By Kalibrate Team
Say “optimization” to a fuel retailer, and most will immediately think of price and fuel margins. Best-in-class fuel retailers think more broadly in terms of optimizing the fuel retail experience, from forecourt to inside the store. Think about it from the customer’s point of view. With so many brands competing for attention, customers aren’t buying just fuel. They’re having an experience, and every aspect counts, from the ease of payments and cleanliness of the facility to the professionalism of staff. And a fuel retailer is only as strong as the weakest element.
In an era of convenience, no single factor (even price) can sustain growth, profitability or performance. Kalibrate’s market intelligence and experience with clients tells us facilities, operations, merchandising and brand can be powerful micro-market differentiators. They can draw customers in or drive them away.
Offering the right products and services, at the right time and with the right attitude, is the art and science of merchandising. Success depends on the correct product mix, adequate inventory, fresh merchandise and a clean, neat appearance. Retailers with best-in-class merchandising practices emphasize category killers. These low-priced, low-margin popular items draw customers into the store, where they tend to make impulse, high-margin purchases.
A facility must fulfill the needs and demands of customers. How easy is it to maneuver into the lot and around the property? Are there enough fueling positions and parking spaces for peak times? Network consistency is also a factor, as it promotes a certain familiarity and comfort level with customers, who like to know where to quickly pick up the products they need. Consistency is an often overlooked challenge for retailers with multiple channels of distribution.
The best facility and location in the world will have difficulty maintaining volume with inadequate operations. Customers expect quick service, courteous employees, well-stocked shelves, well-functioning equipment and fresh fast food. The impact of employees can’t be overestimated. Well-trained, quality people who are retained over time will contribute positively to the bottom line.
Whether local hero or multinational giant, a company’s ethos, quality and consistency is reflected in its brand. Retailers should understand the position of their brand relative to critical mass and saturation. Before a fuel retailer reaches critical mass, the network is vulnerable to competitive threats and acquisitions. Once critical mass is achieved, new sites added to the network will experience greater gains in market share than in outlet share. In other words, as new sites are added to the network, volume share increases at a greater rate than outlet share. On the other hand, once a brand moves beyond saturation, it begins stealing volume from other sites in its own network.
KEY CONCEPT: Forecasting Models Using Multiple Elements
Reliable forecasting models require a sophisticated integration of data science and strategic analytics. Price is not the sole reason consumers make a purchase decision, so a reliable model must also include other relevant decision factors. Without this understanding, a model cannot accurately predict the results of a particular pricing strategy. It cannot predict what will happen to the subject outlet’s volume when it makes a price change. And it cannot predict how a change in price at a subject outlet will impact the performance of its competitors.
Kalibrate’s method for determining a single price recommendation for each fuel grade sold enables clients to realize the highest possible margin while maintaining volume. By considering the integrated impact of multiple elements for success, Kalibrate’s models more reliably predict sales performance.
The Analysis. We randomly selected a sample of 30,000 retail petroleum outlets from our data warehouse and analyzed them to understand the relationship between some of their key success elements and performance. This sample is part of the detailed information—more than 100 pieces of data per site—Kalibrate has collected for more than 2,000,000 petroleum stations through onsite visits.