When the Lights Go On

Prepare now so that you’re not left asking where everyone went.

BY ROY STRASBURGER

Afew weeks ago, my wife, Eva, and I had a lovely meal in London with a couple of our very good friends. The location was a fabulous Italian restaurant in the center of the city. When we arrived, the place was packed. In the intimately lit dining area, every table was filled with couples conversing, friends carousing or businesspeople cutting deals across the table. We had a delightful meal of antipasto and pasta, and we finished the occasion with a leisurely after-dinner drink. During our meal, we were deep in conversation, talking about old friends, new adventures and where we thought the world was headed. Unexpectedly, the restaurant’s lights came up. When we looked around, all our fellow diners were gone. We had, once again, managed to close the restaurant—having had a wonderful time in the process.

Have you ever had that feeling? Being somewhere and suddenly looking around and wondering why you are the last person there? If you’re not careful, you may one day have that same feeling regarding the fuel business.

The retail fuel industry is going through the most disruptive change since the introduction of self-service gasoline. Alternative fuels are a real thing, and electricity is currently leading the charge (see what I did there?).

So, what have you done to prepare yourself for a change in your business, your customer, and your competition? Let’s take each one separately.

Change in business. The retail fuel industry is going through a revolution (not evolution). You may not see it your area, but it is already happening in Europe and California and will be felt in the rest of the United States over the next 10 years. Although gasoline will still be needed, the demand for gasoline is going to go down due to the phasing out of cars with an internal combustion engine. That means that fewer gallons are going to be sold at each retail location. Even if fuel profit margins go up dramatically, it is not going to make up for the loss of gross profit dollars when fewer gallons are sold.

If you are the owner of a site that is barely making it with the current fuel situation, you need to start thinking about how you are going to prepare for the future. Keeping your head in the sand and continuing to do business as usual is not a strategy for success.

Change in customer. Your customers’ expectations of convenience are going to be redefined along with the change in transportation. Two things are going to be at the forefront: ridesharing and electric vehicles. Whether autonomous vehicles become a reality for widespread public use soon is still a big question. What will become more prevalent, though, will be people sharing vehicles and driving less, whether it’s through Uber-like programs, car-ownership sharing programs or a more efficient public transportation system. There will be fewer vehicles on the road and fewer opportunities for people to stop at your store. Customers will start thinking that convenience is based more on delivery, foodservice, unique products, occasional electric charging top ups and innovations that create a destination rather than simply an additional purchase when they fill their tank.

Change in competition. As fuel volumes go down, the retail gasoline business is going to be dominated by the operators who can pump the most gallons at the lowest cost. They will be the last people in the room. High-volume sites are going to need attractions and offers that make them very unique to bring in the remaining internal combustion engine drivers. Not only that, if they decide to get into electric charging stations, their competitors are going to be nontraditional sites that also offer charging stations, such as shopping malls, pharmacies and people’s homes.

The retailers who are going to come out ahead in the recharging game will be those who are located on major thoroughfares where drivers will need to top up on long drives or those located in residential areas where there are not abundant home or apartment charging stations. The fuel retailers who are in the middle of this spectrum—and that is most fuel sites in the United States—will not survive as they are today.

What is the solution? Explore your options. Now is the time to start looking at your future. You need to be ready when the lights come on.

Roy Strasburger is the CEO of StrasGlobal. For 35 years, StrasGlobal has been the choice of global oil brands, distressed assets managers, real estate lenders and private investors seeking a complete, turnkey retail management solution.