Fuel sales are no longer enough to sustain petrol companies, so they are turning to alternative offers to supplement their business.

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Fuel sales are no longer enough to sustain petrol companies, so they are turning to alternative offers to supplement their business, says Scott Billings.


Would you buy a pint of milk emblazoned with the Shell logo? Probably not - the association with Shell's red and yellow clam identity is so strong it conjures up images of diesel, not calcium. Nevertheless, most of us have come to expect a petrol station to offer milk, along with a healthy spread of other convenience store goods.

Few stations are now without a selection of household products and some of the larger sites boast a mini supermarket. Such service extensions represent the principal effort by petrol companies to diversify their businesses at the retail level. But are they struggling - outside the home territory of fuel - to achieve a brand offer that is credible to consumers? Minale Tattersfield partner David Davis believes so. He has worked for a long list of oil companies on forecourt retail strategy and design.

Despite efforts by major players BP and Shell to launch their own retail stores in the UK - dubbed BP Connect and Shell Select respectively - Davis believes petrol retailers have so far failed to think and operate like retailers and consequently the outlets have not hit home with consumers. 'The corporate mindset is much more focused on the upstream business of refining and exploration and so on. Retail is a minor dot on the map,' he says. 'They pay lip-service to retail branding and design, but haven't passed it down through the whole offer yet.'

Davis cites BP's Wild Bean Café as the best attempt yet at creating a distinct retail brand by a petrol company. Even so, he has reservations. 'It has been heavily promoted, but it isn't quite there. You still can't get a good quality coffee,' he claims.

Another potential convenience store route for petrol companies lies in the formation of strategic alliances with supermarket chains. Shell has linked up with Sainsbury's and Esso has jumped into bed with Tesco. These brands certainly have credibility, but making alliances with such strong brands can have its drawbacks.

'If companies are doing deals with brands such as McDonald's or Sainsbury's, they have to be careful that these brands don't overpower the umbrella brand of the petrol station,' explains Circle director Robert Onion, whose consultancy is working on a number of oil company projects in the Middle East.

Over the coming years the trend will be toward a crop of additional service extensions, says Onion. 'There is a most definite trend to focus on value-added services that can bring extra revenue over and above fuel. Where space allows we will see more of these developments in Europe and the US.'

Profit margins on fuel sales are very slim, particularly in the UK, where around three-quarters of the price of petrol at the pump goes to tax. Even in the oil-rich Arabian Gulf, petrol retailers are running either at the thinnest of margins, or in some cases operating at a loss. 'There is a misconception that these companies make lots of money from fuel sales. Some are making a loss and this puts the emphasis on other ventures,' Onion explains.

For design consultancies this situation presents a rich vein of opportunity, which has begun with the convenience store. 'The margins on fuel are too low to make it a worthwhile proposition, so petrol companies are investing [elsewhere],' says Davis.

But the real innovation - and future work for designers - lies beyond the convenience store. Circle has designed a number of valued-added services for Emarat, a petroleum retailer in the United Arab Emirates. These include Fasttrack, a vehicle repair service (pictured), and Bakeria, an on-site bakery. The consultancy handles branding, strategy, architecture and site layout for Emarat.

Circle has also created a 'reverse vending' system that rewards customers who recycle on-site with tokens that can be redeemed at the Emarat convenience store. 'These are all ways of getting people on to the Emarat sites,' says Onion.

Similar services will probably emerge in Europe in the near future, as fuel margins are squeezed and natural resources decimated. The restriction to European growth is likely to be a lack of physical space for developments. 'The key is having the real estate to implement these additional offers. Petrol retailers need to look at services that make the real estate work as hard as possible,' adds Onion.

Value-added services may prove to be the lifeblood of the industry, as petrol retailers face an intrinsic weakness in their long-term businesses: the Earth is fast running out of the stuff they sell. Confronted with a finite supply, extending their brands and services to generate new revenue streams becomes an imperative, not a luxury.

'We don't talk about petrol stations any more, we talk about retail locations,' says a BP spokesman, the linguistic shift illustrating a changing business strategy. Shell declined to comment on any of its plans for forecourt developments, its claim of commercial sensitivity hinting at designs underway.

This strategic change should prove fruitful for the design industry, as it has the skills to advise on the strategy and presentation of services that drive beyond petroleum. 


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