petroleum article.pdf

7/27/2019 Petroleum Article.pdf

1/4

T h e p e tr o le u m r e ta i li n g i n du s tr y i n A s ia a n d M i dd l e E a st f a ce s

s i gn i fi c an t c h al l en g es . W i t h l o w p r od u ct d i ff e re n ti a ti o n, l a ck o f

c u st o me r l o ya l ty, c o up l ed w i th i n te n se c om p et i ti o n, d u e t o

d er eg ul at io n, a s i n In di a, t he v ar io us p la ye rs w il l tr y t o g ai n

s h ar e f r om e a ch o t he r. T h is w i ll e x er t d o wn w ar d p r es s ur e o n

margins and f orce players to ad opt new and i nnovative

strategies.

I n d i a h a s d er e g u l at e d t he p r i ci n g m e c h an i s m fo r re t a i l

p et ro le um , e na bl in g n ew p la ye rs t o e nt er t h e m ar ke t, w h ic h

was once a fiefdom of the public sector. The entry of new

p la ye rs l ik e R el ia nc e, w il l g ro w t he n um be r o f s ta ti on s f ro m

e x is t in g 1 9, 0 00 t o o v er 2 3, 0 00 - 25 , 00 0 i n n e xt 4 - 5 y e ar s . T h is

will reduce the average throughput per station, and total fuel

volu mes per play er. With mark et dete rmin ed pric ing

m ec ha ni sm , p ri ce s w il l h av e t o b e l ow er ed , t hu s r ed uc in g

m a r gi n s f r o m f u e l p r o d uc t s .

I n U AE p ri ce s a re s ti ll re gu la te d b y t he g ov er nm en t.

H o we v er, t he c u rr e nt 3 p l ay e rs A d no c D i st ri b ut i on , EP P CO ,E ma ra t, te nd to l os e m on ey o n r et ai l p et ro l, du e t o h ig he r

i n te r na t io n al c r ud e p r ic e s. A l so , b y 2 0 05 w h en G AT T c o me s

into force, the UAE market is likely to op en up to further

competition.

Petroleum Retailing - The future is now

I n S i ng a po r e, t h e 4 l e ad i ng p l ay e rs E x xo n M ob i l , S he l l, C a l te x

a nd B P, a cc ou nt f or o ve r 95 % o f t he r et ai l fu el s al es .

S i ng a po r e i s c h al l en g ed w i t h l i mi t ed g e o g ra p hy f o r a d di t io n o f

n e w s t at i on s . W i th l i mi t ed g r ow t h i n n u mb e r o f v e hi c le s , t h e

r e ta i l f u el v o l u me s w i ll r e m ai n s t ag n an t , o ff e ri n g l i tt l e s c op e

f o r i m p r ov i n g r e v e nu e s a n d ma r g i ns .

Petroleum Retailing Product or Service?

I n g ro wth ma rk ets , th e ma jo r i mp era ti ve sh ou ld be t oi nc re as e p ro fi ta bl e r ev en ue s a nd m ar ke t s ha re g ro wt h. T he

p e tr o le u m r e ta i le r s w i ll n e e d t o d e ve l op d i f f e re n ti a te d v a l ue

p r op o si t io n s, t o i m pr o ve r e ve n ue s a n d th e ir b o tt o m l i ne s ; b y

a d op t in g a c u st o me r f oc u ss e d ap p ro a ch a n d bu i ld s t ro n g

b r an d e q u it y. To d r iv e r e ve n ue s a n d m a rg i ns , t h e r e ta i le r s w i ll

have to attract new customers or i ncrease share of their

e x is t in g c u st o me r s' w a ll e t. T h e l a tt e r c a n b e a c hi e ve d b y

o f f e ri n g n o n - fu e l pr o d u ct s a n d s e r v ic e s . N o n - fu e l pr o d u ct s ,

which offer higher margins compared to petroleum products,

e na bl e c om pa ni es t o s us ta in t he ms el ve s, e sp ec ia ll y d ur in gtimes when oil prices are high. Though these products and

s e rv i ce s h a ve b e en po p ul a r i n t h e We s t, th e ir im p or t an c e i s

b ei ng r ec en tl y f el t i n th is r eg io n. I n di an f ue l re ta il er s h av e

s t a rt e d o f f e ri n g g r o ce r y, f oo d s , l a u n dr y f a c i li t i e s, f re s h f o o d s,

e tc . a t t he c on ve ni en ce s to re s. U AE r et ai le rs a re u pg ra di ng

a n d a dd i ng s i mi l ar f a c il i ti e s, t o a t tr a ct c u st o me r s, a n d m a ke

them spend more time and money at their facilities.

