4 Approaches to Growing Your Commercial Fuel Network

2 August, 2018

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Across any industry, the best and most successful retailers today have data science at their core. According to a recent study by Forrester Consulting, of the companies who consistently exceed profit expectations and blast past their goals — the leaders in their industries — 88 percent of them use data science to drive retail success.

The fuel and convenience retail market is no exception. In order to grow your commercial fueling network, you can no longer rely on your gut feelings. You need to use data to inform your decisions. But sometimes, translating this data into a comprehensive growth strategy can be tough. That's why we pulled together this list of four approaches to growing your fuel network.

4 approaches to growing your fuel network

1. Begin with location planning

Before you can begin growing your retail fuel network, you must recognize where you stand in relation to competitors in your market. A poor choice of location can lead to years of struggling and thousands of dollars down the drain.

Fortunately, with a location planning tool, you can do some basic benchmarking to understand how well you're performing in your network. Measure this market efficiency in terms of how much volume your site is commanding in the market in comparison to your share of stations. If you're doing a good job, this ratio should be at least 1. In other words, if you operate 30 percent of the stations in a given area, then you should be commanding 30 percent of the market volume.

However, best-in-class retailers will command two, three, or even four times that ratio. They're able to drive much higher volumes within the available volume in the market because of factors like:

  • Where they build their sites
  • The types of facilities they offer
  • How they operate

By using a location planning tool, you can figure out which sites are performing well and why. You can figure out what your competitors have that you don't — and whether or not this is affecting your stations' performance.

2. Identify the real competition

Once you know where you stand in the market, you can use a business intelligence solution to establish which competitors are having a real impact on your performance.

Many fuel retailers will try to conduct a competitive analysis by considering everybody in the market. But not every station in your area provides genuine competition. If you're a bigger retailer that's good at integrating the seven elements for retail success into your approach, then you don't necessarily need to compare yourself to the smaller station operator.

Analyzing the wrong competitors has three consequences: missed opportunities, wasted time, and wasted money. By taking advantage of the key competitor analysis in a market intelligence solution, you can identify the true competitive set in your market and use that information when implementing pricing strategies and tactics for growth.

Remember: this should not be a one-off exercise. The market can change on a day to day basis — competitors build new sites or make new investments — so you have to update your competitive analysis frequently.

3. Focus on pricing

When trying to grow your retail fuel network, there may be a temptation to use price changes as a short-term lever for volume growth. Our advice: don't.

Price is not a strong lever for growing volume. It may have an immediate impact — you can lower your price today and feel the benefits within 48 hours — but you'll stimulate unwanted reactions in the market. Other sites will move quickly to equalize this tactic, and you'll start a price war.

Pricing does affect volume, and you should consider it while trying to grow your fuel network. Take advantage of a fuel pricing solution to optimize your pricing strategy. But focusing on price alone is a mistake. For long-term sustainable growth, price appropriately and then focus on optimizing other volume magnets.

4. Develop your volume magnets

Growing your fuel retail network depends on optimizing these magnets to their full potential. Once you understand your competitors' strengths and weaknesses and can contrast those against your own, you're ready to dive into other volume magnets to increase your sites' competitiveness using a market intelligence software.

These other magnets include things like parking space, quality of service, and the range of inventory in-store. All of these can affect retail volume performance, so even if you find that one of your sites is underperforming, there's still the potential to turn it into one of your most profitable sites based on these other attributes.

If you find that you have a poor set of locations, with low performance and low potential, it may seem like strategic options are limited. Do you sell those sites and risk someone else building better stations there? Is it worth investing a cent in those outlets? Ultimately, that depends on the site itself and your business goals.

Depending on the site, you might find that investing in the other volume magnets increases its profitability. If it's an older site where all historical investments have depreciated, so the only associated cost is the variable cost of staff and supplies, then it's likely not an expensive site to run. You might find you're really happy with a low potential site simply meeting its objectives.

Many options for success

Location planning, competitive analysis, pricing optimization and investing in other volume magnets are four broad, successful approaches to understanding why your retail network performs the way it does and where you need to improve. But the options for change can be quite varied.

Each site will have its own constraints. Using the right tools to analyze where you're being held back, you can figure out what the real drivers for network success are in the market today. How you act on those insights is up to you — but make sure those actions are driven by comprehensive, accurate data.

Don't shoot from the hip. Don't be reactive. Let the data tell you what is truly happening in the marketplace and follow that science toward growing your retail network, driving your success, and becoming a leader in your industry.

Ready to get started? Contact Kalibrate today.

Talk with a Kalibrate Strategy Specialist

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