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7/27/2019 Petroleum Article.pdf
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T h e p e tr o le u m r e ta i li n g i n du s tr y i n A s ia a n d M i dd l e E a st f a ce s
s i gn i fi c an t c h al l en g es . W i t h l o w p r od u ct d i ff e re n ti a ti o n, l a ck o f
c u st o me r l o ya l ty, c o up l ed w i th i n te n se c om p et i ti o n, d u e t o
d er eg ul at io n, a s i n In di a, t he v ar io us p la ye rs w il l tr y t o g ai n
s h ar e f r om e a ch o t he r. T h is w i ll e x er t d o wn w ar d p r es s ur e o n
margins and f orce players to ad opt new and i nnovative
strategies.
I n d i a h a s d er e g u l at e d t he p r i ci n g m e c h an i s m fo r re t a i l
p et ro le um , e na bl in g n ew p la ye rs t o e nt er t h e m ar ke t, w h ic h
was once a fiefdom of the public sector. The entry of new
p la ye rs l ik e R el ia nc e, w il l g ro w t he n um be r o f s ta ti on s f ro m
e x is t in g 1 9, 0 00 t o o v er 2 3, 0 00 - 25 , 00 0 i n n e xt 4 - 5 y e ar s . T h is
will reduce the average throughput per station, and total fuel
volu mes per play er. With mark et dete rmin ed pric ing
m ec ha ni sm , p ri ce s w il l h av e t o b e l ow er ed , t hu s r ed uc in g
m a r gi n s f r o m f u e l p r o d uc t s .
I n U AE p ri ce s a re s ti ll re gu la te d b y t he g ov er nm en t.
H o we v er, t he c u rr e nt 3 p l ay e rs A d no c D i st ri b ut i on , EP P CO ,E ma ra t, te nd to l os e m on ey o n r et ai l p et ro l, du e t o h ig he r
i n te r na t io n al c r ud e p r ic e s. A l so , b y 2 0 05 w h en G AT T c o me s
into force, the UAE market is likely to op en up to further
competition.
Petroleum Retailing - The future is now
I n S i ng a po r e, t h e 4 l e ad i ng p l ay e rs E x xo n M ob i l , S he l l, C a l te x
a nd B P, a cc ou nt f or o ve r 95 % o f t he r et ai l fu el s al es .
S i ng a po r e i s c h al l en g ed w i t h l i mi t ed g e o g ra p hy f o r a d di t io n o f
n e w s t at i on s . W i th l i mi t ed g r ow t h i n n u mb e r o f v e hi c le s , t h e
r e ta i l f u el v o l u me s w i ll r e m ai n s t ag n an t , o ff e ri n g l i tt l e s c op e
f o r i m p r ov i n g r e v e nu e s a n d ma r g i ns .
Petroleum Retailing Product or Service?
I n g ro wth ma rk ets , th e ma jo r i mp era ti ve sh ou ld be t oi nc re as e p ro fi ta bl e r ev en ue s a nd m ar ke t s ha re g ro wt h. T he
p e tr o le u m r e ta i le r s w i ll n e e d t o d e ve l op d i f f e re n ti a te d v a l ue
p r op o si t io n s, t o i m pr o ve r e ve n ue s a n d th e ir b o tt o m l i ne s ; b y
a d op t in g a c u st o me r f oc u ss e d ap p ro a ch a n d bu i ld s t ro n g
b r an d e q u it y. To d r iv e r e ve n ue s a n d m a rg i ns , t h e r e ta i le r s w i ll
have to attract new customers or i ncrease share of their
e x is t in g c u st o me r s' w a ll e t. T h e l a tt e r c a n b e a c hi e ve d b y
o f f e ri n g n o n - fu e l pr o d u ct s a n d s e r v ic e s . N o n - fu e l pr o d u ct s ,
which offer higher margins compared to petroleum products,
e na bl e c om pa ni es t o s us ta in t he ms el ve s, e sp ec ia ll y d ur in gtimes when oil prices are high. Though these products and
s e rv i ce s h a ve b e en po p ul a r i n t h e We s t, th e ir im p or t an c e i s
b ei ng r ec en tl y f el t i n th is r eg io n. I n di an f ue l re ta il er s h av e
s t a rt e d o f f e ri n g g r o ce r y, f oo d s , l a u n dr y f a c i li t i e s, f re s h f o o d s,
e tc . a t t he c on ve ni en ce s to re s. U AE r et ai le rs a re u pg ra di ng
a n d a dd i ng s i mi l ar f a c il i ti e s, t o a t tr a ct c u st o me r s, a n d m a ke
them spend more time and money at their facilities.