P e t r o l e u m r e t a i l i n g i s a p r o d u c t a n d s e r v i c e , w i t h

d i f f e re n t i at i o n p o s s ib l e i n e i t h er or b o t h a r e a s.

K n o w y o u r c u s t o me r :

I n d ev el op in g p ro du ct s a nd s e rv ic es , t he k ey i s t o u nd er st an d

your customer. Segmentation is a powerful tool to help

m a rk e te r s i d en t if y t h e r e qu i re m en t s o f t h e c u st o me r s.

Indi a UAE Singapore

Land Area (sq k m s) 3,2 87,590 83, 600 692

Popu lat ion (m m ) 1, 045 3.5 4. 6

GDP ($ bn) 2, 660 71 112

Per Cap it a G DP ($) 2, 545 20, 286 24, 348

Ro ads (k m s) 3,3 19,644 4 ,835 3,0 66

Re gist ered Vehi cles (m m ) 60. 00 0. 61 0. 70

- m m l trs 48,00 0 3 ,300 850

- $ m m 35,00 0 800 725

Avg pri ce / l tr ($) 0.73 0.24 0.85

Re tai l St ati ons 19,00 0 630 222

Fuel consum p ti on/v ehi cl e (l trs/ annum ) 800 5 ,410 1,2 14

Fuel throughp ut/ stat i on (m m lt rs /annu m ) 2. 5 5.2 3. 8

(A ll values in US dollars)

K e y R a t i os :

Retai l Fuel S al es Market:

Key I ndi cators Comapri son

I EV W


2/4

F o r e g. M o b il s e g me n te d t h e U S p e tr o le u m c o ns u me r s i n to 5

segments:

Mobil's customer segmentation in the US:

Mobil identified the top 3 segments as being the most

p r of i ta b le a n d d e ve l op e d it s p r od u ct s a n d s e rv i ce s t o c a te r to

the tar ge t cus tom ers ' req uir eme nts . An ex erc ise to

u nd er st an d t he c us to me r s eg me nt s c an go a lo ng w ay f or

l oc al p et ro le um r et ai le rs t o i de nt if y t he t ar ge t s eg me nt s a nd

d ev el op in g t he a pp ro pr ia te s tr at eg y. C ed ar h as s eg me nt ed

the retail market in Dubai, as outlined below:

P r od u c t a n d S e r vi c e D e v e lo p m en t :

O nc e t he c ho ic e o f t ar ge t s eg me nt i s i de nt if ie d, p ro du ct s a nd

s e rv i ce s n e ed t o b e t a il o re d t o t h ei r r eq u ir e me n ts . T he t a rg e t

c us to me r sh ou ld d ri ve t he v al ue p ro po si ti on , fo r bo th f ue l

and non-fuel products and services.

F u e l B a s ed P r op o s i ti o n : In the western markets, petroleum

r et ai le rs s el l m u lt ip le g ra de f ue ls b as ed o n t he o ct an e r at in gs ,

with different prices at different stations, where the customer

c a n h u nt f o r a b ar g ai n . In UA E, w h er e u n le a de d f ue l is t h e

n or m, 2 g ra de s a re a va il ab le , O ct an e 9 5 a nd 9 8. H ow ev er,

the Octane 98 petrol accounts for less than 5% of the over

3 . 3 b i l li o n li t re s c o ns u me d .

T h is c o ul d be a t tr i bu t ed t o

the 25% premium over

the Octane 95 produ ct

p ri ce , wh ic h i s a dmi ni st -

e re d by th e g ov ern me nt.

H ow ev er, wi th th e l ar ge

high-end car population, an

o pp ortu ni ty e xi st s i n th em a r k e t t o i m p r o v e t h e

p e r c e p t i o n o f p r o d u c t

s u p e r i o r i t y a n d i m p r o v e

the bottom line. In India

too, with the introduction of stringent pollution norms,

c ou pl ed w it h t he g ro wt h i n la rg e c ar s, t h e s up er io r p ro du ct

b as ed o p p or tu ni ty i s l ar ge . T he f ir st m ov er a d va nt ag e n ee ds

to be captured and capitalised through a mix of customer

e d u c a t i o n a n d

m a r ke t i n g a c t iv i t i es .

