Is There a Future for Service Stations? A number of far-reaching trends are disrupting the fuel retail market. Among the most powerful of these are the rise of alternative fuels (particularly electricity) for mobility, the emergence of new models in mobility, and the evolution of heightened consumer expectations around convenience and personalization. The impetus for these particular disruptions comes from an array of powerful new digital technologies-everything from artificial intelligence (AI) to robotics to the net of Things (IoT).
The ongoing shifts will change the contours of competitive advantage in the industry and require a fundamental transformation in the standard business structure. Fuel retailers must establish a comprehensive response that adjusts the goods and services they offer, adapts their network and business design, alters the layout of the Nearest Gas Station To My Location and convenience stores, and harnesses new digital tools.
To assist companies know what the near future will look like and the things they can do in order to adapt to it, BCG has conducted an in-depth study from the fuel retail industry, detailing four very different market environments that will likely emerge around the world, each defined by alterations in mobility and consumer lifestyles. Fuel retailers can use these market environment scenarios to assess how their business might fare inside the years ahead under different conditions and also to position themselves to evolve within the short, medium, and long terms. Even though environments vary from one another markedly, an important part of the fuel retail network in certain markets may be unprofitable by 2035-even in 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, up to 80% in the fuel-retail network as currently constituted may be unprofitable in approximately 15 years.
To avoid such a decline, fuel retailers need to take action in three areas. First, they should move from a vehicle-centric business model to a customer-centric one out of order to capture new product and service opportunities. This effort entails reinventing the entire customer journey and using digital tools to increase the customer relationship beyond occasional visits for the service station. Second, retailers have to transform their network of service stations and assets. This method includes changing formats in a few locations to satisfy customer demand, divesting locations that will never be profitable, and purchasing assets that support the push into new products and services. Third, they have to develop new capabilities-including digital expertise and, sometimes, capabilities linked to entirely new areas including last-mile logistics or property.
To ensure that you adapt, fuel retailers must embrace a whole new mindset. Making modest changes or tweaks to the business will not suffice. Instead, companies must fundamentally rethink their business and aggressively embrace innovation and new technology. The ones that boldly seize the opportunity will discover themselves in a winning position. Those that do not may be left behind.
The Forces of Disruption.
The pace of disruption within the fuel company is breakneck, as alternative fuels grab share, advanced mobility models remove, and consumers expect greater convenience, quality, and personalization. (See Exhibit 1.) In all 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 the increase of electricity and other alternative fuels. The very first is the rollout of regulations geared towards limiting greenhouse gas emissions. As an example, great britain has mandated that, by 2040, brand new cars and vans sold in the nation needs to be able to achieving zero greenhouse gas emissions, a requirement that can 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, more than a third of all the 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 account for an important share of profits.
Other alternative fuels can also be beginning to gain ground in a few markets. As an example, automakers like Toyota are purchasing developing hydrogen fuel cell vehicles. Meanwhile, in other parts around the world, a substantial proportion of vehicles already run using alternative fuels including 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 alternative fuel including LPG or CNG still require refueling through a traditional fuel retail location-unlike EVs, which users may charge in the home, at work, or in parking lots, and which therefore pose a substitution threat to Shell Near Me.
The Emergence of Advanced Mobility Models
Nearly two-thirds in the global population will live in cities by 2030, and new digital-centric business models will be critical to ensuring efficient urban mobility. Already, ride-hailing services such as Uber and Lyft have ushered in the first phase of the era of shared mobility, decreasing the car ownership aspirations of younger generations. By 2030, the shared mobility market may very well be worth nearly $300 billion-and by 2035, we project, shared mobility solutions will account for nearly 20% of on-road passenger miles.
As shared mobility continues to gain ground, another significant shift will support it: the emergence of autonomous vehicles (AVs). Numerous companies-including both traditional OEMs such as Ford and Toyota and new digital players like Google and Uber-are investing heavily in the creation of autonomous driving capabilities. As a result, we expect that nearly 25% of brand new cars purchased in 2035 will have the capacity to drive themselves without human involvement whatsoever-with a lot of of those AVs probably be electric. As autonomous vehicle systems replace human drivers, shared mobility services can 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 as 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-are becoming more demanding over the board. They are trying to find high-quality, fresh, healthy food options; less expensive; and a lot more attractive store formats. They also want more personalized goods and services along with a seamless, convenient experience through options such as self-service checkout.
In this environment, retailers are leveraging a huge amount of data from their customers to achieve an unprecedented degree of insight about their preferences. And those efforts will grow increasingly sophisticated. Whereas businesses previously grouped consumers into segments, retailers later on can target each individual and tailor goods and services for that individual’s needs.
