Future-proof: Fuel retail businesses and changing landscapes
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Deloitte | A Middle East Point of View - Spring 2021 | Fuel retail
Future-proof:
Fuel retail businesses
and changing
landscapes
12
Deloitte | A Middle East Point of View - Spring 2021 | Fuel retail
13Deloitte | A Middle East Point of View - Spring 2021 | Fuel retail
GCC fuel retailers are The changing paradigm of fuel GCC fuel retailers are also not immune to
retailing the global themes affecting the industry
also not immune to the The fuel retail industry across the GCC that include the commitment of countries
global themes affecting has been experiencing significant and companies to meet targets set by
changes over the past decade. There Paris Agreement, society’s need for
the industry that include were amendments to laws and sustainable energy, and pressure from
the commitment of regulations, women driving in Saudi investors on companies to embed
countries and companies Arabia and a reduction in fuel subsidies
across several GCC countries. In addition,
sustainability in the way they operate.
Given these changes, fuel retailers are
to meet targets set by we observed a shift in the competitive asking difficult questions regarding how
Paris Agreement, landscape as some fuel retailers they can best serve their customers, and
expanded to new territories, such as the how their businesses should respond to
society’s need for entrance of Abu Dhabi National Oil remain competitive. In the retail industry
sustainable energy, and Company (ADNOC) fuel stations into the at large, stories of incumbents failing to
Saudi market and Dubai. Furthermore, evolve and allowing newcomers with
pressure from investors there has been a change in consumer innovative and customer-centric business
on companies to embed sentiment as customers in the region models to acquire their consumers, such
sustainability in the way experience the convenience of a digitized as Nokia, are still fresh in our minds. This
and personalized service across different represents a challenge for the local fuel
they operate. areas of retail, including fuel retail outlets. retail market players, but also an
opportunity to grow and explore new
ways of doing business (Figure 1).
The landscape in which GCC fuel retailers
Figure 1: Adapting to the changing market landscape requires fuel retailers to revisit their strategy, business model and capabilities
Forces of change Changing market dynamic Fuel retail business continuum
Organization analysis components
Consumer behavior Strategy/Vision
1 Carbon-free economy
- Adoption of shared vehicles,
Redefine customer experience strategy
electric vehicles, etc.
- Embracing digitization Business Model
e.g. digital payment, etc. Develop customer-centric model
Digital technologies
2 and connectivity Capabilities
Operating model architecture
Competitive landscape
Reassess organizational activities
and operating model
- New regulatory frameworks
Mobility and adjacent
3 offerings
- Receding footprint of fuel retail
monopolies
Enablers
Process, people and technology
Review/Update enablers
14Deloitte | A Middle East Point of View - Spring 2021 | Fuel retail
operate is being reshaped by certain
macro-forces, namely, a shift towards a EV charging stations present an
carbon-free economy, a rise in digital
connectivity, and a structural change in opportunity for GCC fuel retailers to
mobility and adjacent offerings. These
forces are also coupled with a change in tap into a growing market, generate
fuel retailer customer behavior. We
observe how the customer experience income from non-fuel sales, and take
strategy, customer value proposition
(CVP), as well as the business model of part in shaping the net-zero emissions
fuel retailers may need to evolve to cater
to the changing market landscape, and future.
consequently allowing these companies
to thrive in the new environment, and
future-proof their business. environment. As seen in Figure 2, 54
percent of GCC respondents who do not
Forces of change yet own a car would be inclined to buy a
Through our survey, we identified key car if it were an electric vehicle (EV). This
internal and external macro-forces that makes fast EV charging stations a critical
are affecting the landscape for fuel upgrade consideration for fuel retail
retailers in the GCC. These forces have players who want to cater to the
presented key market players with a new customer of the future, as the
set of challenges and opportunities that overwhelming majority of respondents
will require them to adapt and evolve. were millennials and generation Z,
signaling that the trend is here to stay. EV
Carbon-free economy charging stations present an opportunity
A global movement towards a carbon- for GCC fuel retailers to tap into a
free economy is underway. In fact, in its growing market, generate income from
2020 Energy Outlook report, BP is non-fuel sales, and take part in shaping
predicting a base-case scenario where the net-zero emissions future.