P e t r o l e u m r e t a i l i n g i s a p r o d u c t a n d s e r v i c e , w i t h
d i f f e re n t i at i o n p o s s ib l e i n e i t h er or b o t h a r e a s.
K n o w y o u r c u s t o me r :
I n d ev el op in g p ro du ct s a nd s e rv ic es , t he k ey i s t o u nd er st an d
your customer. Segmentation is a powerful tool to help
m a rk e te r s i d en t if y t h e r e qu i re m en t s o f t h e c u st o me r s.
Indi a UAE Singapore
Land Area (sq k m s) 3,2 87,590 83, 600 692
Popu lat ion (m m ) 1, 045 3.5 4. 6
GDP ($ bn) 2, 660 71 112
Per Cap it a G DP ($) 2, 545 20, 286 24, 348
Ro ads (k m s) 3,3 19,644 4 ,835 3,0 66
Re gist ered Vehi cles (m m ) 60. 00 0. 61 0. 70
- m m l trs 48,00 0 3 ,300 850
- $ m m 35,00 0 800 725
Avg pri ce / l tr ($) 0.73 0.24 0.85
Re tai l St ati ons 19,00 0 630 222
Fuel consum p ti on/v ehi cl e (l trs/ annum ) 800 5 ,410 1,2 14
Fuel throughp ut/ stat i on (m m lt rs /annu m ) 2. 5 5.2 3. 8
(A ll values in US dollars)
K e y R a t i os :
Retai l Fuel S al es Market:
Key I ndi cators Comapri son
I EV W
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F o r e g. M o b il s e g me n te d t h e U S p e tr o le u m c o ns u me r s i n to 5
segments:
Mobil's customer segmentation in the US:
Mobil identified the top 3 segments as being the most
p r of i ta b le a n d d e ve l op e d it s p r od u ct s a n d s e rv i ce s t o c a te r to
the tar ge t cus tom ers ' req uir eme nts . An ex erc ise to
u nd er st an d t he c us to me r s eg me nt s c an go a lo ng w ay f or
l oc al p et ro le um r et ai le rs t o i de nt if y t he t ar ge t s eg me nt s a nd
d ev el op in g t he a pp ro pr ia te s tr at eg y. C ed ar h as s eg me nt ed
the retail market in Dubai, as outlined below:
P r od u c t a n d S e r vi c e D e v e lo p m en t :
O nc e t he c ho ic e o f t ar ge t s eg me nt i s i de nt if ie d, p ro du ct s a nd
s e rv i ce s n e ed t o b e t a il o re d t o t h ei r r eq u ir e me n ts . T he t a rg e t
c us to me r sh ou ld d ri ve t he v al ue p ro po si ti on , fo r bo th f ue l
and non-fuel products and services.
F u e l B a s ed P r op o s i ti o n : In the western markets, petroleum
r et ai le rs s el l m u lt ip le g ra de f ue ls b as ed o n t he o ct an e r at in gs ,
with different prices at different stations, where the customer
c a n h u nt f o r a b ar g ai n . In UA E, w h er e u n le a de d f ue l is t h e
n or m, 2 g ra de s a re a va il ab le , O ct an e 9 5 a nd 9 8. H ow ev er,
the Octane 98 petrol accounts for less than 5% of the over
3 . 3 b i l li o n li t re s c o ns u me d .
T h is c o ul d be a t tr i bu t ed t o
the 25% premium over
the Octane 95 produ ct
p ri ce , wh ic h i s a dmi ni st -
e re d by th e g ov ern me nt.
H ow ev er, wi th th e l ar ge
high-end car population, an
o pp ortu ni ty e xi st s i n th em a r k e t t o i m p r o v e t h e
p e r c e p t i o n o f p r o d u c t
s u p e r i o r i t y a n d i m p r o v e
the bottom line. In India
too, with the introduction of stringent pollution norms,
c ou pl ed w it h t he g ro wt h i n la rg e c ar s, t h e s up er io r p ro du ct
b as ed o p p or tu ni ty i s l ar ge . T he f ir st m ov er a d va nt ag e n ee ds
to be captured and capitalised through a mix of customer
e d u c a t i o n a n d
m a r ke t i n g a c t iv i t i es .