S i t e S e c u r i t y :

Wi th ex pe cte d ne w

c o m p e t i t i o n , s i t e

security is the key. In

U AE a nd I nd ia , w it h

the expansion of roads

n et wo rk , th e e xi st in g

players book the key

s i t e s , t o b e a t f u t u r e

competition. However,development of the sites is undertaken once the road

b ec om es o pe ra ti on al . T he c ha ll en ge i s t o u se a s ci en ti fi c s it e

s el ec ti on m od el , t o e ns ur e t ha t t he s it e i s p ro fi ta bl e o nc e i t i s

operational.

S i t e R a t i o n a l i s a t i o n : E v e n t h o u g h s i t e s e c u r i t y i s

r e q u i r e d , i t i s c r i t i c a l f o r m a n a g e m e n t s t o m o n i t o r

p e rf or ma nc e o f t he ir e x is ti ng a nd n e w s ta ti on s. L o ss m ak in g

s t at i on s n e ed t o b e i d en t if i ed , a nd c o rr e ct i ve a c ti o ns t a ke n t o

m ak e t he m p ro fi ta bl e. I f t ur na ro un d i s n ot p os si bl e, i t i s b es t

to close them and divert the resources for other sites oractivities.

Site Upgradation: T h e r e gi o na l p la y er s h a ve r e al i se d t ha t

h a vi n g a n a t tr a ct i ve s ta t io n , w i th f r ie n dl y s t af f, an d o f fe r in g a

Retail customer segmentation in Dubai (Cedar Research)


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r ang e of n on -f ue l p rod uct s a nd s erv ice s, i s t he k ey to ge t

c us to me rs t o d ri ve i nt o t he ir s ta ti on . D ep en di ng o n t he s it e

s pa ce a va il ab il it y, t he v ar io us p la ye rs i n In di a an d UA E h av e

s t a rt e d r e n o va t i n g t h e i r e x i s ti n g s i t e s, t o o f f e r a n i n t e rn a t i on a l

l oo k a nd f ee l. T he c ha ll en ge i s t o p ri or it is e t he s it es t ha t n ee d

to be upgraded first and which could start offering higher

c o nt r ib u ti o n d u e t o t h e c h an g e.

N o n -F u e l B a s ed P r o po s i t i on :

To g et a l ar ge r s ha re o f th e cu st ome rs' w al let , no n- fu el

p ro du ct s a nd se rv ic es a re n ec es sa ry. No n- fu el re ve nu es

c o nt r ib u te s i gn i fi c an t ly f o r t h e p e tr o le u m r e ta i le r s U S (3 9% ) ,

F ra n ce ( 25 % ), E u ro p e ( 1 5% ) . I n t h e U AE , i t a v er a ge s 1 2% -

1 5 % f o r v a ri o us p l ay e rs , a nd o f fe r s s i gn i fi c an t o p po r tu n it y f o r

d e v e l op m e n t i n t h e r e g i on , e s p e ci a l l y i n I n d i a .

T he n on -f ue l p ro du ct s a nd se rv ic es c an b e b ro ad ly g ro up ed

i n to 3 c a te g or i es :

C o nv e ni e nc e s t or e s ( C S t or e s)

Auto Care Services

Ancillary Services

Convenience Stores:

T he c on ce pt o f C s tor es t hou gh re la ti ve ly n ew i n I nd ia, ha s

got established in the U AE for past 3-5 years. However the

a nn ua l a ve ra ge r ev en ue p er s q f t i n UA E i s $ 32 5 c om pa re d t o

$550 in the US and $800 in UK. The average value per

transaction in U AE is less than $3, compared to $6 in the U K.

F a c t o r s c o n t r i b u t i n g t o t h e s u c c e s s o f C s t o r e s

proposition:

Product mix d rives the C -stores shopp ing. In the UK,

To b ac co ( 3 7% ) , c o nf e ct i on e ry & s n a c ks ( 1 8% ) a n d s o f t d r in k s

( 8% ) a re t he l ea di ng c at eg or ie s. I n th e UA E, d ue t o t he w id e

a v a i l a b i l i t y o f c i g a r e t t e s i n s u p e r m a r k e t s , c i g a r e t t e

co ntri but ion i s on ly 14 %. I t w il l be th e s ame ca se i n Ind ia,

where there are cigarette kiosks at every nook and corner.

T he c ri ti ca l i ss ue i s t o o ff er a p ro du ct a ss or tm en t t ha t d ri ve s

the target customer traffic. This could also be in terms of

o f fe r in g f r es h g r oc e ri e s, f re s h f o od s , c o ff e e, h ot s n ac ks , e tc .

Also, special promotions in terms of discounts on high margin

p r od u ct s c a n d r iv e v o lu m es ( e g. F o u n ta i n s o ft d r in k s) .

