The 2021 Memorial Day Weekend marked the official start of what has been widely projected to be a very busy summer travel season in the United States. As American motorists rekindle their affinity for taking to the highways for summer vacation, put largely on hiatus last year amid the pandemic, they will increasingly rely on convenience stores for fuel, snacks, and sundry other purchases en route.
The greater demand for products and services from “c-stores” occurs as these businesses contend with a dramatic shift in the competitive landscape from a year ago.
“This year was devastating for both consumers and brick-and-mortar businesses, and GetUpside is on a mission to help people and businesses do better so our local communities grow stronger,” said Meredith Sadlowski, president of the Fuel and C-Store unit of GetUpside, a mobile app that informs motorists of cash-back promotions with participating retailers.
The GetUpside app links 30 million people with tens of thousands of brick-and-mortar businesses throughout the United States, said Sadlowski, whose previous roles include chief commercial officer within Carlyle Group of Companies’ Infrastructure Energy Fund and 10-plus years with Gulf Oil, most recently as senior vice president of Gulf’s Branded unit, overseeing more than 2,000 retail outlets. She explained the free app uses retail processor data and machine learning algorithms to learn about each individual customer, personalizing the retail experience and helping retailers see how their promotions influence customer behavior.
In a recent conversation with Rigzone, Sadlowski offered her insights on the transition underway in U.S. fuel retailing, the prospects for expanding automation in the value chain, and more. Read on for her perspectives.
Rigzone: Looking back a year ago, what were fuel retailers worrying about?
Meredith Sadlowski: In May 2020, fuel retailers were worried about winning all the remaining gallons on the road, following COVID-19 safety precautions, and the drop in higher-margin convenience store purchases.
GetUpside collected data from more than 40,000 fuel retail locations nationwide to capture how fuel consumption changed throughout the pandemic. When COVID-19 response measures began in March 2020, fuel sales were down by as much as 75% in areas like New York and San Francisco. By the end of Q1, sales nationwide were down by more than 40%, after being roughly flat for decades. Then by the end of Q3, leading into Q4 2020, sales were still down 21% in most areas (in comparison with the change in average daily fuel transactions from this time in 2019). And since 80% of c-stores are attached to a gas station, c-store sales were also heavily impacted and retailers were unable to guide shoppers into the store to buy higher-margin products.
Retailers on GetUpside were largely insulated from these effects. The platform gave retailers the opportunity to sustain their volume levels or prevented them from experiencing the kind of drops in sales that the rest of the market experienced. All without building or acquiring new stations in their portfolio.
In numbers, at the point when volume at non-participating sites (sites not on GetUpside) was down 22%, volume at participating sites (sites on GetUpside) was only down 10%. In the cases where the percentage of volume that GetUpside drives increase – we saw some instances where GetUpside was driving nearly 5% of all a merchant’s volume.
We did this by capitalizing on an extraordinarily high-value prospect segment during the pandemic: delivery drivers. On the whole, grocery delivery was up 150%, restaurant delivery was up 67%, and home package delivery was up 65% as a result of COVID-19. These drivers were driving as much as 75 to 100 miles (121 to 161 kilometers) per day, filling up and buying snacks while on the go. Finding a way to attract these delivery drivers was key, so GetUpside invested in delivery partnerships that bring those gallons to our merchant partners.
Rigzone: Fast-forward to now, what are they worrying about?
Sadlowski: Today retailers are worried about the same things: gallons, competition, and c-store purchases. But now we can add the uptick in mergers and acquisitions and a changed demand for fuel to the mix.
The effects of COVID-19-related sales drops were compounded by the uptick in mergers and acquisitions. Fewer dealer sites were left to supply in the market, making it difficult for merchants to grow their station portfolios and win more gallons.
Customer buying behavior has changed, too. With the vaccine rollout strong and the arrival of summer weather, people will certainly take to the road again. Fuel will be an important commodity for years to come. But with new technologies, savvier market entrants, legislative shifts to green energy, and changing buying behavior resulting from COVID-19, it is true that people need less fuel. The Energy Information Administration (EIA) estimates it will take years for fuel demand to return to 2019 levels, if ever.
