What is the Future for Service Stations? A number of far-reaching trends are disrupting the fuel retail market. Some of the most powerful of these are the rise of alternative fuels (particularly electricity) for mobility, the emergence of new models in mobility, as well as the evolution of heightened consumer expectations around convenience and personalization. The impetus for these disruptions comes from a multitude of powerful new digital technologies-everything from artificial intelligence (AI) to robotics to the Internet of Things (IoT).
The ongoing shifts will change the contours of competitive advantage in the business and require a fundamental transformation of the standard business model. Fuel retailers must establish a comprehensive response that adjusts the goods and services they offer, adapts their network and business structure, alters the design of the Gas Stations Open Near Me and convenience stores, and harnesses new digital tools.
To aid companies understand what the future will look like and the things they can do to adjust to it, BCG has conducted an in-depth study from the fuel retail industry, detailing four very different market environments that will probably emerge all over the world, each defined by modifications in mobility and consumer lifestyles. Fuel retailers can use these market environment scenarios to analyze how their business might fare within the years ahead under different conditions as well as position themselves to evolve within the short, medium, and long terms. Even though the environments are different from each other markedly, a significant portion of the fuel retail network in certain markets may be unprofitable by 2035-even inside the scenarios in which new mobility models are less disruptive and fossil fuel sales usually do not decline precipitously. In a market environment where electric vehicles (EVs), autonomous vehicles, and new mobility models explode rapidly, as much as 80% in the fuel-retail network as currently constituted may be unprofitable within 20 years.
To prevent this kind of decline, fuel retailers need to take action in three areas. First, they should move from a vehicle-centric business structure to some customer-centric one out of order to capture new product and repair opportunities. This effort entails reinventing the general customer journey and making use of digital tools to prolong the client relationship beyond occasional visits towards the service station. Second, retailers need to transform their network of service stations and assets. This process includes changing formats in a few locations to satisfy customer demand, divesting locations that will not be profitable, and purchasing assets that secure the push into new products and services. Third, they need to develop new capabilities-including digital expertise and, sometimes, capabilities related to entirely new areas like last-mile logistics or real estate property.
To actually adapt, fuel retailers must embrace a brand new mindset. Making modest changes or tweaks for the business will not suffice. Instead, companies must fundamentally rethink their business and aggressively embrace innovation and new technology. People who boldly seize the chance will find themselves in a winning position. Those which do not may be left behind.
The Forces of Disruption.
The pace of disruption inside the fuel organization is breakneck, as alternative fuels grab share, advanced mobility models take off, and consumers expect greater convenience, quality, and personalization. (See Exhibit 1.) In every three areas, advances in digital technology-including big data and analytics, AI, the IoT, robotics and automation, and virtual and augmented reality-are driving and enabling change.
The Takeoff of Alternative Fuels.
Two forces are spurring an upswing of electricity and other alternative fuels. The very first is the rollout of regulations targeted at limiting greenhouse gas emissions. For instance, great britain has mandated that, by 2040, all new cars and vans sold in the united states needs to be capable of achieving zero greenhouse gas emissions, a requirement which will increase demand for battery electric, plug-in hybrid electric, or hydrogen-fueled vehicles.
The second force is technology. As battery costs carry on and decline, automotive OEMs are investing heavily in EVs. By 2030, over a third of all new vehicles sold will likely be fully or partly electric. This development poses an important threat to fuel retailers, especially those that operate numerous stations where fuel purchases take into account a substantial share of profits.
Other alternative fuels are also beginning to gain ground in certain markets. As an example, automakers including Toyota are making an investment in developing hydrogen fuel cell vehicles. Meanwhile, in other areas around the world, a substantial proportion of vehicles already run using alternative fuels such as liquefied petroleum gas (LPG) and compressed gas (CNG), and biofuels are increasing their be part of the gasoline and diesel pools. Vehicles which use an alternate fuel like LPG or CNG still require refueling by way of a traditional fuel retail location-unlike EVs, which users may charge in your own home, at work, or in parking lots, and which therefore pose a substitution threat to Shell Petrol Station Near Me.