S t or e l a yo u t a n d a p pe a ra n ce a t tr a ct c u st o me r s t o s p en d m o re

time in the store. This can be based on research to track the

m ov em en t o f c us to me rs , a nd h e nc e t he l ik el ih oo d o f t he m

p i c k i n g t h e p r o d u c t . S i n c e o p e r a t i n g C - s t o r e s r e q u i r e

d i f f e r e n t s e t o f c a p a b i l i t i e s i n t e r m s o f s u p p l y c h a i n

m a na g em e nt a n d s o ur c in g , t h e C - st o re s o p er a ti o ns c o ul d be

o ut so ur ce d. I n U AE , a ll o p er at or s c on tr ac t t he f re sh f oo ds

ma na ge me nt to t he f oo d su pp li er s w ho re pl en is h s to ck s o n

c on su mp ti on a nd t ak e b ac k t he u nu se d s to ck b as ed a ft er

e xp ir y d at e. A r ed uc ed r i sk m od e l is a n a ll ia nc e o r co mp le te

o u ts o ur ci n g, e sp e ci a ll y i n th e b r an d ed h ot f o od s c a te g or y l i ke

pizzas, coffee, burgers, etc.

Auto Care Services:

Auto care services complement the fuel services. These

i n cl u de l u be c h an g e, ca r w a sh , w h ee l & ty r e s e rv i ce s , c a r

u p h o l st e r y c l e a ni n g , mi n o r r e p a ir s e rv i c e s, e t c. A l l o f t h e se

c on tr ib ut e t o t he i nc re me nt al s h ar e o f t he c us to me rs ' w al le t.

T he c ar wa sh a nd au to c ar e a ve ra ge a ro un d 7 % a nd 4% of

the total revenues for fuel retailers in Japan and U S. In the

UAE i t i s b et we en 1% -2% . Al so , th e l ub e t o f ue l v ol ume

r at io i n UA E i s 0 .2 6% , co mp ar ed t o 1 % in te rn at io na ll y.

H ow ev er, i n t he U AE i t i s o bs er ve d th at w he re t he se s er vi ce s

a r e a v a i l ab l e , t h e i r u t i l i sa t i o n i s h i g h , t h e r ef o r e , t h e y s h o u ld be

a v ai l ab l e a t m o re n u mb e r o f l o ca t io n s. I n I n di a t h es e s e rv i ce s

offered a t the stations are at a n ascent stage, d ue to thecustomers unwillingness to pay the price. Small garage

o pe ra to rs t en d t o o ff er t he se s er vi ce s a t a m u ch l ow er p r ic e.

T he c ha ll en ge i s t o u nd er st an d t he c us to me rs ' w il li ng ne ss t o

C st o res

Su ccessF act o rs

C st o res

Su ccessF act o rs

St o re

Ap p earan ce

St o re

Ap p earan ce

Pricin gPricin g

FoodFood

ServiceService

P r o d uc t M i xP r o d uc t M i x

Dist rib u t io nDist rib u t io nLayoutLayout

Pro mo t io n sPro mo t io n s


4/4

p a y , a n d d e s i g n t h e s e r v i c e , c o u p l e d w i t h r i g h tc o m mu n i c at i o n t o p r o mo t e t h e m.

Ancillary Services:

ATMs, laundry facilities, Internet access, mosques (in the

M id d le E as t) , e tc . g et t he c us to me r t o d ri ve i nt o t he s ta ti on ,

a nd i ncre as e h is sp en di ng . Ema ra t ( Sh am il ) a nd Ep pco

( Ta s j e el ) i n UA E a l s o o f f e r c a r te s t i ng , r eg i s tr a t i on , a nd a u to

i n su r an c e f a ci l it i es , w h ic h a r e c e rt i fi e d b y t h e a u th o ri t ie s . T hi s

p r ov i de s t h e c u st o me r a o n e- s to p -s h op f o r t h e c a r' s a n nu a l

c he ck -u p, a nd o th er f or ma li ti es , wi th t he l ux ur y o f a n ai r-

c o nd i ti o ne d f ac i li t y, i n l es s t h an 3 0 m i nu t es c o mp a re d t o t h e

h a lf - da y a t g o ve r nm e nt f a ci l it i es . Do o r- t o- d oo r se r vi c e i s a l so

o f f e re d , w h ic h r e q u i re s e v e n l es s e r t i m e .