S i t e S e c u r i t y :
Wi th ex pe cte d ne w
c o m p e t i t i o n , s i t e
security is the key. In
U AE a nd I nd ia , w it h
the expansion of roads
n et wo rk , th e e xi st in g
players book the key
s i t e s , t o b e a t f u t u r e
competition. However,development of the sites is undertaken once the road
b ec om es o pe ra ti on al . T he c ha ll en ge i s t o u se a s ci en ti fi c s it e
s el ec ti on m od el , t o e ns ur e t ha t t he s it e i s p ro fi ta bl e o nc e i t i s
operational.
S i t e R a t i o n a l i s a t i o n : E v e n t h o u g h s i t e s e c u r i t y i s
r e q u i r e d , i t i s c r i t i c a l f o r m a n a g e m e n t s t o m o n i t o r
p e rf or ma nc e o f t he ir e x is ti ng a nd n e w s ta ti on s. L o ss m ak in g
s t at i on s n e ed t o b e i d en t if i ed , a nd c o rr e ct i ve a c ti o ns t a ke n t o
m ak e t he m p ro fi ta bl e. I f t ur na ro un d i s n ot p os si bl e, i t i s b es t
to close them and divert the resources for other sites oractivities.
Site Upgradation: T h e r e gi o na l p la y er s h a ve r e al i se d t ha t
h a vi n g a n a t tr a ct i ve s ta t io n , w i th f r ie n dl y s t af f, an d o f fe r in g a
Retail customer segmentation in Dubai (Cedar Research)
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r ang e of n on -f ue l p rod uct s a nd s erv ice s, i s t he k ey to ge t
c us to me rs t o d ri ve i nt o t he ir s ta ti on . D ep en di ng o n t he s it e
s pa ce a va il ab il it y, t he v ar io us p la ye rs i n In di a an d UA E h av e
s t a rt e d r e n o va t i n g t h e i r e x i s ti n g s i t e s, t o o f f e r a n i n t e rn a t i on a l
l oo k a nd f ee l. T he c ha ll en ge i s t o p ri or it is e t he s it es t ha t n ee d
to be upgraded first and which could start offering higher
c o nt r ib u ti o n d u e t o t h e c h an g e.
N o n -F u e l B a s ed P r o po s i t i on :
To g et a l ar ge r s ha re o f th e cu st ome rs' w al let , no n- fu el
p ro du ct s a nd se rv ic es a re n ec es sa ry. No n- fu el re ve nu es
c o nt r ib u te s i gn i fi c an t ly f o r t h e p e tr o le u m r e ta i le r s U S (3 9% ) ,
F ra n ce ( 25 % ), E u ro p e ( 1 5% ) . I n t h e U AE , i t a v er a ge s 1 2% -
1 5 % f o r v a ri o us p l ay e rs , a nd o f fe r s s i gn i fi c an t o p po r tu n it y f o r
d e v e l op m e n t i n t h e r e g i on , e s p e ci a l l y i n I n d i a .
T he n on -f ue l p ro du ct s a nd se rv ic es c an b e b ro ad ly g ro up ed
i n to 3 c a te g or i es :
C o nv e ni e nc e s t or e s ( C S t or e s)
Auto Care Services
Ancillary Services
Convenience Stores:
T he c on ce pt o f C s tor es t hou gh re la ti ve ly n ew i n I nd ia, ha s
got established in the U AE for past 3-5 years. However the
a nn ua l a ve ra ge r ev en ue p er s q f t i n UA E i s $ 32 5 c om pa re d t o
$550 in the US and $800 in UK. The average value per
transaction in U AE is less than $3, compared to $6 in the U K.
F a c t o r s c o n t r i b u t i n g t o t h e s u c c e s s o f C s t o r e s
proposition:
Product mix d rives the C -stores shopp ing. In the UK,
To b ac co ( 3 7% ) , c o nf e ct i on e ry & s n a c ks ( 1 8% ) a n d s o f t d r in k s
( 8% ) a re t he l ea di ng c at eg or ie s. I n th e UA E, d ue t o t he w id e
a v a i l a b i l i t y o f c i g a r e t t e s i n s u p e r m a r k e t s , c i g a r e t t e
co ntri but ion i s on ly 14 %. I t w il l be th e s ame ca se i n Ind ia,
where there are cigarette kiosks at every nook and corner.
T he c ri ti ca l i ss ue i s t o o ff er a p ro du ct a ss or tm en t t ha t d ri ve s
the target customer traffic. This could also be in terms of
o f fe r in g f r es h g r oc e ri e s, f re s h f o od s , c o ff e e, h ot s n ac ks , e tc .
