Is There a Future for Service Stations? Numerous 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, and the evolution of heightened consumer expectations around convenience and personalization. The impetus for these particular disruptions comes from a range of powerful new digital technologies-everything from artificial intelligence (AI) to robotics to the web of Things (IoT).
The ongoing shifts will modify the contours of competitive advantage in the market and require a fundamental transformation from the standard business structure. Fuel retailers must establish a comprehensive response that adjusts the products and services they sell, adapts their network and business model, alters the layout with their Gas Stations Open Near Me and convenience stores, and harnesses new digital tools.
To help companies know very well what the near future will appear like and what they can do today to adapt to it, BCG has conducted an in-depth study in the fuel retail industry, detailing four totally different market environments that will likely emerge around the globe, each defined by modifications in mobility and consumer lifestyles. Fuel retailers can use these market environment scenarios to evaluate how their business might fare within the years ahead under different conditions as well as position themselves to evolve over the short, medium, and long terms. Even though the environments differ from one another markedly, a significant area of the fuel retail network in certain markets could be unprofitable by 2035-even inside the scenarios by which new mobility models are less disruptive and fossil fuel sales do not decline precipitously. In a market environment in which 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 15 years.
To prevent this type of decline, fuel retailers have to take action in three areas. First, they should move from the vehicle-centric business model to your customer-centric one out of order to capture cool product and repair opportunities. This effort entails reinventing the overall customer journey and using digital tools to increase the consumer 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 certain locations to satisfy customer demand, divesting locations that is definitely not profitable, and investing in assets that secure the push into new products and services. Third, they have to develop new capabilities-including digital expertise and, in some cases, capabilities linked to entirely new areas including last-mile logistics or real estate property.
To successfully adapt, fuel retailers must embrace a brand new mindset. Making modest changes or tweaks for the business is not going to suffice. Instead, companies must fundamentally rethink their business and aggressively embrace innovation and new technology. The ones that boldly seize the opportunity will see themselves in a winning position. Those that 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 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 targeted at limiting greenhouse gas emissions. As an example, the united kingdom has mandated that, by 2040, brand-new cars and vans sold in the country ought to be able to 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 the new vehicles sold will likely be fully or partly electric. This development poses a significant threat to fuel retailers, particularly those that operate numerous stations where fuel purchases make up an important share of profits.
Other alternative fuels are also starting to gain ground in certain markets. For instance, automakers including Toyota are investing in developing hydrogen fuel cell vehicles. Meanwhile, in other regions around the globe, a substantial proportion of vehicles already run on alternative fuels including liquefied petroleum gas (LPG) and compressed natural gas (CNG), and biofuels are increasing their share in the gasoline and diesel pools. Vehicles that use a different fuel including LPG or CNG still require refueling by way of 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 https://Locationsnearmenow.Net/Shell-Gas-Station-Near-Me.
The Emergence of Advanced Mobility Models
Nearly two-thirds of the global population will live in cities by 2030, and new digital-centric business models is going to be essential to ensuring efficient urban mobility. Already, ride-hailing services such as Uber and Lyft have ushered in the first phase from the era of shared mobility, reducing 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 take into account nearly 20% of on-road passenger miles.
As shared mobility will continue 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 development of autonomous driving capabilities. Consequently, we expect that nearly 25% of new cars purchased in 2035 will are able to drive themselves without human involvement whatsoever-with most of the AVs likely to be electric. As autonomous vehicle systems replace human drivers, shared mobility services will end up less and less expensive for customers, encouraging further growth 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 effect will be 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 become more demanding over the board. They are searching for high-quality, fresh, healthy food options; less expensive; and more attractive store formats. Additionally they want more personalized services and products and a seamless, convenient experience through options like self-service checkout.
In this particular environment, retailers are leveraging an enormous amount of data off their customers to get an unprecedented level of insight regarding their preferences. And people efforts will grow increasingly sophisticated. Whereas businesses before grouped consumers into segments, retailers in the future can target each individual and tailor products and services for that individual’s needs.