O th er a nc il la ry s er vi ce s c ou ld b e p ot en ti al ly o ff er ed t o

i n c l ud e c o u r ie r s er v i ce s , ca r r en t a l s, e t c, d e p en d i n g o n t he

c us to me rs ' r eq ui re me nt s. T he i de a i s t o m ak e t he p et ro l

s t a ti o n i n to a d e s ti n a t io n f o r t h e c u s to m e r vi s i t . P e tr o l e um

m ar ke ti ng h as a s tr on g n on -f ue l e le me nt , w hi ch c an b e

l e v e r a g e d f o r d i f f e r e n t i a t i o n i n a c o m m o d i t y m a r k e t

environment.

N o n F u e l R e v e n u e

p e r c u s t o m e r

Confecti onery

Ci garettes

S o f t D r i n ks

K i osk

Ki osk

H o t F o o ds

F r e s h G r o ce r i e s

C S t o r e

L u b e C h a n ge

Car Wash

S e r vi c e S t a t i on

C Store

A u t o S e r v ic e s

A n c i ll a r y S e r v i ce s

D esti nati on

N o n F u e l R e v e n u e

p e r c u s t o m e r

Confecti onery

Ci garettes

S o f t D r i n ks

K i osk

Ki osk

H o t F o o ds

F r e s h G r o ce r i e s

C S t o r e

L u b e C h a n ge

Car Wash

S e r vi c e S t a t i on

C Store

A u t o S e r v ic e s

A n c i ll a r y S e r v i ce s

D esti nati on

Customer Loyalty Programs:

We have been discussing the subject of acquiring/retaining

c u s t om e r s a n d u n de r s t an d i n g t h e i r re q u i re m e n ts . C u st o m er

l oy al ty p ro gr am s e na bl e o rg an is at io ns w or ld wi de t o a ch ie ve

these goals. The loyalty program ensures that the customer

limits the use of competitors' facilities, due to various

i n c e nt i v e s, wh i c h a r e o f f e re d t o h i m . S e c o nd l y, it c a n c a p t ur e

the buying behaviour of the customer in terms of the types

o f p r od u ct s, p u rc h as e f r eq u en c y, a m ou n t s p en t , l o ca t io n s

u s e d , e t c . C o m p a n i e s c a n u s e t h i s v a l u a b l e d a t a t od i f f e re n t i at e a n d d e v e l op t he i r p r o d uc t a n d s e r v ic e o f f e ri n g s ,

b a s e d o n t h e c u s to m e rs ' r e q u ir e m e nt s , t h e r eb y i m p ro v i n g

r e ve n ue s a n d p r of i ta b il i ty. Fu e l C a rd s a r e b e in g u s ed i n t h e

U A E a n d r e c e n t l y i n I n d i a , b u t p r i m a r i l y f o r f l e e t

m a na g em e nt . I n ve s tm e nt i n te c hn o lo g y i s r e qu i re d , t o l i nk a l l

the forecourt and non-fuel facilities to a common data

s ys te m. T h is i nv es tm en t c an g o a l o ng w ay i n u nd e rs ta nd i ng

the customer.

T h us , a s t ra t eg y b a se d o n b u il d in g s t ro n g a n d d if f er e nt i at e dvalue propositions is particularly relevant for petroleum

r e ta i le r s i n th i s r e gi o n, w it h a n op p or t un i ty t o b u il d re v en u es

and enhance profitability.

Manish Kotwala is A ssociate Director -

A sia/Middle E ast, Cedar Consulting.

O f f i ce s i n P r i nc i p a l C i t i es o f t h e W or l dwww.cedar-consulting.com

d ia0 3 N i r ma n K e n d r aff E M os es R oa d

ah alaxm io mb a y 4 0 0 0 1 1

d ia+ 91 2 2 6 66 1 9 80 0

+ 91 2 2 6 66 1 9 80 1ind ia@ced ar-consulting.com

M i d d le E a s tPO Box 417851102, Al Attar Tower

Al Mak toum StreetDeira, Dub ai, UAET + 97 1 4 2 21 04 44F + 97 1 4 2 24 94 54E m id d [email protected]

C e d a r M a n a g e m e n t C o n s u lt i n gInternational LLC3 0 0 P ar k A v en u e, 1 7 t h F l oo r N ew York , N Y 10022, USA T + 1 2 12 5 72 63 14F + 1 2 12 5 72 64 99E am ericas@ced ar-consulting.com

S o ut h E a st A s ia / C h i n a1 0 W i n ds o r Pa r k H i l l R o a dS i n g a po r e 5 7 4 20 0M + 6 5 9 0 68 5 7 74E seasia@ced ar-consulting.com

Cedar Technomic1 1 8 S . C l in t o n St . , S ui t e 3 7 0Ch icago, IL60661T: +1 312-575-9626F: +1 312-575-9627

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