Shell SA

SHELL SOUTH AFRICA

SHELL SOUTH AFRICA

Quality Retail Offering to Grow

Across Shell Fuel Network PRODUCTION: Manelesi Dumasi

‘We put the service back into service-station, ensuring you always leave us a little happier than when you arrived’ is the message from Shell South Africa, and by building partnerships with some of the country’s most recognisable brands to deliver quality across its network, this message has a sound framework to support it.

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BUSINESS PROFILE INDUSTRY FOCUS: AUTOMOTIVE

SHELL SOUTH AFRICA

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At the start of July, the Department of Energy (DoE) announced that prices at the petrol pumps would fall; a welcome reprieve for motorists around the country. A decrease of 68-69 cents on 95 ULP and LRP, and 93 Octane, ULP and LRP sees customers paying R12.86 per litre.

This is the second consecutive month that prices have fallen.

Prices of Diesel (0.05% sulphur), 0.005% sulphur and illuminating paraffin have also fallen with the DoE citing global oil prices as the driver behind the decrease.

“The prices of petroleum products decreased, on average, in the international markets in line with the lower crude oil prices.

Oil Prices have reached their lowest point for the year as light sweet crude supplies particularly from the United States as well as Libya and Nigeria (unbound by the Organisation of Petroleum Exporting Countries (OPEC) cut agreement) continue to rise,” said the department.

But lower prices don’t mean an influx of customers for the country’s fuel retailers. Unlike other industries, fuel pricing is highly elastic in South Africa thanks to a tightly regulated market, so attracting customers remains tricky, despite the fact that they will pay slightly less for certain fuel products.

So how do the country’s petrol retailers attract drivers? What makes a commuter or traveller pull in to refuel? What differentiates one service station from the next?

This is the challenge faced by fuel companies across the country, and one of the world’s biggest, Shell, has positioned itself at the front of the industry by partnering with other brands to offer its customers more than just a ’fuel and go’ offering.

Back in 2013, Shell started

a relationship with Vida e Caffe, South Africa’s premier coffee retailer, to bring the Cape Townbased company’s European espresso bar culture to the Shell fuelling network.

The development of this relationship was driven by changing demographics and changing demands from a rapidly changing consumer base. Shell’s Head of Retail Marketing, Yaasier Abrahams told Enterprise Africa last year: “People’s lifestyles have evolved and consumers are looking for much more than just fuel when visiting a service station.”

He said that the reputation and brand-strength of Vida e Caffe, combined with the nationwide reach of Shell had resulted in ‘absolutely phenomenal feedback’ and the roll out of Vida stores at Shell service stations quickly reached more than 100 sites.

To help further enhance the customer offering, Shell and Vida worked together to develop a new brand, Torrador. A secondary brand of Vida e Caffe, Torrador offers the traditional Vida product range but allows for tailoring of services depending on location, especially with food.

In January 2016, Vida opened its 100th store in the Shell network at Dorp Street in Stellenbosch, demonstrating the country-wide demand for the idea, and today Vida covers a total of 150 Shell outlets.

The partnership has had the desired effect with Abrahams claiming that turnover and basket size in Shell convenience stores has increased since the launch. “Where we’ve put in coffee shops, we’ve seen the basket size in the store increase and we’re also seeing an uplift in fuel volumes because we’re attracting more consumers from the forecourt into the stores,” he said last year.

With the market heavily regulated, attracting customers through fuel price is not an option and so pushing quality products and quality relationships are critical parts of the offer. Shell has taken a long-term view on this strategy and over the years has partnered with a number of leading SA brands including Steers, Pharmashop 24, Clicks, Discovery Insure, Spar, KFC, Vida e Caffe, and more. These partnerships twinned with industry-leading fuel and lubricant products make for a brand with serious clout.

Abrahams explains that today, the Shell brand is highly-regarded among South Africans and the global organisation realises the potential of the SA market.

“From a brand recognition perspective, we do a global customer tracker on a quarterly basis that we have completed that for the past 15-20 years. Our internal brand metrics show us we are tracking very favourably in terms of brand preference as well as premium fuels perception and we’re currently sitting at an all-time high. From an external perspective, our local Sunday Times does a ‘Top Brands’ survey every year and in 2014, the Shell brand was sitting at fourth in the market behind Engen who is the largest player in the market. Last year, we shifted from fourth to second so we see that strategies and activities are being well-received.

“We are part of the growth segment within the Group and we will be seeing a lot more investment as we continue to grow and deliver value. We have a growing population where 50% is considered youth with long term GDP forecasts looking positive, as the middle class starts to grow and more people within the economy become upwardly mobile and have access to vehicles and have greater

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INDUSTRY FOCUS: AUTOMOTIVE

discretionary spend. We think it bodes well for the future of this country. We have a population of 55 million and yes, income inequality is still high, but the trajectory is very positive for us and the group recognises that.