These dramatic alterations in the retail environment will pose a significant challenge for fuel retailers, which will lose customers both to more technical retailers that provide fast and easy purchases as well as increasingly innovative e-commerce players. Actually, convenience will increasingly visit mean “delivered for the home,” as e-commerce companies that offer instant delivery emerge being a significant option to the standard convenience store. Companies like Amazon happen to be 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 america alone, investors have committed $9 billion for some 125 startups operating in this particular space. In addition, retail players are leveraging technology to produce a true omnichannel experience that seamlessly integrates offline and online retail. Voice-activated shopping, made possible from the IoT and through AI, is emerging as being a powerful new model within both physical and virtual stores.
Other efforts make an effort to create the in-store experience more effective and convenient. For example, emart24 has presented unstaffed stores, and Farmer’s Bridge has developed walk-in vending machines. Also unfamiliar with the scene are mobile stores such as Robomart and Mobymart and chains including AmazonGo and JD.com’s 7Fresh (in China) that offer automated checkout. Fuel retailers have to take steps to generate options that match the rate and ease these formats offer.
The Planet Is Evolving-And Native Implications Vary. The complete impact of the trends that are remaking the fuel retail business will be evident in the next ten or fifteen years. For the time being, however, some markets will change more rapidly than others. For example, the interest in electric along with other alternative-fuel-powered vehicles, the penetration of AVs, and the adoption of the latest shared mobility solutions is going to be greater in Northern Europe, North America, and some fast-developing economies including China than in most countries in Middle East or Africa, for example.
Four Future Market Environments – To mirror the disparate pace of change around the world, we have now identified four distinct market environments that are likely to play out between now and 2035, each of that will possess 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 in the market and assess 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 still predominate, with limited penetration of electric vehicles. People carry on and rely heavily on personal vehicles, with shared mobility solutions making up only 5% to 10% of road mobility. In this environment, the buyer shopping experience is going to be digitally enabled, and seamless purchasing and checkout is going to be commonplace. Businesses will still target segments of clients (not individual customers), and traditional human-powered last-mile delivery will remain the standard. Regardless of the dominance of ICE vehicles, as well as population growth as well as the emergence of the expanding middle-class in developing countries, need for fossil fuel will stagnate or decline slightly. This is due partly to increasingly fuel-efficient vehicles and in part to help-albeit limited-penetration of EVs. As a result, by 2035, within “do nothing” scenario where fuel retailers have not adapted to the changing environment, 25% to 30% of fuel retail outlets will earn returns below their weighted average cost of capital and stay 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 crucial amount of penetration of EVs. Within this environment, government regulations and incentives foster EV adoption, and electricity powers nearly 50 % of the cars on the road. But electric charging infrastructure remains limited to public spaces in urban locations and also to public spaces and homes in surrounding suburbs, with little infrastructure available in rural and remote areas. Consumers in this particular environment will expect amounts of integration between offline and online shopping that go past the click-and-collect approach. Advanced digital in-store and out-of-store experiences-for example, ordering products through personal digital assistants both at home and using automated checkout in stores-will likely 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 will be on the rise. Although EVs won’t completely dominate this environment, their impact will likely be powerful. If fuel retailers tend not to adjust their model, the decline in their fuel sales will render 45% to 60% of https://Locationsnearmenow.Net/Petrol-Station-Near-Me/ potentially unprofitable by 2035 and can push the average return on capital employed (ROCE) of the sector for the low single digits.
Market environment 3: All rise, but none dominate. Within this environment, adoption of EVs is widespread, but there is also significant interest in alternative fuels such as hydrogen, LPG, CNG, and biofuels, as governments as well as other entities support their development. As a result, the overall share of fossil fuels is relatively low. Simultaneously, 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. In this environment, the shopping experience will reach its maximum amount 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 within just one half of all last-mile deliveries. The financial situation for fuel retailers within this environment will likely be challenging. Although fuels such as LPG and CNG will replace a few of the lost volume of gasoline, they won’t completely cancel out the effect of rising EV use. By 2035, assuming the fuel retail model doesn’t significantly change, we expect 60% to 75% of fuel stores to get vulnerable to unprofitability, with average sector ROCE in negative territory.
Market environment 4: Mobility movesbeyond standard fuels. In the most innovative in the market environments, EVs are dominant, as well as the AV revolution is well underway. About 10% to 20% of all new cars sold will likely be both electric and fully autonomous. Non-renewable fuels will power only about a quarter of all road mobility energy needs. Furthermore, the infrastructure necessary to serve a zwvzos fleet of AVs-to move goods and individuals through the day, as well as charge overnight and during idle times in dedicated areas-will be in place. On-demand mobility will take into account nearly 30% of all the passenger kilometers in cities, as more and more people opt for shared mobility over vehicle ownership. The retail environment will likely be like the one outlined in market environment 3. But market environment 4 will need fuel retailers to help make even more dramatic change.