October 5, 2015

Benchmarking Performance: What Drives Your Success? What Holds You Back?

Insider

Fuel and convenience retail success looks different depending on where you sit. Executive, manager, analyst … each one has a priority that matters most—profitability, growth, risk mitigation, price optimization, site performance, revenue enhancement, accountability or some other goal. But, like the blind men describing the elephant based only on a trunk, tail or leg, it’s easy to forget the bigger picture. 

With clients large and small, we see how easy it is for executives and analysts to be disconnected. Strategy fades from daily tactics. Blame our historically siloed business structures and a lack of tools that can share information across roles without bogging down productivity.

The paradigm, however, is shifting. Increasing VISIBILITY is a key to increasing alignment across all aspects of a business. This is part of the paradigm shift that started for Kalibrate back in the 1970s, when we realized that a defensive focus on cutting costs was not as effective or sustainable as a proactive focus on building profits. We still believe that today.

A focus on building profits takes a clear eye across all aspects of a business. That’s not as easy as it sounds. We find that many fuel and convenience retailers don’t really understand why they are being successful or why they aren’t living up to their potential—sometimes by a wide margin. They don’t know how different parts of the business really contribute, beyond a few financial metrics. 

Even best-practices retailers can be surprised, like the major oil company in Southeast Asia that didn’t realize it was cannibalizing its own network. Or the major U.S. chain who discovered that getting executives and analysts aligned around the impact and nature of volatility could make strategies and tactices more effective. 

Sometimes you get lucky with business decisions. More often, great strategies are fueled by the right conversations and supported with the right solutions.

 

KEY CONCEPT: Benchmarking with the 7 Elements for Fuel and Convenience Retail Success

Around the world, the fuel retailer’s battle for higher sales volume at an acceptable margin never gets easier. At first, volume and margin performance are good. Then competition increases. Fuel retailers typically drop their prices, hoping to maintain market share. Price wars begin. Competition hits a critical mass, then oversaturates. Stable markets become volatile. Some fuel retailers fail. Uncontrollable events happen, like the massive drop in crude oil prices in 2014. Volume—the cornerstone of most fuel retailers’ profitability—becomes harder to achieve. 

Kalibrate has discovered that the retailers who excel focus on 7 Elements for Fuel and Convenience Retail Success. Best-practice fuel retailers maximize performance by considering the role of each element in the daily tactics and strategic goals of their sites—price, location, market intelligence, merchandising, operations, facility and brand. These elements give visibility beyond ROI (return on investment) into VOI (value on investment). Optimizing the 7 Elements depends on a fuel retailer’s specific business, but only an integrated focus can ensure that every possible area of value is being leveraged.

In every market that Kalibrate has studied, the top quartile retailers understand that these 7 elements drive success. They constantly monitor these elements to focus their resources and maximize the effectiveness of their tactics. This is how some retailers are able to thrive when many other simply survive.

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