Is There a Future for Service Stations? A number of far-reaching trends are disrupting the fuel retail market. One 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 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 market and require a fundamental transformation of the standard business model. Fuel retailers must establish a comprehensive response that adjusts the goods and services they sell, adapts their network and business structure, alters the layout of the https://Locationsnearmenow.Net/Gas-Station-Near-Me-Open-Now and convenience stores, and harnesses new digital tools.
To assist companies know very well what the near future will appear like and whatever they can do to conform to it, BCG has conducted an in-depth study of the fuel retail industry, detailing four totally different market environments that are likely to emerge around the globe, 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 and also to position themselves to evolve within the short, medium, and long terms. Even though environments vary from each other markedly, a substantial part of the fuel retail network in certain markets could be unprofitable by 2035-even within the scenarios in which new mobility models are less disruptive and fossil fuel sales tend not to decline precipitously. In a market environment by which electric vehicles (EVs), autonomous vehicles, and new mobility models remove rapidly, as much as 80% from the fuel-retail network as currently constituted may be unprofitable in approximately 20 years.
To avoid this type of decline, fuel retailers must take action in three areas. First, they have to move from a vehicle-centric business model to some customer-centric one in order to capture new product and service opportunities. This effort entails reinventing the entire customer journey and using digital tools to extend the customer relationship beyond occasional visits for the service station. Second, retailers must transform their network of service stations and assets. This procedure includes changing formats in certain locations to meet customer demand, divesting locations that will not be 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 associated with entirely new areas like 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 never suffice. Instead, companies must fundamentally rethink their business and aggressively embrace innovation and new technology. The ones that boldly seize the chance 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 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 rise of electricity along with other alternative fuels. The very first is the rollout of regulations aimed at limiting greenhouse gas emissions. As an example, great britain has mandated that, by 2040, all new cars and vans sold in the united states ought to be able to achieving zero greenhouse gas emissions, a requirement that will increase interest in battery electric, plug-in hybrid electric, or hydrogen-fueled vehicles.
The second force is technology. As battery costs still decline, automotive OEMs are investing heavily in EVs. By 2030, over a third of new vehicles sold will likely be fully or partly electric. This development poses a major threat to fuel retailers, especially those that operate numerous stations where fuel purchases take into account a significant share of profits.
Other alternative fuels will also be starting to gain ground in a few markets. For example, automakers including Toyota are purchasing developing hydrogen fuel cell vehicles. Meanwhile, in other parts around the globe, a sizable proportion of vehicles already operate on alternative fuels like liquefied petroleum gas (LPG) and compressed natural gas (CNG), and biofuels are increasing their share in the gasoline and diesel pools. Vehicles that use an alternate fuel such as LPG or CNG still require refueling through a traditional fuel retail location-unlike EVs, which users may charge in the home, at work, or even in parking lots, and which therefore pose a substitution threat to Gas Station 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 like Uber and Lyft have ushered inside the first phase in the era of shared mobility, decreasing the car ownership aspirations of younger generations. By 2030, the shared mobility market will probably be worth nearly $300 billion-and through 2035, we project, shared mobility solutions will make up 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 including Ford and Toyota and new digital players like Google and Uber-are investing heavily in the creation of autonomous driving capabilities. Because of this, we expect that nearly 25% of the latest cars available in 2035 will have the ability to drive themselves without human involvement whatsoever-with most of these AVs apt to be electric. As autonomous vehicle systems replace human drivers, shared mobility services will end up less expensive for customers, encouraging further growth of such services.
The implications for fuel retailers are significant since 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 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; better value; and much more attractive store formats. They also want more personalized products and services and a seamless, convenient experience through options including self-service checkout.
In this particular environment, retailers are leveraging a huge level of data off their customers to achieve an unprecedented degree of insight regarding their preferences. And those efforts will grow increasingly sophisticated. Whereas businesses in the past grouped consumers into segments, retailers later on will be able to target each individual and tailor products and services to that particular individual’s needs.