contribution of solar to global energy will
have a compound annual growth rate Figure 2: Car non-owners inclined to own an
(CAGR) of 7.8 percent through to 2050. electric vehicle in the future
This, contrasted with a CAGR of 1 percent
for natural gas and -0.3 percent for oil,
highlights the shift away from fossil fuels,
albeit gradual1. This creates a challenge 30%
for fuel retailers as less carbon-based
fuel is likely to be sold, but also gives 54%
them an opportunity to explore new
markets. Moreover we note that within 16%
the GCC, consumers are perturbed by
climate change since, as evidenced by
our survey, 70 percent of respondents
Yes No Maybe
were concerned about the effect of fossil
fuel carbon emissions on the
15Deloitte | A Middle East Point of View - Spring 2021 | Fuel retail
Exhibit 1: BP Chargemaster case study: Catering for a growing EV market
An example of this is illustrated in Exhibit
1, where BP has acquired Chargemaster2
in the UK, in order to establish a firm
The company was founded in 2008 by entrepreneur David Martell. In June 2018, BP foothold in the UK EV charging services
announced that it had entered into an agreement to buy Chargemaster for GBP130m, market, expecting to have one million EV
with the company to be rebranded BP Chargemaster. users by 2022.
Digital technologies and connectivity
The company provides charging units for home, business and public use, and operates On-demand services and online retail
its own electric vehicle public charging network, called POLAR, which is the largest
consumption continue to evolve and
network in the United Kingdom. By 2017, the company had supplied more than 30,000
charging points for electric vehicle drivers’ homes and more than 10,000 public and raise consumer expectations. This is due
commercially-operated charging points. to advancement in universal connectivity
and its underlying technology
infrastructure, not to mention the Covid-
The business model of Chargemaster capitalizes on two revenue streams. The first
19 lockdown, which introduced many
is installing charging stations at homes or offices for a fixed fee. The second is a
subscription fee whereby customers pay a monthly fee and through a mobile app can people to the convenience of online
find where the closest charging station is and use it, an option to pay per use is also shopping. Customers, now more than
available. ever, expect to have seamless
communication and increased
personalization in services. In fact, the
Chargemaster is growing rapidly and is currently the largest operator of charging
survey reveals that 86 percent of expat
stations in the UK, putting it in the prime position to benefit from the anticipated
one million EV drivers expected to be in the UK by 2022. This gives BP an edge over and local vehicle owners, in the GCC,
competition in terms of catering for this new customer group as people start to prefer to use contactless digital payments
move away from ICE (Internal Combustion Engine) vehicles. at fuel stations. However, almost 60
percent of transactions today are still
cash transactions driven mainly by blue
Exhibit 2: Shell case study: Innovation across different verticals
collar workers.
Shell is one of many companies that has adapted successfully to the new environment of the fuel retail
market, with the realization of the need to reinvent the way they serve customers. Therefore, they have Certain global fuel retailers have already
developed several initiatives to cater to customers’ needs:
started embracing digitization to enhance
Shell tap-up operational efficiency and improve on
A fuel delivery service that is helping Shell play into the trend of on-demand home delivery their customer experience. For example,
service. ExxonMobil developed Speedpass+ to
facilitate payment processes for their
Amazon parcel network customers. In addition, Shell is heavily
A joint venture with Amazon to create a network of convenient pick-up locations for its goods innovating in retail by a mix of
at Shell’s fuel stations (experimented in Munich, Germany).
partnerships and internal capability
building, to address market
Shell motorist
developments and customer needs
Customer app that keeps the user up to date with Shell loyalty offers, rewards and (Exhibit 2).
promotions, and acts as a station locator. The app’s latest feature, “Fill up & Go” allows for
mobile payments to be conducted at the fuel pump.
Although similar digital payments already
Alternative fuels
exist in the GCC, only 7 percent of vehicle
Shell is part of a consortium of 13 companies (including car manufacturers such as BMW owners have used them (Figure 3). The
and Toyota) that has announced they will invest US$10.78billion in hydrogen fuel cells. In
addition, Shell announced a partnership with Allego, a leading EV charging station provider
primary reason for this contradicting
in Europe, on deploying fast stations at select Shell service stations. result was that 61 percent of
respondents were not aware of these
Connected car apps. As such, GCC fuel retailers might
A mobile payment mechanism installation onto Jaguar’s Connected Car platform, to show its want to reassess their marketing and
OEM partners its digital leadership in the automotive sector. customer attraction initiatives.
