Non-fuel retail at petrol pumps

Other than conventional market places like high streets and malls, retailers also select unconventional places like airports and railway stations for business expansion. These places do offer unique facilities and an ambience that is very much in tune with bustling atmosphere of a marketplace. They also ensure larger space, high footfalls, parking facilities etc. Considering these factors, retailers have found petrol pumps as ideal places for setting up their outlets. Oil companies too have been experiencing the necessity to adopt a new image. Bharat Shell Ltd, joint venture between Bharat Petroleum and Shell Overseas Investments of Netherlands, launched the first convenience store at its outlet in late nineties and pioneered this business model. Earlier, petrol companies had indifferent approach towards customer services. Later, oil companies started to think of gradually making their services more customer-centric. Nowadays, petrol pumps are trying to provide their customers with every commodity required for everyday-use.

Non-fuel retail activities

Gone are the days when everything about a petrol pump was vehicle-related. Nowadays, a petrol filling station spruced up with retail facilities has a retail-friendly look and offers offers a variety of value-added service centres that include departmental stores, coffee shops, pubs, kiosks, cyber cafés, laundry, pizzas, courier, drugs, pollution check, ticketing, music shops, auto LPG stations, auto service centres, kerosene distribution, photo shop, pay by card, telephone directories distribution, ATM, jewellery shop and general stores. George Paul, GM, Retail HQ (Brand & ARB), BPCL, observes, “Most of the petrol pumps are prominently located and highly visible to customers. Non-fuel activities give these petrol pumps opportunity to derive maximum value from these sites. Since petrol buying is usually considered an uninvolved category of purchase, bundling more products and services through non-fuel retail initiatives transforms the station into a add-value place.”

 

Various tie-ups 

IOC entered into tie-up with Akbarally’s for convenience stores and also formed alliances with ICICI Bank, Centurion Bank and Bank of Punjab for ATMs. It tied up with MTNL so that its customers can make their payments at the select outlets in Delhi and Mumbai. It also introduced Jubilee retail outlets along highways, which offer a number of services like first aid area, mini mall with post office, banking facilities and spare part retail shops.  At its select outlets, it has launched ‘Top Gear’ outlets featuring fast food, restaurants, pharmacies and auto car wash. IOC has currently tied up with leading players like Tata Motors, Eicher Motors, Café Coffee Day, Domino’s Pizza, Exide and JK Tyres for setting up different non-fuel facilities at their retail outlets.

HPCL has Speed Mart, the convenience store, stationed at its outlets. It has also the ATM booths, the provision for automatic car wash and India’s first public access internet kiosk. It tied up with Satyam Infoway as the internet service provider. The oil company has also tied up with Sangini Diamonds and Crossword Book stores.

BPCL launched convenience retail initiative under ‘In&Out’ brand offering a wide range of services. Apart from various food joints, it has formed alliances with ITC, HUL, Pepsi, Coke, Planet M and Music World to set up outlets at select-locations. Also, BPCL has a partnership with Cross Roads (car help-line) to offer customers value added services such as discounts on lubricants and engine oil and free petrol cards. For money transfer service, the company has tied up with Western Union.

These filling stations have become abodes for unconventional shops and services. A ‘Surf Laundry Service’ is on the anvil at one of the outlets of BPCL, where consumers could avail of dry cleaning and mending of garments. Launched in Mumbai, the concept involves dropping the garments at In&Out stores and picking them later.

 

Eating joints

Eating joints at petrol pumps have proved to be the most popular destinations as revealed by all the oil companies. Manpreet Gulri of Subway says, “In terms of sales and volumes, it is not very different. However, from operation point of view, it is very different. Also, the customer profile is different.” According to SP Chaudhry, Executive Director (Retail Sales), HPCL, fast food sells most in this kind of retail outlets. To cater the gastronomical urge, HPCL has tied up with McDonald’s and Kamat chain of restaurants. Pizza Corner has set up two outlets at BPCL petrol pumps in Chennai and Bangalore.  These are ‘Express Outlets’ where one can get pizza within five minutes. Mr Kaushik Roy, CEO, Pizza Corner, observes, “After filling their vehicles, customers here have no time to wait and they prefer fast service.”  Other food-joints like McDonald’s, Café Coffee Day and Subway are following the example. McDonald’s has tied up with HPCL and BPCL, Café Coffee Day has partnership with BPCL and also with HPCL. IOC has tied up with Domino’s Pizza and Nirula’s. Also, BPCL has taken initiative for launching Quick Restaurant Service (QRS) with McDonald’s, Pizza Hut, Subway and Nirula’s.

 

Outlets on highways

Mr Chaudhry says that highway retailing is gaining momentum in Indian retail scenario. The model offers convenience for customers and proves to be a distinct mode of revenue generation. For highway travellers, refreshment comes as the first priority. People look for food joints and toilets in hygienic conditions.  BPCL is going to invest Rs 6 billion in the next five years to set up 250 ‘Ghar’ outlets on highways to provide home-away-from-home experience to truckers and highway travellers. These outlets will provide non-fuel facilities like shopping, eateries and entertainment.

