Fuel retail industry statistics over the past few years tell a similar story in almost every global market. In the face of challenging market conditions, our industry’s best retailers continue to improve across a variety of performance indicators.
As they excel, they widen the gap with competitors. That means the rest need to work even harder to catch up.
However, a lack of effective perspective could hold back those retailers working to keep up. When you’re in the thick of it, objective assessment of one’s own efforts and outcomes can be tough to see. But this lack of perspective will stand in the way of progress. Business improvement has to start with a frank, honest assessment of the strengths and weaknesses of the retail organization. From that point, necessary changes become clearer.
Beginning to Slip
One of Kalibrate’s clients is a great retailer that wanted to keep its No. 1 position. It dominates the markets where it operates, but it had concerns about one region. The organization’s executives and managers had a gut instinct that it was slipping from the leadership position. Kalibrate’s Strategy Group was able to confi rm their suspicion. Our market intelligence demonstrated conclusively that the client’s market efficiency—how effective its sites were compared to competitors—was diminishing. By drilling into the data, our analytics identified which individual sites were dragging down performance of the region as a whole.
How did this erosion start? The client was the fi rst fuel retailer in the area. Its original sites were perceived as leading edge and met all the requirements of local demographics. But over time, competition increased. Next to new entrants’ sites, our client’s facilities began to look tired and outdated.
The country as a whole was becoming wealthier, and the area under analysis changed as income levels rose significantly. This created a great opportunity because volume in the market was increasing. But our client’s off ering had not changed, and competitors were building bigger sites with offers that more closely aligned with the new level of consumer sophistication.
Our client’s sites had too few pump islands to meet customer traffic demands. The fuel sold had remained static, with no diesel available. Their shops were smaller than their competitors’ and the offer below par. We also identified a need for employee and dealer training. In summary, the competition had been smarter, had reacted more quickly and displayed more agility, and it was reaping the benefits.
Areas of Opportunity
We developed a plan for the client that combined rebuilds of existing sites in the area with aggressive new site development to capture its share of growing demand. Using data modeling and our knowledge of the market, we identified areas of unfulfilled demand and sites that required investment. By focusing on location opportunities, the facilities at each location and how well the sites are operated, we were able to strategize a set of signifi cant improvement opportunities.
The results: At the new and rebuilt sites, gasoline market share doubled. Market efficiency increased from 0.8 to almost 1.3. The stores’ performance was even more impressive: Market efficiency of the stores increased from 1.4 to 2.1, and shop turnover tripled. (See 7E chart below.)
By definition, most retailers are playing catch-up. They are trying to close the gap on the market leader. In this market, the leader was working hard to ensure that it was dominant in every region. By focusing on specific areas of opportunity—location, facilities and operations—at individual sites where performance was less than expected, this leading retailer was able to re-establish its position at No. 1 across all markets.
Note: 7E is Kalibrate’s way of evaluating fuel retailers’ strengths and weaknesses based on assessment of their sites and network.
Ian Thompson is senior vice president of global solution consultancy for Kalibrate. For more information, visit kalibrate.com.