By Janet Tooke, VP Strategy Group
How can you establish where opportunities for growth exist in your retail fuel and convenience networks? Where should you spend your capital to maximize return on network investments? Which sites in the network have potential to pump more volume or generate more shop revenue? Which sites are damaging your brand because they are situated on the wrong piece of real estate?
Quadrant analysis is the process by which it is possible to reveal the strengths and weaknesses of your retail fuel and convenience network, whether your organization already owns it or it's a potential acquisition. Existing volumes and shop turnover are not necessarily indicators of future potential. By understanding key variables that drive a service station’s volume and shop turnover, it is possible to project future potential for each site in your network and therefore the potential volume and shop turnover potential of your entire network.
Is Your Retail Network Fit For Growth?
In the quadrant analysis process, a service station is assessed and categorized into one of four quadrants based on actual volume output versus potential volume output. The projection requires a calculation that includes several elements, namely market (competition), location, facilities, operations, merchandising, brand and pricing. During the quadrant analysis itself, though, we look at only one of these elements: the location strength or “dirt strength” of the site. The location strength of a site is calculated and scored based on the fuel and convenience demand generated by the site’s trade area demographics (i.e., population statistics, number of houses, number of vehicles and average household income) as well as by the number of vehicles that pass the site daily.
The quadrant chart compares sites to the market average for both actual volume throughout and location volume.
The four quadrants:
High Performance/Low Potential
These are sites that have above average sales but below average locations. They perform above their projected location strength volume. This is often due to little competition in the area on better real estate. These sites are vulnerable to competitors opening a stronger site close by in the future. Most companies retain these sites because of their superior performance, but keep an eye on competitor developments.
High Performance/High Potential
These are the high performing sites in the network (the stars), having above average sales and strong location strength. High performing brands in a market typically have a considerable percentage of their sites in this quadrant. This is the quadrant that requires protection from competitor takeover attempts.
Low Performance/Low Potential
These are poor performing sites with below average sales and locations. The sites falling into this quadrant are often reviewed for possible divestment or closure. These are commonly small and poorly maintained sites with possible negative consequences for the brand image of the network.
Low Performance/High Potential
These sites have below average volumes with above average locations. This quadrant reflects the best opportunity for improving sales volumes in the network. A drill-down on a site-by-site basis to assess volume drivers aside from location strength (e.g., competition, facilities, operations, merchandising, brand and pricing) can reveal the causes for the lower performance of these sites. In many cases, it is possible to rebuild or make other changes (e.g., add new forecourt, change price, improve c-store, etc.) to move these sites from this quadrant to the high performance/high potential quadrant. By running simulations through the Kalibrate Retail Network Planning Model for each of these sites, it is possible to project volume and c-store uplift as a result of a number of capital and operational interventions.
When considering how best to optimize an existing or future retail fuel and convenience network, the first place to start is to understand where the existing sites fall in terms of a quadrant chart. This is the key that unlocks understanding future potential for the network.
Kalibrate Strategy Group has assisted many clients through the quadrant analysis process using our Retail Network Planning tool as the source of the key volume drivers. Through a joint workshop with clients, Kalibrate planning consultants are able to interrogate all sites in each quadrant to identify opportunities for network improvement.
Kalibrate Strategy Group consultants have over 20 years of deep fuel and convenience strategic planning experience with some of our consultants having come directly from retail management positions within the oil industry itself. Our knowledge and sophisticated planning tools have resulted in us providing consulting services and expertise to major international oil companies on strategic market planning, including the vital process of quadrant analysis. We can help you:
• Know which of your outlets are positioned for improvement opportunities.
• Identify divestment candidates that are in poor locations.
• Understand which of your outlets are vulnerable because they sit on inferior locations.
• Learn from your outlets that have high performance and high potential and protect them.
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