Also, special promotions in terms of discounts on high margin
p r od u ct s c a n d r iv e v o lu m es ( e g. F o u n ta i n s o ft d r in k s) .
S t or e l a yo u t a n d a p pe a ra n ce a t tr a ct c u st o me r s t o s p en d m o re
time in the store. This can be based on research to track the
m ov em en t o f c us to me rs , a nd h e nc e t he l ik el ih oo d o f t he m
p i c k i n g t h e p r o d u c t . S i n c e o p e r a t i n g C - s t o r e s r e q u i r e
d i f f e r e n t s e t o f c a p a b i l i t i e s i n t e r m s o f s u p p l y c h a i n
m a na g em e nt a n d s o ur c in g , t h e C - st o re s o p er a ti o ns c o ul d be
o ut so ur ce d. I n U AE , a ll o p er at or s c on tr ac t t he f re sh f oo ds
ma na ge me nt to t he f oo d su pp li er s w ho re pl en is h s to ck s o n
c on su mp ti on a nd t ak e b ac k t he u nu se d s to ck b as ed a ft er
e xp ir y d at e. A r ed uc ed r i sk m od e l is a n a ll ia nc e o r co mp le te
o u ts o ur ci n g, e sp e ci a ll y i n th e b r an d ed h ot f o od s c a te g or y l i ke
pizzas, coffee, burgers, etc.
Auto Care Services:
Auto care services complement the fuel services. These
i n cl u de l u be c h an g e, ca r w a sh , w h ee l & ty r e s e rv i ce s , c a r
u p h o l st e r y c l e a ni n g , mi n o r r e p a ir s e rv i c e s, e t c. A l l o f t h e se
c on tr ib ut e t o t he i nc re me nt al s h ar e o f t he c us to me rs ' w al le t.
T he c ar wa sh a nd au to c ar e a ve ra ge a ro un d 7 % a nd 4% of
the total revenues for fuel retailers in Japan and U S. In the
UAE i t i s b et we en 1% -2% . Al so , th e l ub e t o f ue l v ol ume
r at io i n UA E i s 0 .2 6% , co mp ar ed t o 1 % in te rn at io na ll y.
H ow ev er, i n t he U AE i t i s o bs er ve d th at w he re t he se s er vi ce s
a r e a v a i l ab l e , t h e i r u t i l i sa t i o n i s h i g h , t h e r ef o r e , t h e y s h o u ld be
a v ai l ab l e a t m o re n u mb e r o f l o ca t io n s. I n I n di a t h es e s e rv i ce s
offered a t the stations are at a n ascent stage, d ue to thecustomers unwillingness to pay the price. Small garage
o pe ra to rs t en d t o o ff er t he se s er vi ce s a t a m u ch l ow er p r ic e.
T he c ha ll en ge i s t o u nd er st an d t he c us to me rs ' w il li ng ne ss t o
C st o res
Su ccessF act o rs
C st o res
Su ccessF act o rs
St o re
Ap p earan ce
St o re
Ap p earan ce
Pricin gPricin g
FoodFood
ServiceService
P r o d uc t M i xP r o d uc t M i x
Dist rib u t io nDist rib u t io nLayoutLayout
Pro mo t io n sPro mo t io n s
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p a y , a n d d e s i g n t h e s e r v i c e , c o u p l e d w i t h r i g h tc o m mu n i c at i o n t o p r o mo t e t h e m.
Ancillary Services:
ATMs, laundry facilities, Internet access, mosques (in the
M id d le E as t) , e tc . g et t he c us to me r t o d ri ve i nt o t he s ta ti on ,
a nd i ncre as e h is sp en di ng . Ema ra t ( Sh am il ) a nd Ep pco
( Ta s j e el ) i n UA E a l s o o f f e r c a r te s t i ng , r eg i s tr a t i on , a nd a u to
i n su r an c e f a ci l it i es , w h ic h a r e c e rt i fi e d b y t h e a u th o ri t ie s . T hi s
p r ov i de s t h e c u st o me r a o n e- s to p -s h op f o r t h e c a r' s a n nu a l
c he ck -u p, a nd o th er f or ma li ti es , wi th t he l ux ur y o f a n ai r-
c o nd i ti o ne d f ac i li t y, i n l es s t h an 3 0 m i nu t es c o mp a re d t o t h e
h a lf - da y a t g o ve r nm e nt f a ci l it i es . Do o r- t o- d oo r se r vi c e i s a l so
o f f e re d , w h ic h r e q u i re s e v e n l es s e r t i m e .