When market conditions were stable, sign price was a good way to reach customers that were driving by a station and loyalty programs captured customers that had strong brand affinity. But today, sign price adjustments and loyalty are not driving new, additional gallons to the most competitive retailers today.
To be clear, top-performing retailers are using sign price and loyalty programs as effectively as possible. Advances in sign pricing software and loyalty programs have gotten the industry very far. But now the most competitive retailers are joining the next wave of innovation. They have layered on new ways to find customers and influence their buying habits, so more customers choose them and buy more when they are on site. GetUpside is an example of such a tool.
Rigzone: How much would you expect fuel retailers to be back to “normal” this summer? Which aspects of their business/competitive environment do you think will be permanently different given the pandemic-related upheaval?
Sadlowski: With the vaccine rollout strong and the arrival of summer weather, people will take to the road again. Fuel will be an important commodity for years to come, but people will need less of it. If the EIA is right, it will take years for fuel demand to return to 2019 levels, if ever. For all the reasons already discussed, people’s buying habits have permanently changed.
Our survey of 1,300 fuel customers nationwide tells us that price is the number one factor that influences a customer’s buying decision. When market conditions were stable, sign price was a good way to reach customers that were driving by a station. But in 2021 coming out of the pandemic, customers are more price-aware than ever, and apps like Google Maps, Waze, and Apple Maps show customers real-time pricing and influence their purchasing decisions by routing them right to the lowest price. While demand for fuel stays stagnant at these low post-COVID levels, the options available to customers are only increasing with new market entrants like unbranded retailers and sophisticated chains. So, while sign price will always be relevant, competitive retailers understand that the traditional tactics that come with competitive pricing are time consuming, sacrifice margin, and only reach the customers that can physically see the sign. So, they’re looking for different ways to reach customers on the road when they’re looking to fill up.
When it comes to retention, loyalty programs are great for keeping customers with strong brand affinity so they are not swayed by a nearby competitor’s sign price. But in our analysis of 1.7 billion transactions nationwide, customers use fuel loyalty programs for only 9% of their purchases. This has forced the most established fuel retailers to rethink the way they find and retain customers, taking on new tactics that more effectively influence the 91% of purchases that are unrelated to loyalty programs in this volatile market environment.
Today’s market challenges present retailers with an opportunity to think differently about their business. Customer buying decisions are most heavily based on price, and the tools retailers have used to win customers to date have gotten the industry very far. Now competitive retailers are finding their future customers using digital tools, so they can change customer behavior and earn proven profit.
Rigzone: What effects might these changes have further upstream, say, at the pipeline/storage and refinery levels?
Sadlowski: The EIA data shows that U.S. oil production remained strong in March and April. With the summer driving season kicking off and crude prices remaining over $55 per barrel, there is continued incentive for producers to drill. While stocks will be plentiful, the overall decrease in demand year-over-year for fuel will continue to squeeze margins at the refinery level. Midstream (pipeline/storage) margins should remain stable, but overall retailers will continue to have the most flexibility with margins as shown over the last 12 months.
Rigzone: Heading into what will likely be a busy summer, how are retailers (and those higher up in the value chain) positioning themselves for growth while managing challenges tied to staffing, logistics, etc.? For instance, are there automation technologies that can help?
Sadlowski: Internally, retailers are using technology to automate administrative responsibilities such as invoicing and pricing systems. In addition, some retailers are migrating away from in-house scheduling and automating their fuel purchase process. Externally, the most sophisticated retailers are looking at technology like GetUpside to drive demand to their existing portfolio and generate more profit.
To contact the author, email mveazey@rigzone.com.
"fuel" - Google News
June 01, 2021 at 08:52PM
https://ift.tt/3paYZXh
USA Fuel Retailers Face Much Different Summer - Rigzone News
"fuel" - Google News
https://ift.tt/2WjmVcZ
Bagikan Berita Ini
0 Response to "USA Fuel Retailers Face Much Different Summer - Rigzone News"
Post a Comment