Is There a Future for Service Stations? Several far-reaching trends are disrupting the fuel retail market. One of the most powerful of these are the rise of alternative fuels (particularly electricity) for mobility, the emergence of new models in mobility, and also the evolution of heightened consumer expectations around convenience and personalization. The impetus for these disruptions comes from a multitude of powerful new digital technologies-everything from artificial intelligence (AI) to robotics to the net of Things (IoT).
The ongoing shifts will alter the contours of competitive advantage in the market and require a fundamental transformation from the standard business structure. Fuel retailers must establish a comprehensive response that adjusts the services and products they sell, adapts their network and business structure, alters the layout with their https://locationsnearmenow.net/gas-station-near-me-open-now/ and convenience stores, and harnesses new digital tools.
To aid companies understand what the long run can look like and what they can do to adjust to it, BCG has conducted an in-depth study from the fuel retail industry, detailing four completely different market environments that are likely to emerge all over the world, each defined by changes in mobility and consumer lifestyles. Fuel retailers can utilize these market environment scenarios to evaluate how their business might fare inside the years ahead under different conditions and also to position themselves to adapt within the short, medium, and long terms. Although the environments differ from one another markedly, a substantial area of the fuel retail network in certain markets might be unprofitable by 2035-even in the scenarios by which new mobility models are less disruptive and fossil fuel sales do not decline precipitously. In a market environment by which electric vehicles (EVs), autonomous vehicles, and new mobility models remove rapidly, approximately 80% in the fuel-retail network as currently constituted may be unprofitable within 20 years.
To prevent such a decline, fuel retailers need to take action in three areas. First, they have to move coming from a vehicle-centric business structure to a customer-centric one in order to capture cool product and service opportunities. This effort entails reinventing the entire customer journey and ultizing digital tools to prolong the customer relationship beyond occasional visits towards the service station. Second, retailers must transform their network of service stations and assets. This procedure includes changing formats in certain locations to satisfy customer demand, divesting locations that will not be profitable, and investing in assets that keep the push into new products and services. Third, they have to develop new capabilities-including digital expertise and, sometimes, capabilities linked to entirely new areas like last-mile logistics or real estate.
To ensure that you adapt, fuel retailers must embrace a new mindset. Making modest changes or tweaks to the business will never suffice. Instead, companies must fundamentally rethink their business and aggressively embrace innovation and new technology. The ones that boldly seize the chance will find themselves in a winning position. Those which do not may be left behind.
The Forces of Disruption.
The pace of disruption in the fuel company is breakneck, as alternative fuels grab share, advanced mobility models explode, and consumers expect greater convenience, quality, and personalization. (See Exhibit 1.) In all three areas, advances in digital technology-including big data and analytics, AI, the IoT, robotics and automation, and virtual and augmented reality-are driving and enabling change.
The Takeoff of Alternative Fuels.
Two forces are spurring the increase of electricity along with other alternative fuels. First is the rollout of regulations geared towards limiting greenhouse gas emissions. For instance, great britain has mandated that, by 2040, brand new cars and vans sold in the country should be capable of achieving zero greenhouse gas emissions, a requirement that can increase need for battery electric, plug-in hybrid electric, or hydrogen-fueled vehicles.
The second force is technology. As battery costs continue to decline, automotive OEMs are investing heavily in EVs. By 2030, greater than a third of all new vehicles sold will likely be fully or partly electric. This development poses a significant threat to fuel retailers, especially those that operate numerous stations where fuel purchases account for a substantial share of profits.
Other alternative fuels will also be starting to gain ground in some markets. For example, automakers including Toyota are purchasing developing hydrogen fuel cell vehicles. Meanwhile, in other parts around the world, a substantial proportion of vehicles already run on alternative fuels including liquefied petroleum gas (LPG) and compressed natural gas (CNG), and biofuels are increasing their be part of the gasoline and diesel pools. Vehicles designed to use an alternate fuel like LPG or CNG still require refueling by way of a traditional fuel retail location-unlike EVs, which users may charge in the home, at work, or even in parking lots, and which therefore pose a substitution threat to Gas Near Me.
