Within the fuel and convenience retailing market, demand and consumer behavior can often times be erratic and sensitive to factors that are out of your control. Across different sites, different daily, weekly and seasonal cycles of demand can develop. Understanding these cycles is critical to maintaining an appropriate strategy and maximizing your retail network's profitability.
There are three distinctive types of demand factors — typical, artificial and disruptive — that can affect the cycles at any given site. These factors layered over one another create complicated demand cycles that can be difficult to navigate. To help you understand and manage these disparate cycles, we'll dive into the three categories of impactors and how to react to these impactors when they arise.
Typical factors that affect demand tend to be steady and more predictable than the artificial and disruptive factors. They tend to be focused around different periods of the day, week, month or year. Despite their predictability, they can still be varied and complex. These factors include:
All of these elements layered over one another create the base demand for a site. But there isn't a 'one size fits all,' making it difficult for retailers to plan and strategize around. For example, even sites that are all transient, have the same average demographics, and the same holidays are going to have varied cycles from site to site.
Demand complexity also increases as artificial factors are introduced, as these artificial impactors need to now be overlaid on the typical demand cycle, and the two will almost never follow the same cycle. Artificial demand impactors are those that are introduced mainly by retailers themselves, such as:
These artificial impactors have become the norm for today's mature market. Along with the typical demand factors, these artificial factors increase the complexity of a site's demand cycle. Imagine a poorly-branded site on a transient route that offers a car wash and fresh food options — that demand cycle has many factors pulling it in different directions, which can be tough to decipher and respond to. The key is understanding the degree to which the typical demand cycle is impacted by the artificial disruptors and how.
Disruptive factors are the third type that can affect demand cycles. These are the factors that are not necessarily cyclical, but can impact the overall demand both long and short term at an individual site, or your network as a whole. These include:
None of these factors are steady or certain, which can make it difficult to understand how they affect demand cycles and how to deal with them when they arise.
As the market matures, the key to managing complex demand cycles is understanding how these typical, artificial and disruptive factors work together, how they can all be used to understand your network behavior and how they can help drive your strategy.
You must find a balance between a quick and automatic reflex, and a flexible and incremental change, in response to these many factors. Different sites, markets and products will need to be managed differently to ensure you're maximizing your network's share of the available demand. Be careful that pricing frequency is managed appropriately given the market dynamic — it may be tempting to adjust prices immediately to increase demand, but this is a shortsighted tactic that contributes to long-term volatility.
Also, the frequency with which you may need to assess these many factors will depend on your retail network's stage of maturity. If you're in the latter stages of maturity, it is likely that typical and artificial demand levels have probably been established for a while, so the only time your cycles would shift is if there's a significant disruptor.
However, in the early stages of maturity, such as deregulating markets, it could take decades to reach stability. There's more potential for disruption as everyone is finding their feet and consumers are becoming more and more price aware. Just one new retailer could shake up the entire market. In this case, you may want to assess your demand cycles more frequently.
A smart market intelligence tool will allow you to review your cycles frequently and automatically.
By understanding your demand cycles and managing them appropriately given your network maturity and the market dynamic, you can optimize your strategy, boost demand and maximize total site profitability.
Contact Kalibrate to learn more about how we can help you navigate through these disparate demand cycles.