroCONNECT to keep track of all your back office needs. Until the government comes to the party, retailers will need to find other avenues to secure their business’ future including labour relations and risk management. Partnering with PetroCONNECT will add a layer of insight and stability that will assist you in the success of your fuel retail journey.

Click here to read more about how the fuel retail industry has been challenged over the last seven years in the IOL article.