The Emergence of Advanced Mobility Models
Nearly two-thirds from the global population will live in cities by 2030, and new digital-centric business models will likely be essential to ensuring efficient urban mobility. Already, ride-hailing services like Uber and Lyft have ushered within the first phase from the era of shared mobility, lowering the car ownership aspirations of younger generations. By 2030, the shared mobility market is likely to be worth nearly $300 billion-and by 2035, we project, shared mobility solutions will take into account nearly 20% of on-road passenger miles.
As shared mobility consistently gain ground, another significant shift will support it: the emergence of autonomous vehicles (AVs). Numerous companies-including both traditional OEMs including Ford and Toyota and new digital players like Google and Uber-are investing heavily in the development of autonomous driving capabilities. As a result, we expect that nearly 25% of brand new cars purchased in 2035 will have the ability to drive themselves with no human involvement whatsoever-with a lot of of the AVs likely to be electric. As autonomous vehicle systems replace human drivers, shared mobility services will become less expensive to customers, encouraging further expansion of such services.
The implications for fuel retailers are significant because the refueling or recharging of shared-mobility-service AVs will commonly occur while the vehicles are empty of passengers, at dedicated AV parking areas located outside urban areas. The result is a decline in customer traffic at service stations and lower fuel and convenience store sales.
The Evolution of Consumer Expectations. Retail customers-including those shopping in convenience stores-have grown to be more demanding throughout the board. They are searching for high-quality, fresh, healthy food options; better value; and more attractive store formats. They also want more personalized goods and services as well as a seamless, convenient experience through options like self-service checkout.
In this environment, retailers are leveraging a vast amount of data off their customers to get an unprecedented level of insight with regards to their preferences. And those efforts will grow increasingly sophisticated. Whereas businesses in the past grouped consumers into segments, retailers in the future should be able to target every person and tailor goods and services to that particular individual’s needs.
These dramatic changes in the retail environment will pose a significant challenge for fuel retailers, which stand to lose customers both to more technical retailers offering fast and simple purchases as well as increasingly innovative e-commerce players. Actually, convenience will increasingly come to mean “delivered towards the home,” as e-commerce firms that offer instant delivery emerge being a significant substitute for the conventional convenience store. Companies such as Amazon are already testing delivery by drone in an effort to substantially reduce last-mile delivery time. Others are addressing the last-mile challenge through partnerships with companies such as Instacart and Uber. In the usa alone, investors have committed $9 billion to a few 125 startups operating in this particular space. Furthermore, retail players are leveraging technology to make a true omnichannel experience that seamlessly integrates online and offline retail. Voice-activated shopping, made possible by the IoT and through AI, is emerging as being a powerful new model in both physical and virtual stores.
Other efforts make an effort to make the in-store experience more efficient and convenient. For instance, emart24 has rolled out unstaffed stores, and Farmer’s Bridge has created walk-in vending machines. Also new to the scene are mobile stores such as Robomart and Mobymart and chains including AmazonGo and JD.com’s 7Fresh (in China) that provide automated checkout. Fuel retailers must take steps to create options that match the rate and ease that these particular formats offer.
The Planet Is Beginning To Change-And Local Implications Vary. The complete impact in the trends that are remaking the fuel retail business will likely be evident inside the next 10 to 15 years. For the time being, however, some markets will change more rapidly than the others. For example, the demand for electric along with other alternative-fuel-powered vehicles, the penetration of AVs, and also the adoption of the latest shared mobility solutions will likely be greater in Northern Europe, North America, and a few fast-developing economies such as China than in most countries in Middle East or Africa, for instance.
