Transforming the traditional business model
From their inception, the role of service stations has been to keep busy motorists moving, by providing fuel, air for tyres, car wash and the odd snack. However, the emergence of new energies is prompting retailers to rethink the traditional business model and become versatile, multi-purpose operations offering a variety of services such as cafés, leisure and shopping, as well as both traditional and alternative fuels. With so many radical changes, retailers must adapt swiftly to the new consumer trends and expectations in order to maintain a competitive edge.
What is driving change in service stations?
Service stations have already started to adapt, in varying degrees, to accommodate the ever-evolving landscape of the energy industry. The driver behind this transformation is the global concern for climate change and the need to drastically cut CO2 emissions to satisfy environmental goals.
In 2021, electric car (EV) sales accounted for a 9% share across major car markets, resulting in 16.5 million EVs on the road. To meet the Net Zero Emissions by 2050 objective, 2030 should see the number of EVs rise to 300 million, representing 60% of new car sales. In addition, by 2035, the European Union will ban the sale of all new internal combustion engine (ICE) cars, and other markets are destined to follow.
The energy reformation provides many opportunities for all kinds of service stations to embrace a fuel retail evolution and prepare for the not-so-distant future. We have listed the four major trends in the retail industry and the openings they create.
1: The shift to more responsible energies
Electricity, hydrogen, natural gas, ethanol and biofuels are a few examples of new energies available to coexist with traditional fuels. The efforts and investments towards a future with fewer fossil fuels will push energy retail to reinvent itself to maintain its relevancy to its customers.
This shift enables service stations to attract new clients who are adopting alternative energies. By providing multi-energy solutions, retailers can engage different types of customers, changing the sales mix configuration and providing new sources of revenue to their business. Furthermore, EV drivers recharging their vehicles often utilise the wait time by taking advantage of the site’s café and shopping facilities, before resuming their journey.
2: Digitalisation is developing fast
Noncash retail payment transactions grew 13% globally between 2018 and 2021, says McKinsey. The digital payments market, which grew $83.27 billion in 2021, is expected to reach $170.95 billion in 2026. Digital is taking hold of many aspects of life, including finances, which have seen not only an increase in digital transactions but also a variety of payment methods.
By keeping up with the latest technologies, service station owners can adapt to customers’ new behaviour, providing a frictionless payment experience that encompasses different devices – cards, smartphones, and smartwatches. This typically alleviates traditional payment at the counter, making queues easier to handle, and allowing staff to perform other important, managerial and customer-related tasks.
The system can be extended to more than the shop: self-service coffee payment with upgraded coffee options, for example, and even self-service car wash programmes can be autonomously used by the customer. This possibility means that service stations can improve the customer journey and simultaneously stimulate combined purchases and higher average ticket prices.
The same goes for monitoring service stations, which include transactions and equipment management. Innovative, integrated systems hosted in the cloud allow service station owners to easily control their businesses from a mobile phone or tablet, and decrease downtime, drive-offs and other issues. By digitalising station management, business owners can connect everything in one place, from point of sale and payment terminals to multi-energy dispensers, chargers and forecourt camera systems. Local and remote real-time access to service station status provides the opportunity to take immediate action if a problem occurs.
The transition to alternative fuels has introduced a whole new dynamic to the energy retail and convenience sector, as customer demands and expectations multiply. This new business model fundamentally changes the structure and rationale behind the integral function of service stations, which now must offer a revised retail experience to remain engaged with their customers. Retailers need to be creative, devising new ways to attract motorists and providing products and services to suit their individual needs.
Customers going on longer journeys might want to take a relaxing break, notably EV drivers who have to wait for their vehicles to recharge. One alternative is to extend the convenience store to provide food and beverage options or introduce a comfortable lounge area offering free wi-fi. Sit-down restaurants or cafes serving a variety of meals transcend the standard coffee and sandwich offering and make a good investment, especially in high-traffic stations
Car washes are a popular destination for drivers living in urban areas. Car wash, including self-car wash, is an added service that can generate regular additional revenue for site owners, whilst helping customers to keep their pride and joy in tip-top condition. Furthermore, customers making their daily commute to and from work often visit their local stations for snacks, drinks, groceries, lottery tickets and parcel drop off/collection.
By combining self-service payment solutions with forecourt media, retailers are able to promote special offers and discount codes whilst the customer is refuelling, driving traffic into the store. These additional features and services will help to transform stations into multi-faceted, one-stop-shop urban hubs.
4: Focusing on the customer
Improving the consumer experience will help to attract and retain new business and as a result, contribute to operational success. McKinsey research shows that 71% of customers expect a personalised transaction from the businesses they patronise, while research from SalesForce in 2022, shows that 62% of clients expect companies to anticipate their needs. To manage this diversity of clients with specific demands and meet their expectations, businesses need to provide a variety of energies and services, with multiple payment methods and advanced monitoring systems. To complete the loop of customer-focused tools and offers, owners can invest in loyalty programmes, to help customise their promotions and offer cross-selling discounts on energy or store commodities, based on customer data.
Apart from benefitting the clients, there is a strong possibility that it will also increase engagement and conversions for the service station. The revenue of top-performing loyalty programmes increased by 15 to 25% annually for customers who redeem points, according to another McKinsey research. Digital tools can also aid in monitoring and tailoring customer segmentation. Data dashboards help service station owners create segmentation groups and offer specific products and services depending on what their clients usually buy. McKinsey found that segmentation boosts customer acquisition by 10 to 20% and engagement and satisfaction by 20 to 30%.
Alternative energies and the shift in consumer behaviour create an opening for site owners to cultivate customer relationships whilst taking care of their vehicles. . With the digital evolution, innovative services provide a seamless and more efficient customer journey. All sizes and types of service stations can play a role in the mobility transition and benefit from the business opportunities it brings.
TSG offers a one-stop shop, for innovative energy and retail solutions to enable service stations to make a responsible mobility transition, providing new retail experiences, adjacent services and innovative digital services. We work with partners and highly skilled engineers to supply, install and maintain retail, gas and electric charge solutions. We have developed a cloud solution that connects different payment services; fuel purchases, car wash and coffee sales. TSG can help any service station, no matter how big or small, with everything they need to make the shift to a more responsible future.