Report: Consumer Behaviors Impact Retailer Offerings

Headwinds facing the fuel industry are continuing to accelerate since the beginning of the COVID-19 pandemic. More fuel retailers are looking to expand service offerings and accommodate electric vehicles (EVs) as alternative fuels have gained traction and attitudes and consumer behavior continues to evolve.

A new report from Boston Consulting Group (BCG), titled “A New Era for Fuel Retailers,” explores a fuel retail landscape that is evolving at a “faster-than-predicted” pace and the strategies fuel and convenience retailers should implement to survive and thrive amid constant disruptions.

According to the report, which is based on a survey of 33 executives from 20 global retailers, operators with robust retail businesses found that in-store sales and online offers during the pandemic offset sharp declines in gasoline and diesel sales volumes. More recently, as geopolitical uncertainty and volatility have placed upward pressure on oil prices, many operators are realizing that retail is a matter of “business resiliency.” To that end, the survey found that some 70% of top retailers are planning to expand their network in the coming years.

"Beyond extracting the most value from their traditional core business, fuel retailers' survival depends on investing beyond the pump," said Mirko Rubeis, a managing director and senior partner at BCG and a co-author of the report, in a news release. "They need to make ambitious moves into new digital businesses while also adapting the service station [in-store] to support EV and other alternatives fuels, capitalize on their existing real estate and zero in on sustainable mobility."

Leading Trends in the Fuel Retail Landscape

BCG’s report outlined five trends in the fuel retail industry that have stood out in the past few years:

• Alternative fuels are no longer optional. Sales of EVs are rising – in some regions, even outpacing those of internal combustion engine (ICE) vehicles. BCG projects that by 2030, more than 50% of new light-duty vehicle sales in the U.S. will be EVs. Demand for biofuels is also increasing, and regional partnerships in Europe, China and the U.S. are being created to enable the mass market rollout of hydrogen-fueled heavy-duty transportation (e.g., long-haul trucks; buses). As a result, 95% of fuel retailers are either already offering or planning to offer EV charging, and 55% are offering or planning to offer alternative fuels. (This can create more DOOH advertising opportunities via EV charging stations.)
• Advancing mobility forms are changing usage patterns. The pace of technological development in advanced mobility will change the kind of vehicles – and the type of customers – that show up at the service station. The pool is diversifying from purely self-driven vehicles to autonomous fleets and from ICE-only to EVs.
• COVID-19 has altered consumer behavior. Convenience store sales in the U.S. are increasing among those fuel retailers that have adapted their offerings to meet rising consumer expectations around convenience. Sixty-five percent of the fuel retailers surveyed now plan to invest more in their c-stores to enhance the customer experience and improve site efficiencies.
• Digital technologies are expanding retailers' capabilities. Roughly 60% of retailers are using big data analytics to customize their offerings within and beyond the service station. Digital technologies have also enabled individual stations to use dynamic pricing, an important tool for keeping margins high during the pandemic when volumes plummeted.
• Sustainability is taking root. Regulators are adopting more stringent measures to control CO₂ emissions, and price consistency between alternatives and fossil gasoline is becoming a reality. More EVs are becoming available at prices comparable to ICE vehicles, while in some regions renewable diesel is approaching the same price point as petroleum-derived diesel.

These developments indicate a need for fuel retailers to reorient themselves “away from fossil fuel and toward alternatives, and away from the vehicle and toward the customer,” per the release.

With all the changes, BCG highlights four strategic areas of growth retailers should focus on:

• Rethinking a future network for a world in which hydrocarbon fuels no longer dominate.
• Reimagining the station as a mobility and convenience hub.
• Revamping loyalty and personalization programs.
• Driving new growth areas beyond the service station.

"The possibilities for fuel retailers are numerous, but time is in short supply," said Stuart Groves, a managing director and partner at BCG and a co-author of the report, in the release. "Retailers that embrace these imperatives, seriously and swiftly, will not only retain their relevance in the low-carbon economy, but can also look forward to an expansive future."