These dramatic alterations in the retail environment will pose a major challenge for fuel retailers, which stand to lose customers both to more advanced retailers that offer fast and easy purchases as well as increasingly innovative e-commerce players. In fact, convenience will increasingly arrived at mean “delivered for the home,” as e-commerce firms that offer instant delivery emerge as a significant option to the standard convenience store. Companies including Amazon are already testing delivery by drone in order to substantially reduce last-mile delivery time. Others are addressing the last-mile challenge through partnerships with companies like Instacart and Uber. In the usa alone, investors have committed $9 billion for some 125 startups operating within this space. In addition, retail players are leveraging technology to make a true omnichannel experience that seamlessly integrates online and offline retail. Voice-activated shopping, made possible through the IoT and by AI, is emerging being a powerful new model in both physical and virtual stores.
Other efforts aim to make the in-store experience more efficient and convenient. For instance, emart24 has rolled out unstaffed stores, and Farmer’s Bridge has developed walk-in vending machines. Also unfamiliar with the scene are mobile stores like Robomart and Mobymart and chains such as AmazonGo and JD.com’s 7Fresh (in China) that offer automated checkout. Fuel retailers must take steps to generate options that match the pace and ease that these formats offer.
The Entire World Is Changing-And Native Implications Vary. The complete impact of the trends which are remaking the fuel retail business is going to be evident in the next ten or fifteen years. For the time being, however, some markets will change more rapidly than others. For instance, the need 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 much higher in Northern Europe, North America, and some fast-developing economies including China compared to 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 world, we have identified four distinct market environments that are likely to play out between now and 2035, each of which will use 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 influence on their business. Their key features are as follows:
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 continue to rely heavily on personal vehicles, with shared mobility solutions making up only 5% to 10% of all road mobility. Within this environment, the consumer shopping experience will 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 standard. Regardless of the dominance of ICE vehicles, as well as population growth and the emergence of your expanding middle class in developing countries, demand for fossil fuel will stagnate or decline slightly. This will be due partly to increasingly fuel-efficient vehicles and in part to help-albeit limited-penetration of EVs. Because of this, by 2035, within a “do nothing” scenario where fuel retailers have not adapted to the changing environment, 25% to 30% of fuel retail stores will earn returns below their weighted average price of capital and become vulnerable to closure.
Market environment 2: There’s a brand 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. Within this 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 confined to public spaces in urban locations as well as public spaces and homes in surrounding suburbs, with little infrastructure offered in rural and remote areas. Consumers in this particular environment will expect amounts of integration between offline and online shopping who go past the click-and-collect approach. Advanced digital in-store and out-of-store experiences-as an example, ordering products through personal digital assistants both at home and using automated checkout in shops-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 will be on the rise. Although EVs won’t completely dominate this environment, their impact will likely be powerful. If fuel retailers do not adjust their model, the decline in their fuel sales will render 45% to 60% of Nearest Petrol Station To My Current Location potentially unprofitable by 2035 and will push the average return on capital employed (ROCE) in the sector towards the low single digits.
Market environment 3: All rise, but none dominate. In this environment, adoption of EVs is widespread, but there is also significant interest in alternative fuels including hydrogen, LPG, CNG, and biofuels, as governments along with other entities support their development. Consequently, the entire share of fossil fuels is relatively low. Concurrently, many consumers prefer shared mobility solutions to owning cars that largely go unused through the day. The upshot: nearly 20% of all the passenger kilometers in cities are traveled in a few shared mode of transport. Within this environment, the shopping experience will reach its maximum amount of online and offline 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 half of all last-mile deliveries. The financial circumstances for fuel retailers in this environment is going to be challenging. Although fuels like LPG and CNG will replace a number 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 retail outlets to get vulnerable to 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 new cars sold will be both electric and fully autonomous. Non-renewable fuels will power no more than a quarter of all road mobility energy needs. Additionally, the infrastructure necessary to serve a zwvzos number of AVs-to transport goods and folks through the entire day, and to charge overnight and during idle times in dedicated areas-are usually in place. On-demand mobility will take into account nearly 30% of passenger kilometers in cities, as more and more people choose shared mobility over vehicle ownership. The retail environment will be like the one outlined in market environment 3. But market environment 4 will need fuel retailers to help make even more dramatic change.