Four Future Market Environments – To reflect the disparate pace of change in different parts of the planet, we have now identified four distinct market environments that will likely play out between now and 2035, all of which will have a different effect on fuel retailers’ profitability. (See Exhibit 2.) These four basic environments can serve as signposts in the future, helping companies identify signals of change on the market and measure the effect on their business. Their key features are listed below:
Market environment 1: Fossil fuel remains king. This environment reflects conditions under our most conservative projections. Internal combustion engine (ICE) vehicles carry on and predominate, with limited penetration of electric vehicles. People still rely heavily on personal vehicles, with shared mobility solutions making up only 5% to 10% of all the road mobility. In this environment, the consumer shopping experience is going to be digitally enabled, and seamless purchasing and checkout will be commonplace. Businesses will still target segments of consumers (not individual customers), and traditional human-powered last-mile delivery will remain the norm. Despite the dominance of ICE vehicles, as well as population growth and the emergence of your expanding middle class in developing countries, need for fossil fuel will stagnate or decline slightly. This will be due to some extent to increasingly fuel-efficient vehicles as well as in part to help-albeit limited-penetration of EVs. Because of this, by 2035, within a “do nothing” scenario in which fuel retailers have not adapted for the changing environment, 25% to 30% of fuel retail stores will earn returns below their weighted average price of capital and be at risk of closure.
Market environment 2: There’s a new fuel on the block. Inside the second market environment, countries are in a transitional state before having achieved a vital degree of penetration of EVs. In this particular environment, government regulations and incentives foster EV adoption, and electricity powers nearly one half of the cars on the road. But electric charging infrastructure remains restricted to public spaces in urban locations and to public spaces and homes in surrounding suburbs, with little infrastructure available in rural and remote areas. Consumers in this particular environment will expect levels of integration between offline and online shopping that go beyond the click-and-collect approach. Advanced digital in-store and out-of-store experiences-as an example, ordering products through personal digital assistants at home or using automated checkout in stores-will be common. AI-driven innovation will permit highly personalized offerings in traditional stores and via self-driving mobile on-demand stores. Alternative last-mile delivery models using drones and autonomous robots is going to be on the rise. Although EVs won’t completely dominate this environment, their impact is going to be powerful. If fuel retailers usually do not adjust their model, the decline in their fuel sales will render 45% to 60% of Nearest Petrol Station potentially unprofitable by 2035 and definately will push the typical return on capital employed (ROCE) from the sector to the low single digits.
Market environment 3: All rise, but none dominate. In this environment, adoption of EVs is widespread, there is however also significant need for alternative fuels like hydrogen, LPG, CNG, and biofuels, as governments and other entities support their development. Consequently, the entire share of standard fuels is relatively low. At the same time, many consumers prefer shared mobility answers to owning cars that largely go unused throughout the day. The upshot: nearly 20% of all passenger kilometers in cities are traveled in a few shared mode of transport. Within this environment, the shopping experience will reach its maximum degree of offline and online integration. Drones and autonomous robots is going to be commonplace, bringing products to customers’ doorsteps from urban micro-hubs. Humans will participate directly in just 50 % of all last-mile deliveries. The finances for fuel retailers in this environment is going to be challenging. Although fuels such as LPG and CNG will replace a number of the lost volume of gasoline, they won’t completely offset the effect of rising EV use. By 2035, assuming that the fuel retail model doesn’t significantly change, we expect 60% to 75% of fuel stores to get in danger of unprofitability, with average sector ROCE in negative territory.
Market environment 4: Mobility movesbeyond standard fuels. In the most sophisticated from the market environments, EVs are dominant, and also the AV revolution is well underway. About 10% to 20% of all the new cars sold will be both electric and fully autonomous. Fossil fuels will power just about a quarter of all road mobility energy needs. Additionally, the infrastructure needed to serve a zwvzos number of AVs-to move goods and folks through the entire day, and also to charge overnight and throughout idle times in dedicated areas-are usually in place. On-demand mobility will take into account nearly 30% of all the passenger kilometers in cities, as more people go for shared mobility over vehicle ownership. The retail environment is going to be just like the one outlined in market environment 3. But market environment 4 will need fuel retailers to create even more dramatic change.