1 Fueling Growth in Petro-Retailing: New Business Opportunities.
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Transcript of 1 Fueling Growth in Petro-Retailing: New Business Opportunities.
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Fueling Growth in Petro-Retailing: Fueling Growth in Petro-Retailing: New Business OpportunitiesNew Business Opportunities
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Presentation OverviewPresentation Overview
Define the key drivers of Define the key drivers of
change change
Identify key imperatives for Identify key imperatives for
Indian Petro RetailersIndian Petro Retailers
Discuss the new business Discuss the new business
opportunities which will opportunities which will
emerge in Petro Retailingemerge in Petro Retailing
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Drivers of Change
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Our assessment of the regulatory environment indicates that Petro Our assessment of the regulatory environment indicates that Petro retailing will undergo significant change across the value chainretailing will undergo significant change across the value chain
Increase in refining capacity is transforming India from a net Increase in refining capacity is transforming India from a net importer to a net exporter of petroleum productsimporter to a net exporter of petroleum products
Decontrol of petroleum products marketingDecontrol of petroleum products marketing
Possible replacement of the Oil Coordination Committee (OCC) Possible replacement of the Oil Coordination Committee (OCC) with a downstream oil & gas regulatory bodywith a downstream oil & gas regulatory body
Disinvestment of the government’s equity in petroleum refining Disinvestment of the government’s equity in petroleum refining and marketing companies and marketing companies
Entry of new domestic and multinational players into the sectorEntry of new domestic and multinational players into the sector
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We also leveraged our international experience We also leveraged our international experience and understanding of and understanding of the Indian the Indian consumer to identify learnings for petro-retailing in Indiaconsumer to identify learnings for petro-retailing in India
Sample List
Petro retailing Petro retailing and Retail and Retail clientsclients
Indian Indian marketmarket insightsinsights
Indian retail Indian retail market market
understandingunderstanding
Market ResearchMarket Research
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Currently there are some stark differences in the Indian market Currently there are some stark differences in the Indian market compared to the more developed marketscompared to the more developed markets
QuQuality interpreted as ‘no ality interpreted as ‘no adulteration’adulteration’
QQuantity interpreted as getting uantity interpreted as getting the right amount of fuel, i.e. the right amount of fuel, i.e. integrityintegrity
Price is not a differentiating Price is not a differentiating factorfactor
However, aHowever, as the Indian market evolves, s the Indian market evolves,
• PParameters such as integrity of fuel quantity and purity are likely to become arameters such as integrity of fuel quantity and purity are likely to become hygiene factorshygiene factors
• Consumer needs will change and require changes to the value Consumer needs will change and require changes to the value propositionproposition
Quality interpreted as iQuality interpreted as impact on mpact on fuel efficiency and engine fuel efficiency and engine performanceperformance
QQuantity is not a parameter for uantity is not a parameter for considerationconsideration
Price is a very important factorPrice is a very important factor
Indian marketIndian market US marketUS market
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DDistinct psychographic consumer segments are emerging in Indiaistinct psychographic consumer segments are emerging in India
Each consumer segment represents a potentially profitable target group
Prestige seeker
Trust Seeker
Routine Chore doer
Time Poor
• Higher emotional needs • More brand conscious• Stereotyped as “self-made”• Potential target for
international or premium brands
• Unique to emerging markets such as India
• Driven by a strong desire for integrity and by strong relationships with the retailer
• A typical late adapter, price and quality conscious
• Petroleum purchasing is seen as a ‘drudgery’.
• Seeks additional vehicle repair and maintenance services.
• Indulges in monotonous routine jobs
• Strong need for locational convenience and other non-fuel related services.
• Characterized by his need for quick service and convenience.
• Likely to be a professional, 24X7 worker
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IInsights into the nsights into the differing differing needs and behaviours of the Indian needs and behaviours of the Indian consumer indicate that clear opportunities exist for petro-retailersconsumer indicate that clear opportunities exist for petro-retailers
“I buy from the pump because I have a good relationship with the owner…”
Over 50% of consumers say …
“The brand of petrol is not important to me…”
Less than 10% of consumers will use a cybercafe at a petrol station
Taxi and truck drivers want ‘dhobi’ services
90% of consumers…“Don’t fill up the tank at a station…”
45% of car owners have shopped
at a convenience store in New Delhi
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Strategic Imperatives for Petro Retailers
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Given the opportunities and Given the opportunities and changing consumer needs, there are changing consumer needs, there are three key imperatives for retailersthree key imperatives for retailers
• How to build a unique and sustainable competitive advantage ?
• How to attract new customers ?
• How to capture a greater share of customer’s wallet ?