The Emergence of Advanced Mobility Models
Nearly two-thirds in the global population will live in cities by 2030, and new digital-centric business models will likely be essential to ensuring efficient urban mobility. Already, ride-hailing services like Uber and Lyft have ushered in the first phase in the era of shared mobility, lowering the car ownership aspirations of younger generations. By 2030, the shared mobility market may very well be worth nearly $300 billion-and also by 2035, we project, shared mobility solutions will account for nearly 20% of on-road passenger miles.
As shared mobility continues to gain ground, another significant shift will support it: the emergence of autonomous vehicles (AVs). Numerous companies-including both traditional OEMs including Ford and Toyota and new digital players including Google and Uber-are investing heavily in the creation of autonomous driving capabilities. As a result, we expect that nearly 25% of new cars sold in 2035 will have the capacity to drive themselves without any human involvement whatsoever-with a lot of of these AVs apt to be electric. As autonomous vehicle systems replace human drivers, shared mobility services will end up less expensive for customers, encouraging further development of such services.
The implications for fuel retailers are significant since the refueling or recharging of shared-mobility-service AVs will commonly occur whilst the vehicles are empty of passengers, at dedicated AV parking areas located outside urban areas. The result will certainly be a decline in customer traffic at service stations and lower fuel and convenience store sales.
The Evolution of Consumer Expectations. Retail customers-including those shopping in convenience stores-have grown to be more demanding across the board. They are looking for high-quality, fresh, healthy food options; better value; and much more attractive store formats. Additionally they want more personalized goods and services and a seamless, convenient experience through options such as self-service checkout.
Within this environment, retailers are leveraging a vast amount of data from their customers to gain an unprecedented degree of insight regarding their preferences. And the ones efforts will grow increasingly sophisticated. Whereas businesses before grouped consumers into segments, retailers in the future can target every individual and tailor services and products to that individual’s needs.
These dramatic modifications in the retail environment will pose a significant challenge for fuel retailers, which will lose customers both to more technical retailers that offer fast and simple purchases and to increasingly innovative e-commerce players. Actually, convenience will increasingly visit mean “delivered towards the home,” as e-commerce firms that offer instant delivery emerge as being a significant option to the traditional convenience store. Companies including Amazon already are testing delivery by drone as a way to substantially reduce last-mile delivery time. Others are addressing the last-mile challenge through partnerships with companies such as Instacart and Uber. In america alone, investors have committed $9 billion for some 125 startups operating in this space. In addition, retail players are leveraging technology to create a true omnichannel experience that seamlessly integrates online and offline retail. Voice-activated shopping, made possible through the IoT and by AI, is emerging as a powerful new model both in physical and virtual stores.
Other efforts make an effort to make the in-store experience better and convenient. For instance, emart24 has presented unstaffed stores, and Farmer’s Bridge has created walk-in vending machines. Also a new comer to the scene are mobile stores such as Robomart and Mobymart and chains including AmazonGo and JD.com’s 7Fresh (in China) offering automated checkout. Fuel retailers must take steps to produce options that match the rate and ease that these formats offer.
The World Is Beginning To Change-And Native Implications Vary. The full impact in the trends that are remaking the fuel retail business will be evident inside the next ten or fifteen years. In the meantime, however, some markets will change more rapidly as opposed to others. For example, the interest in electric along with other alternative-fuel-powered vehicles, the penetration of AVs, and the adoption of the latest shared mobility solutions will be much higher in Northern Europe, North America, and some fast-developing economies including China compared to most countries in Middle East or Africa, as an example.