These dramatic alterations in the retail environment will pose an important challenge for fuel retailers, which will lose customers both to more technical retailers that provide fast as well as simple purchases and to increasingly innovative e-commerce players. Actually, convenience will increasingly come to mean “delivered for the home,” as e-commerce firms that offer instant delivery emerge as being a significant alternative to the traditional convenience store. Companies including Amazon happen to be testing delivery by drone as a way to substantially reduce last-mile delivery time. Other people 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 in this space. Additionally, retail players are leveraging technology to make a true omnichannel experience that seamlessly integrates online and offline retail. Voice-activated shopping, made possible from the IoT and also by AI, is emerging as a powerful new model both in physical and virtual stores.
Other efforts try to have the in-store experience more effective 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 have to take steps to create options that match the speed and ease these formats offer.
The Planet Is Changing-And Local Implications Vary. The full impact of the trends which can be remaking the fuel retail business will likely be evident within the next 10 to 15 years. For the time being, however, some markets will change more rapidly as opposed to others. As an example, the interest in electric and other alternative-fuel-powered vehicles, the penetration of AVs, and the adoption of new 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 example.
Four Future Market Environments – To mirror the disparate pace of change around the entire world, we have now identified four distinct market environments that are likely to play out between now and 2035, every one of which will have a different influence 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 assess the influence 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 particular environment, the consumer shopping experience is going to be digitally enabled, and seamless purchasing and checkout will likely be commonplace. Businesses will still target segments of customers (not individual customers), and traditional human-powered last-mile delivery will always be the norm. Despite the dominance of ICE vehicles, as well as population growth and also the emergence of your expanding middle-class in developing countries, interest in fossil fuel will stagnate or decline slightly. This will be due in part to increasingly fuel-efficient vehicles as well as in part to further-albeit limited-penetration of EVs. As a result, by 2035, within a “do nothing” scenario in which fuel retailers have not adapted towards the changing environment, 25% to 30% of fuel retail stores will earn returns below their weighted average price of capital and become at risk of closure.
Market environment 2: There’s a whole new fuel on the block. Within the second market environment, countries are in a transitional state before having achieved a critical degree 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 to public spaces and homes in surrounding suburbs, with little infrastructure offered in rural and remote areas. Consumers in this particular environment will expect levels of integration between offline and online shopping who go beyond the click-and-collect approach. Advanced digital in-store and out-of-store experiences-for example, ordering products through personal digital assistants at home or 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 be powerful. If fuel retailers do not adjust their model, the decline inside their fuel sales will render 45% to 60% of Gas Near Me potentially unprofitable by 2035 and 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 particular 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 overall share of non-renewable fuels is fairly low. Simultaneously, many consumers prefer shared mobility solutions to owning cars that largely go unused during the day. The upshot: nearly 20% of all the passenger kilometers in cities are traveled in a few shared mode of transport. In this particular environment, the shopping experience will reach its maximum amount of offline and online integration. Drones and autonomous robots will likely be commonplace, bringing products to customers’ doorsteps from urban micro-hubs. Humans will participate directly in just one half of all last-mile deliveries. The financial situation for fuel retailers in this particular environment will likely be challenging. Although fuels like 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 retail outlets to become vulnerable to unprofitability, with average sector ROCE in negative territory.
Market environment 4: Mobility movesbeyond fossil fuels. Within the most sophisticated in the market environments, EVs are dominant, and the AV revolution is well underway. About 10% to 20% of all the new cars sold is going to be both electric and fully autonomous. Fossil fuels will power only about a quarter of all road mobility energy needs. Additionally, the infrastructure required to serve a zwvzos fleet of AVs-to transport goods and people through the entire day, and to charge overnight and during idle times in dedicated areas-will be in place. On-demand mobility will account for 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 require fuel retailers to help make even more dramatic change.