16Deloitte | A Middle East Point of View - Spring 2021 | Fuel retail
Figure 3: Percentage of car owners who have
used digital services offered by fuel stations
driver-driven vehicles is expected to Certain global fuel
decline; in 2025, shared driver-driven
(e.g. ENOC ViP, ENOCPay, ADNOC Wallet) and
the percentage of car owners who are willing
vehicles are expected to account for retailers have already
to use digital/contactless payment in light of more than 10 percent of miles driven, started embracing
the COVID-19 outbreak increasing through to 2040, when shared
mobility will account for up to 80 percent
digitization to enhance
Car owners using digital services by
fuel stations
of miles driven3. Therefore, how will the operational efficiency
future fuel station change once the
mobility is largely autonomous/driverless
and improve on their
7% and platform driven? Fewer cars on the customer experience.
road and increased popularity of electric
vehicles will ultimately have major
implications on the fuel retail business,
and will cause them to reexamine the
products and services they offer to create
93% cross selling opportunities, and introduce
services to accommodate for EVs.
In addition, GCC fuel retailers may want
Yes No to focus on offering an experience, as
opposed to selling a commodity, in order
Car owners’ willingness to use to explore new revenue streams. The
digital/contactless payment
survey indicates that, in the GCC,
participants visit fuel stations for reasons
2% other than fueling their cars. Such
12% services include using the carwash,
buying items from the grocery store,
visiting the restaurants in the gas
stations, or simply stopping to take a
break (Figure 4). In fact, new customer
86%
segments are emerging, forcing fuel
retailers to rethink the type of services
offered at fuel stations. An example of
Yes No Maybe new customer segments are women
drivers in Saudi Arabia. In addition, more
than a third of respondents have
reported that over 50 percent of their
In addition to digital payments, fuel
non-fuel spending is composed of
retailers may want to focus on data
impulse shopping, giving fuel retailers an
analytics to capture consumer data in
opportunity to capitalize on an additional
real time. This will help retailers obtain
revenue source.
constructive insight on customers’ needs,
behavior and trends, enabling them to
Fuel retails might also focus on entering
make data-driven decisions.
new markets to diversify their market
portfolio—a trend that has started
Mobility and adjacent offerings
already with ENOC Group announcing, in
Mobility is transforming into a complex,
2018, major expansion plans to build 45
horizontally structured ecosystem. As per
new service stations in Saudi Arabia over
Deloitte’s global Future of Mobility Analysis;
the next four years.
by 2022, the use of personally-owned
17Deloitte | A Middle East Point of View - Spring 2021 | Fuel retail
Figure 4: Reasons for car non-owners to visit fuel stations
Buy food and drinks from the Take a break
30% convenience shop
(e.g. groceries, snacks, water,
25%
24% soft drinks, etc.)
25%
None, I don’t visit fuel stations
Buy non-food items from the
20% convenience shop
(e.g. camping gear and Fill up fuel for a car I don’t own
14% supplies, cosmetics, cigarettes, (e.g. a rental car, or a car for a
15%
batteries, etc.) friend/family member)
11%
10%
10% 8%
7% Buy food and drinks from
other food retailers Other
5% (fast-food chains, coffee
chains, etc.)
1%
0% Use toilets
What companies can do: Redesigning programs, which ranked second in our
Fuel retailers need to be the value proposition survey as services that customers would
aware that a digitized, The drivers of change discussed above like to be offered by fuel retailers (digital
personalized, and have redefined the context in which payments ranked first).
retailers operate. Fuel retailers need to
seamless customer be aware that a digitized, personalized, As the customer experience is being
experience is increasingly and seamless customer experience is defined, fuel retailers need to look
increasingly becoming the norm rather inwards towards their existing business
becoming the norm than the exception. Thus, they can model and the systems supporting it, to
rather than the leverage technological disruption to assess whether or not they are capable
exception. better serve their customers’ needs and
design a new customer value proposition
of creating and delivering value to
customers in the new business context.
that captures this end-to-end retail This would require fuel retailers to re-
experience. examine the products and services that
they are offering customers as well as the
Our survey indicates that enhancing the channels used to deliver said products
customer experience entails addressing and services.
pain points and providing new services.