• How to build a unique and sustainable competitive advantage ?
• How to attract new customers ?
• How to capture a greater share of customer’s wallet ?
Develop in-depth consumer insight (Know Your Consumer)
Build offering around the target consumer
Build a strong brand proposition
Develop in-depth consumer insight (Know Your Consumer)
Build offering around the target consumer
Build a strong brand proposition
Key Issues Imperatives
Focus on “Topline” growth
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25%
21% 20%
18%
16%
Developing in-depth customer insight is essential pre-requisite to Developing in-depth customer insight is essential pre-requisite to brand building and acquiring market sharebrand building and acquiring market share
Generation F3•Fuel, food, fast•M/F < 25 yrs
True Blues•M/F•Station loyal•Cash
Road Warriors•Middle-aged men•High mileage•Premium
Price Shoppers•All demographics•Regular
Homebodies•Females w/children•Local station
Mobil Brand Identity
Rational levers• High performance• Reliability• Service
Emotional levers
• “It’s meant for me – high performer”
• “It puts in my hand the latest technology”
Psychographic Consumer Segmentation - USA
ExampleExample
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Retailers will need to create Retailers will need to create differentiatdifferentiateded offerings offerings depending depending on the needs of the target segmenton the needs of the target segment
Breadth of offerings
Store Appearance
ServiceConvenience
Image
Price
Basis of Differentiation
Food
Distribution
Levers for differentiating a non-fuel offering
OR
OR
Petro-retailers in India will need to adapt global business models to suit the local environment
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Successful brand-building strategies will evolve from “product” Successful brand-building strategies will evolve from “product” related features to “service” related featuresrelated features to “service” related features
Product related features
Quality ?
Quantity ?
Location
Service related features
Personalized Consumer experience
• Speed of service
• Attendant disposition
• Station Ambience
Brand building linked to customer maturity
Brand building linked to customer maturity
The recent experience of campaigns in India bear testimony to the effectiveness of brand building
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New Business Opportunities
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Value added products and services
Sale of Value Added Fuels High volume – low
margin businesses
In the next few years, opportunities in petro retailing will arise In the next few years, opportunities in petro retailing will arise in three key areasin three key areas
In short, “revenue enhancement” is the key
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A fuel-based differentiation strategy will result in a more A fuel-based differentiation strategy will result in a more profitable product mixprofitable product mix
A strong consumer brand image…
“Good Performance”
… delivers a more profitable grade mix
Illustration : Leading American petroleum company
LeadingPetroleumCompany
Exxon Mobil Shell
31%43% 43% 46%
20%
23%16%
19%
49%34%
41% 35%
LeadingPetroleumCompany
Exxon Mobil Shell
Premium grade
Intermediate grade
Regular
Sale of value added fuels
There is a need to create a differentiation around “premium” fuels
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Non-fuel products and services will also generate additional Non-fuel products and services will also generate additional revenue streams in the future……revenue streams in the future……
Non Fuel Contribution of Petroleum Retailers
USA
Revenue 38.6%
Profit 65.8%
USA
Revenue 38.6%
Profit 65.8%
France
Revenue 28%
Profit 40%
France
Revenue 28%
Profit 40%
Value added products and services
Convenience Stores
Food Service
Ancillary Service
The critical issue is to develop product assortment to drive both “traffic” and “consumer” purchases
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Price based differentiation strategy could also become a useful Price based differentiation strategy could also become a useful tool in the long-termtool in the long-term
High volume, low margin businesses
QuikTrip Operating Model• Chain of over 300 C-store format petroleum stations
in 9 states in US
• Known to provide excellent service, quality petrol at much lower prices
• Discount quality petroleum to drive volumes – sells 75% more gasoline per gas station per year as compared to the majors
• Stores limited categories of food/snack/beverage items – available only in fast turnaround SKUs – ensures competitive pricing and delivery of the ‘freshness promise’ through strong backward integration
Might not work in
India in the short-term because of
low non fuel sales
Petroleum marketers in India would need to develop other consumer hooks such as “consumer experience” to build customer loyalty
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In conclusion ..…In conclusion ..…
• The next generation petro-retailer will adopt a consumer centric organisational
model aligned to a distinct value proposition
• “Cookie cutter” approach won’t work in India – a key to success will be to adapt
international models to suit the local environment
• Retailers who best understand and satisfy their target consumers latent needs will
have a sustainable competitive advantage
• There will be clear opportunities to build strong brands around service and
customer experience; value added fuels and non-fuel products & services
• Price-based platform will be powerful in the Indian context in the long term, but
the challenge will be to deliver it profitably