Four Future Market Environments – To mirror the disparate pace of change around the world, we have now identified four distinct market environments that will likely play out between now and 2035, each of which will possess a different impact on fuel retailers’ profitability. (See Exhibit 2.) These four basic environments can serve as signposts for the future, helping companies identify signals of change available in the market and assess the effect on their business. Their key features are the following:
Market environment 1: Fossil fuel remains king. This environment reflects conditions under our most conservative projections. Internal combustion engine (ICE) vehicles still predominate, with limited penetration of electric vehicles. People still rely heavily on personal vehicles, with shared mobility solutions making up only 5% to 10% of road mobility. In this environment, the buyer shopping experience will be digitally enabled, and seamless purchasing and checkout will be commonplace. Businesses will still target segments of consumers (not individual customers), and traditional human-powered last-mile delivery will always be the standard. Despite the dominance of ICE vehicles, as well as population growth and also the emergence of the expanding middle class in developing countries, interest in fossil fuel will stagnate or decline slightly. This will be due in part to increasingly fuel-efficient vehicles as well as in part to advance-albeit limited-penetration of EVs. Consequently, by 2035, within a “do nothing” scenario by which fuel retailers have not adapted towards the changing environment, 25% to 30% of fuel retail stores will earn returns below their weighted average cost of capital and stay in danger of closure.
Market environment 2: There’s a whole new fuel on the block. Inside the second market environment, countries are in a transitional state before having achieved a critical amount of penetration of EVs. Within this environment, government regulations and incentives foster EV adoption, and electricity powers nearly 50 % of the cars on the road. But electric charging infrastructure remains limited to public spaces in urban locations and also to public spaces and homes in surrounding suburbs, with little infrastructure available in rural and remote areas. Consumers within this environment will expect amounts of integration between offline and online shopping that go past the click-and-collect approach. Advanced digital in-store and out-of-store experiences-as an example, ordering products through personal digital assistants at home or using automated checkout in stores-is going to be common. AI-driven innovation will permit highly personalized offerings in traditional stores and via self-driving mobile on-demand stores. Alternative last-mile delivery models using drones and autonomous robots will be on the rise. Although EVs won’t completely dominate this environment, their impact will be powerful. If fuel retailers tend not to adjust their model, the decline inside their fuel sales will render 45% to 60% of Nearest Petrol Station To My Current Location potentially unprofitable by 2035 and will push the average return on capital employed (ROCE) of the sector for the low single digits.
Market environment 3: All rise, but none dominate. Within this environment, adoption of EVs is widespread, there is however also significant interest in alternative fuels such as hydrogen, LPG, CNG, and biofuels, as governments as well as other entities support their development. Because of this, the overall share of non-renewable fuels is comparatively low. Simultaneously, many consumers prefer shared mobility solutions to owning cars that largely go unused through the day. The upshot: nearly 20% of all passenger kilometers in cities are traveled in certain shared mode of transport. Within this environment, the shopping experience will reach its maximum level of online and offline integration. Drones and autonomous robots is going to be commonplace, bringing products to customers’ doorsteps from urban micro-hubs. Humans will participate directly in just half of all last-mile deliveries. The finances for fuel retailers in this particular environment is going to be challenging. Although fuels including LPG and CNG will replace a number of the lost volume of gasoline, they won’t completely offset the effect of rising EV use. By 2035, assuming the fuel retail model doesn’t significantly change, we expect 60% to 75% of fuel stores to become in danger of unprofitability, with average sector ROCE in negative territory.
Market environment 4: Mobility movesbeyond standard fuels. Inside the most sophisticated from the market environments, EVs are dominant, and the AV revolution is well underway. About 10% to 20% of all the new cars sold will be both electric and fully autonomous. Non-renewable fuels will power just about a quarter of all the road mobility energy needs. Furthermore, the infrastructure necessary to serve a zwvzos number of AVs-to transport goods and people throughout the day, and to charge overnight and throughout idle times in dedicated areas-are usually in place. On-demand mobility will make up nearly 30% of passenger kilometers in cities, as more people go for shared mobility over vehicle ownership. The retail environment will be like the one outlined in market environment 3. But market environment 4 will need fuel retailers to create even more dramatic change.