“A good enabler for our growth not necessarily present in other markets is our service champions who are able to upsell products and build one-on-one relationships with customers,” he says.

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INNOVATING THE RETAIL SPACE Regarding the popular Shell-Vida e Caffe partnership, the success remains absolute. “We have around 620 service stations and 150 now have Vida full barista-served coffee,” says Abrahams. “We’ve had an aggressive roll out this year,” he adds. “It’s been going really well especially considering the tough economy that we’re faced with. Our local consumers love having our Vida staff making coffee for them

amidst the humdrum of their daily journeys.”

Adding to the offering for customers at Shell, Discovery Insure and Clicks have also come on board as fuel rewards partners, contributing loyalty rewards for members who refuel at Shell service stations. In November, Discovery Vitality - which already had a long-standing relationship with Vida e Caffe – began offering Vitality Active Rewards.

INDUSTRY FOCUS: AUTOMOTIVE

SHELL SOUTH AFRICA

“It’s been very successful,” admits Abrahams. “Together with our partners we have provided our customers with convenient offers whatever their mission, and rewarded them for their patronage and behaviour in terms of our fuel rewards partners.”

He highlights once more the importance of a successful retail offering in driving consumer demand and ensuring market share retention. Clearly, partnerships are vital to Shell’s strategy.

“Because margins are regulated, the non-fuel retailing space is incredibly important to us and our retailers.

“It’s an exciting time for us.

As consumers wants and needs have changed, and as technology has shifted, it’s opened up so many opportunities for Shell.

The opportunity to engage with customers across new platforms, such as social media, is allowing us to engage and converse with customers rather than just talking at them, and that is really rich for us.”

When Shell entered the South African market 115 years ago, the focus was simply the sale of paraffin and kerosene.

Today, arriving at a Shell service station, a consumer is greeted by a selection of world-class petroleum products, an industry leading retail operation, and much-desired services from carefully selected partners. “We’ve partnered with Clicks across their loyalty programme and we’ve seen phenomenal results where, in a market where fuel demand is declining because of the broader macro economy, to offer customers value with our partners has helped us defend and grow our fuel volumes and grow our other offers,” explains Abrahams.

“We also have expanded our footprint of Quick Service

Restaurants and we have more than 100 at our forecourts, catering to the growing demand for food across the network.”

FUELLING THE FUTURE Despite a flagging economic situation and a general feeling of uncertainty surrounding the country’s short-term future, Abrahams remains positive and says that Shell is committed to the SA market with further investment to come.

“We’re one of the first markets globally to be launching the new positioning for Shell V Power building on our technical heritage that we’ve built with Ferrari over the years as well as the recent endorsement of our V-Power fuels by BMW M,” he says.

“In the loyalty space, there’s a lot of development happening and this is an area where we have seen good growth. We have already introduced contactless payment for fuel at the pump across the network to facilitate faster and easier payments for our customers and we’ve seen some adoption. We’re also continuously looking to improve and evolve our Convenience Retail Offers as consumers wants, needs and expectations change.

“Both globally and locally food is increasingly important; people want fresh, they want healthy, they want the food-for-now and foodfor-later opportunities, and they want nutritional value so there are good growth opportunities to explore as the market evolves.

From a partnership perspective, we started piloting with Spar as a grocery alliance partner and we will be looking to expand with Spar going forward. We had three Spar pilots within the network as of last year and by the end of this year we’ll have 10 and we’ll also be looking to scale that up at selected

locations where the customer mission warrants over the next few years.”

And has Abrahams personal experience of the development of Shell South Africa’s retail offering been something that he is proud of and looking forward to continuing?

“You get this sort of opportunity once in a lifetime,” he says. “Where you are able to invest and build CVPs (customer value propositions) for your market, this is the stuff that allows you to leave a legacy for the next generation. It’s very exciting,” he adds.

“It’s important for the SA population as Shell through our retailers employ almost 20,000 forecourt staff and that is a significant contributor to an economy where you have 27% unemployment. We want to make a positive difference for our people but also for consumers in today’s challenging times. If we can make their journeys a little better every day, that is a good purpose to get up for,” he concludes.

The claim from Shell that to ‘Go Well’ you should ‘Go Shell’ and that certainly seems to be true, and looks like it will only be getting stronger in the future.

SHELL SOUTH AFRICA +27 11 996 7000 info@southafrica.shell.com southafrica.shell.com

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