O th er a nc il la ry s er vi ce s c ou ld b e p ot en ti al ly o ff er ed t o
i n c l ud e c o u r ie r s er v i ce s , ca r r en t a l s, e t c, d e p en d i n g o n t he
c us to me rs ' r eq ui re me nt s. T he i de a i s t o m ak e t he p et ro l
s t a ti o n i n to a d e s ti n a t io n f o r t h e c u s to m e r vi s i t . P e tr o l e um
m ar ke ti ng h as a s tr on g n on -f ue l e le me nt , w hi ch c an b e
l e v e r a g e d f o r d i f f e r e n t i a t i o n i n a c o m m o d i t y m a r k e t
environment.
N o n F u e l R e v e n u e
p e r c u s t o m e r
Confecti onery
Ci garettes
S o f t D r i n ks
K i osk
Ki osk
H o t F o o ds
F r e s h G r o ce r i e s
C S t o r e
L u b e C h a n ge
Car Wash
S e r vi c e S t a t i on
C Store
A u t o S e r v ic e s
A n c i ll a r y S e r v i ce s
D esti nati on
N o n F u e l R e v e n u e
p e r c u s t o m e r
Confecti onery
Ci garettes
S o f t D r i n ks
K i osk
Ki osk
H o t F o o ds
F r e s h G r o ce r i e s
C S t o r e
L u b e C h a n ge
Car Wash
S e r vi c e S t a t i on
C Store
A u t o S e r v ic e s
A n c i ll a r y S e r v i ce s
D esti nati on
Customer Loyalty Programs:
We have been discussing the subject of acquiring/retaining
c u s t om e r s a n d u n de r s t an d i n g t h e i r re q u i re m e n ts . C u st o m er
l oy al ty p ro gr am s e na bl e o rg an is at io ns w or ld wi de t o a ch ie ve
these goals. The loyalty program ensures that the customer
limits the use of competitors' facilities, due to various
i n c e nt i v e s, wh i c h a r e o f f e re d t o h i m . S e c o nd l y, it c a n c a p t ur e
the buying behaviour of the customer in terms of the types
o f p r od u ct s, p u rc h as e f r eq u en c y, a m ou n t s p en t , l o ca t io n s
u s e d , e t c . C o m p a n i e s c a n u s e t h i s v a l u a b l e d a t a t od i f f e re n t i at e a n d d e v e l op t he i r p r o d uc t a n d s e r v ic e o f f e ri n g s ,
b a s e d o n t h e c u s to m e rs ' r e q u ir e m e nt s , t h e r eb y i m p ro v i n g
r e ve n ue s a n d p r of i ta b il i ty. Fu e l C a rd s a r e b e in g u s ed i n t h e
U A E a n d r e c e n t l y i n I n d i a , b u t p r i m a r i l y f o r f l e e t
m a na g em e nt . I n ve s tm e nt i n te c hn o lo g y i s r e qu i re d , t o l i nk a l l
the forecourt and non-fuel facilities to a common data
s ys te m. T h is i nv es tm en t c an g o a l o ng w ay i n u nd e rs ta nd i ng
the customer.
T h us , a s t ra t eg y b a se d o n b u il d in g s t ro n g a n d d if f er e nt i at e dvalue propositions is particularly relevant for petroleum
r e ta i le r s i n th i s r e gi o n, w it h a n op p or t un i ty t o b u il d re v en u es
and enhance profitability.
Manish Kotwala is A ssociate Director -
A sia/Middle E ast, Cedar Consulting.
O f f i ce s i n P r i nc i p a l C i t i es o f t h e W or l dwww.cedar-consulting.com
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ah alaxm io mb a y 4 0 0 0 1 1
d ia+ 91 2 2 6 66 1 9 80 0
+ 91 2 2 6 66 1 9 80 1ind ia@ced ar-consulting.com
M i d d le E a s tPO Box 417851102, Al Attar Tower
Al Mak toum StreetDeira, Dub ai, UAET + 97 1 4 2 21 04 44F + 97 1 4 2 24 94 54E m id d [email protected]
C e d a r M a n a g e m e n t C o n s u lt i n gInternational LLC3 0 0 P ar k A v en u e, 1 7 t h F l oo r N ew York , N Y 10022, USA T + 1 2 12 5 72 63 14F + 1 2 12 5 72 64 99E am ericas@ced ar-consulting.com
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