Among the vehicle owners surveyed, Simultaneously, the company must ask
nearly 70 percent identified long queues what capabilities would be needed to
as the main pain point they experience create the new customer experience, and
when visiting fuel stations. This provides how must it organize these capabilities
the retail players with the opportunity to around its new objectives in order to
deploy technology in order to improve operate profitably, effectively, and
operations and cut throughput time, thus efficiently. The business model redesign
increasing customer satisfaction. In fact, process is thus both technology-enabled
the survey demonstrates that consumers and technology-induced (Exhibit 3). An
in the UAE are willing to change their awareness of the interplay between
habits by using the Cafu services (an emerging technology, a changing
online fuel delivery service), in order to customer experience, and a new
receive a seamless experience and avoid business model that encompasses them
long queues. Other services can also be is key to future-proof the fuel retail
developed, such as tailored loyalty industry.
18Deloitte | A Middle East Point of View - Spring 2021 | Fuel retail
The evolution Exhibit 3: Future-proofing fuel retailers requires understanding the interdependencies
Players in the GCC fuel retail market need between the experience of the customer, the retailers’ business model,
to fundamentally reimagine and update and emerging technologies
ways of working to appeal to the
customer base which, as our survey
indicates, is experiencing a shift in their
preferences and behaviors. The new
customer value proposition must take Customer
Diffusing technology in the To effectively tailor the value
into account the needs of today’s Experience
marketplace redefines customer proposition underpinning the
consumers, as well as the potential expectations and new customer experience,
needs of the consumers of the future. It simultaneously offers a redesign and revisit of a
also needs to be mindful of the energy business tools company’s business
to deliver the expected model would be
transition that is being shaped by the customer experience required
forces of change discussed hitherto. Fuel
retail businesses might also need to
redefine their business models to add
new services and benefit from potential
new sources of revenue while addressing
current customer pain points. Such an Technological Business
Innovation Model
exercise should be complemented by an
update to existing processes, systems,
and people capabilities; eventually
Setting the right systems and tools in
yielding new and updated gas station place to realize the new business model
archetypes (Exhibit 4). Thus, ensuring fuel requires incorporating digitalization into
retail businesses are equipped with the the company’s ways of working
relevant organizational tools and have a
solid foundation to transform the new
Exhibit 4: The three fuel station archetypes
business model into reality.
Defining the type of station is highly dependent on the location and consumer needs in that area.
by Bart Cornelissen, Energy, Resources Three archetypes of future energy stations are outlined below together with their key features.
& Industrials Leader, Deloitte Middle
East, Managing Partner, Monitor Deloitte, Urban Energy Station Suburban Energy Station Highway Energy Station
Carmen Hamze, Director, Monitor ‘Get the basics right’ ‘Key asset for local community’ ‘All travel needs covered’
Deloitte, Middle East, Abdellatif Smairi,
Senior Consultant and Tatiana Ibrahim,
Consultant, Consulting, Deloitte Middle
East
Endnotes
1. BP 2020 Energy Outlook report
2. “BP to Acquire the UK’s Largest Electric Vehicle • EV “Fast” charging Superior amenties All a travellers’ needs
Charging Company: News and Insights: Home.” capabilities • All features of ‘Urban • All features of ‘Suburban
BP Global • Autonomous drive energy station’ plus: energy station’ plus:
3. Deloitte Future of Mobility Analysis support - ‘Mini-mall’ products and - Logistics hub for online
• Automated fueling and services retailers
payment solutions - Enhanced ‘click and - Extensive vehicle
• Digital engagement with collect’ maintenance facilities
Saudi Aramco in advance - Collaboration space for - Broader range of fuel
of arrival local start-ups products
• Last mile delivery for - ‘Pop-up’ space to - Transport hub for
retail deliveries support local autonomous vehicles
• Bike rental restaurants, shops etc. - Load balancer providing
- Basic vehicle safety storage for autonomous
checks vehicles when demand
is below peak
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