Given the recent news of an electric-vehicle (EV) arms race among Apple, Virgin, Tesla and major automakers, my editor recently asked my thoughts on the topic. Is the c-store channel ignoring EVs? Could the c-store business model evolve to support EV charging, in a way similar to the current fueling experience? How could retailers exploit the business opportunity presented by this evolution?
Our channel is not ignoring an opportunity. Rather, we understand that we haven’t discovered how to support our business model based on convenient speed of service.
Addressing Change
Our lives have greatly changed as a result of so-called “disruptive technologies”—innovations that create a new market and eventually disrupt existing markets and networks by displacing the earlier technology.
A perfect example of this is the buggy whip. It once was a stable product, a tool to encourage horses to move quicker that was viewed as innovation. Who at the time foresaw that this product would become meaningless as a result of one of the biggest disruptors of the 20th century, the automobile?
Consider the smartphone. If I had told you 10 years ago that it would be common to bring a computer into the bathroom, you would have laughed, considering the technology at that time. However, studies today show that more than 70% of Americans bring computers into the bathroom in the form of their smartphones. These devices have become not only a computer, but also a method of maintaining social contact, an alarm clock, a radio, a way to track health habits and even a camera. This evolution continues through the development of apps that make this technology ever more valuable.
Our increasing concern with internal combustion engines’ contribution to global climate change, as well as our desire to become energy-independent, have set the stage for various types of alternative-fuel vehicles to address these issues. The hard reality we must face is that innovations in electronics and other electric-powered technologies are most likely to give rise to vehicles that operate based on electricity.
If one accepts this premise, then it is logical to accept that the supply chain will involve offering the fuel that satisfies this eventuality. Electricity starts at power plants today, and vehicle fuel in refineries, but in the future, power and fuel will be the same. Because the consumer today must spend excessive time waiting for an electric car to recharge (20 to 30 minutes under optimum charging conditions), a c-store charging station will not suffice, unless the electricity is being generated via hydrogen fuel cells.
Unfortunately, hydrogen does not have as great an opportunity to become the fuel of choice. Although Toyota is making significant progress in developing such vehicles, the hydrogen-fuel infrastructure needs to be built from the ground up, requiring excessive capital investment.
Electric supply, while in need of massive reinvestment, exists today and will be upgraded by power utilities rather than retailers, offsetting these investments through the sale of additional power. Unlike retailers, the utilities have the ability to levy taxes necessary to perform these upgrades in the form of rate increases.
Charging stations would need to be destinations that offer several amenities while the consumer recharges the EV. Today, big-box retailers, restaurants and other destination retailers can best accommodate these types of needs and are the likely candidates to provide these services.
Finding Our Opportunity
The greatest opportunity for the c-store industry would be one in which all vehicle manufacturers agreed upon one battery standard. This would allow for consumers to quickly “refuel” by visiting a c-store, and in the time it would take to fill a vehicle with gasoline, have a newly charged battery placed in their vehicle, swapped with their “empty” battery—similar to how we now exchange propane tanks for grills. This could alleviate many consumers’ “range anxiety.” (But perhaps not all consumers. Polls of millennials suggest that they would likely carry an extra charged battery with them, and recharge both of them at home.)
In the absence of faster charging technologies, EVs pose the greatest challenge to our industry. The inevitable conclusion we need to embrace is that the fueling experience many of us have built our business models upon may not be part of a future reality.
I once asked my oldest child, “What do you want to be when you grow up?” This is a critical question for the industry. Do we become less convenient and more of a destination to accommodate anticipated changes, or do we remain focused on building the best buggy whip for which there will eventually be no market? Although such transformation will not occur overnight, forward-thinking retailers will be prepared to evolve along with technology.
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