Sourced from “Fueled for Thought” by Joe O’Brien, Source North America Corporation
Twenty years ago, the business buzz phrase was “paradigm shift.” Today, the buzzword is “disruption.” Whatever the term, the notion is worth considering. There are ideas afoot in today’s retail fuel market that indicate a change to the conventional business model is under way.
For those operating in the retail fuel industry, not that much has changed over the past 35 years or so, relatively speaking. Sure, the fuels change, payment technologies evolve and the dispensing equipment advances, but the basic principle—and execution—of buying and reselling fuel to the motorists who decide to pull into your station has remained a fairly consistent part of the equation. Customers pull in, pay, pump and pull off.
However, there are several new business models emerging that have the capacity to truly disrupt the fundamental business concepts within our industry. With consumer loyalty and convenience at the heart of their value propositions, and large-scale business-to-business (B2B) partnerships driving the new strategies, these models create business ecosystems that promise to influence buying norms in the retail fueling space. Fuel marketers need to recognize the shift, acknowledge its potential and identify ways to embrace the change to obtain an edge over their competition.
For your consideration, here are a few examples of partnerships developing between fuel retailers and other industry partners that could define the future of the c-store customer pool.
They Sleep, You Sell
International car manufacturer Volvo recently launched a pilot program that enables its customers to order services such as fueling and car washes, which can be completed while car owners are not using their vehicles (working or sleeping, for example). Made possible through a digital key, an authorized service provider accesses the car and completes the requested tasks. When the owner returns to his or her car, it is clean and/or refueled.
The concept of concierge services such as these suggests the possibility that fuel retailers who partner with automakers to provide these services will be able to leverage the car manufacturer’s customer base.
A fuel retailer’s customer base could change from being a somewhat unpredictable collection of consumers to one that includes a consistent set of drivers for a particular make of car. While it will be some time before the impact of these services can be determined, they represent an opportunity for enterprising fuel marketers to begin outlining how partnerships with vehicle original equipment manufacturers (OEMs) might impact their businesses in the future.
“In Touch” with Loyalty and Payment Programs
Other car manufacturers are shaking things up through their in-vehicle loyalty/payment programs. Ford recently partnered with ExxonMobil to integrate ExxonMobil’s Speedpass+™ into its Ford SYNC® 3 touchscreen menu, which enables drivers to authorize payment for fuel without leaving their cars.
As added motivation for using the app, Speedpass+ enables customers to earn loyalty points at Exxon and Mobil stations. In addition, Honda, in collaboration with Visa, Gilbarco Veeder-Root and IPS Group, revealed a proof of concept for its in-vehicle payment platform at CES 2017 in Las Vegas.
The Honda platform allows drivers to pay for fuel and parking via an in-vehicle touchscreen interface. Loyalty and payment perks are already proven to draw repeat business. Retailers who integrate their loyalty programs with the devices and digital interfaces customers use the most stand to benefit greatly from this evolution in the fuel purchasing process.
Need Customers? There’s an App for That
An estimated 650 gas stations in the District of Columbia, Maryland and Virginia have signed up to partner with Upside, a company that developed an app that connects customers to the most competitive fuel pricing in their area.
Here’s how it works from the consumer’s vantage point: Upside negotiates price discounts for fuel sold at individual gas stations, and the prices are then published on a map that customers access via a smartphone app. To claim their discounts, customers use the app to photograph their receipts, after which they receive cash back credits from Upside.
What sets this app apart from other fuel apps that have come before it is its potential for disrupting a longtime pricing practice. It’s no secret that stations cluster near one another in high-traffic areas and, to ensure no particular station on a given corner gains an advantage, each station in the cluster offers fuel for the same price. Upside takes advantage of this competitive environment by offering their fuel discount to the first station in the area that reaches out to Upside. Stations that engage with Upside after the discount has already been claimed by another retailer are shut out of the opportunity.
To help prevent stations from discovering the true price discount being offered to customers in their area, Upside offers different discounts to different users. The exclusive nature of this alternative loyalty program is especially challenging to the current marketplace. However, apps such as Upside represent an opportunity to draw a wealth of new customers. While the margins of the fuel sold to these customers may take a hit, the potential to sell higher-margin soda, snacks and non-fuel services can quickly increase total revenue and profits.
The EMV Connection
Each of these emerging business ecosystems share three common elements: they drive customer loyalty, they are facilitated by advancements in digital technologies and are made possible through industry alliances. So, what does all of this have to do with EuroPay MasterCard Visa (EMV)? Timing.
The delay in phase two of the EMV conversion has diminished the collective sense of urgency. But in this time of unmitigated transformation, retailers who are only looking at the EMV deadline as just that—an EMV deadline—are not seeing the whole picture.
The EMV conversion is a major opportunity for fuel marketers to establish a defined and conscious strategy that drives customer loyalty, and to implement hardware- and software-supported equipment solutions that help grow it. When 2020 arrives, every retailer’s automated dispenser payment terminal will need to be EMV compatible for store operators to avoid financial liabilities.
However, since so many marketers will need to complete upgrades to make the EMV conversion possible, now is a fortuitous time to identify other opportunities—and plan for capital investments—that would benefit your operation. For example, now may be the time to deploy a media-rich in-dispenser marketing platform or a platform that supports in-vehicle payments, while ensuring your EMV equipment choices are in alignment with those secondary initiatives.
In this time of transformation, there are three things retailers can do to position themselves to benefit from the new business models that are surfacing amid the EMV conversion:
- Leverage brand support to the fullest extent. As the ExxonMobil-Ford partnership demonstrates, a brand partner who exhibits an aptitude for growing customer loyalty and establishes alliances with large players in related industries is likely to be an asset moving forward.
- Cultivate a relationship with a knowledgeable and trusted fueling equipment supplier. With direct inroads to fueling equipment manufacturers, fueling equipment suppliers often have insights about planned product innovations in advance of the general public.
- Stay informed and stay engaged in the industry to stay ahead of the competition. As the Upside discount illustrates, the early bird gains the market share.
Joe O’Brien is Vice President of Marketing at Source™ North America Corporation. He has more than 20 years of experience in the petroleum equipment fueling industry. Contact him at JObrien@SourceNA.com.