First to enter such a strategic alliance, McDonald’s has three such outlets in Mathura (UP), Doraha (Punjab) and Chanakyapuri (New Delhi).  Asked about any special feature of such outlets, Mr Vikram Bakshi, Managing Director, McDonald’s India (North & East), says, “ Our primary focus is on providing convenience to our customers while they are on the move, especially on highways.” While speaking about petrol pump as retail destination, Mr Bakshi highlights– “McDonald’s restaurants at petrol pumps are beneficial proposition for customers travelling on highways. BPCL and HPCL have an advantage because of their state-of-the-art infrastructures. McDonald’s wants these restaurants to be relaxing destinations for travellers.” Ms Simran Sablok, General Manager, Marketing, Café Coffee Day, opines, “The outlets at petrol pumps and gas stations are not different from our regular outlets. It is important to understand that classic retail- spaces (like gas station or petrol pump) are frequented by many people and are good places to have coffee shops like ours. Many a time, while people are in transit, they look for a cup of coffee or a bite – a Café Coffee Day at a gas station provides just that.” Here, the fast food joints always offer some additional items. Besides a variety of coffees, Café Coffee Day offers snacks like pakoras, bread and omlette that hungry travellers can gorge on.  Café Coffee Day has around 20 such outlets at petrol pumps. Ms Sblok says, “A gas station with a coffee shop is a welcome concept as one can execute two different tasks at the same time.” She also reveals that this kind of retail mode is definitely having a contribution to their overall brand image and the company is mulling over opening more such outlets in future.

 

Jewellery store

Mehul Modh, CEO, Sangini Diamonds, thinks of non-fuel retailing as an innovative way for branding strategy. The company’s tie-up with HPCL has resulted in cross-promotion of both the brands. “These petrol pumps are strategically located and ensure high footfalls. Moreover, with ever-increasing price of real estate, such retail venues become more reasonable options. Maintenance cost is less here as compared to any other busy market or mall at prime locations.” He also acknowledges that the company has so far experienced encouraging response from such retail models. At their Kolkata outlet, the company has recovered an amount, which is 10 per cent more than the investment value within nine months. Sangini has six such outlets – two in Bangalore and one each in Mumbai, Kolkata, Hyderabad and Pune.

 

Pharmacy store

Guardian Lifecare, a chain of pharmacy store, has tied up with HPCL to set up their outlets at petrol pumps. Ashutosh Garg, Chairman and Managing Director, Guardian Lifecare, is quite positive about such a venture. He says, “The conventional petrol pump is changing rapidly. There has been an increase in the non-petrol commercial activity at petrol pumps. Planning the retail mix of products at such petrol pumps depends on the need of the local community. A pharmacy pulls in customers increasing petrol sales in comparison with usual formats that rely, for footfalls, only on petrol.”

 

 

Non-fuel initiatives at rural areas

According to Mr Chaudhry, this non-fuel retailing format varies from place to place. In the heart of a city, within an area of student community or BPOs, ATM and STD outlets, apart from food joints, are always preferred. In rural areas, HPCL has set up stores where rural people can get items of daily use. In this regard, HPCL has tie-up with Godrej Agrovet Ltd to set up Godrej Adhaar, retail chain that offers seeds and fertilisers. Similarly, IOC has set up low-cost petrol pumps, Kisan Seva Kendra, in rural areas across the country where retailing facility for agro-based products like seeds, fertiliser and pesticide are made available. These petrol pumps also house convenience store for consumable products of everyday use and banking facilities. The company has tied up with ICICI, oriental Bank of Commerce and Bank of Baroda. Recently, BPCL has tied up with Godej Agrovet Ltd to open Adhaar Express at its outlets in semi-urban and rural areas so as to provide agri-advisory services and customised products.

 

Investment for setting up outlets            

As regards investment for setting up non-fuel retail outlets, Mr Chaudhry informs that it can vary from Rs 15 lakh for a small outlet to Rs 50 lakh for a food joint like McDonald’s. HPCL provides the basic infrastructure in return for rental and some percentage of the turnover. Mr Roy informs that the company has invested approximately Rs 5,000 per sq. ft to set up outlets at BPCL petrol pumps in Chennai and Banagalore. K R Suresh Kumar, GM (Retail Sales), HO, IOC, says, “IOC generally invests in setting up the civil structure and the operators furnish the interiors. This investment varies for each site depending on the type of facility set up.”  Mr Paul shares one and same point with Mr Roy. He says, “Cost of constructing an outlet largely depends on the class of market, location, products and services to be offered at the outlet.” Mr Gulri reveals, “The investment in a 500 sq. ft-location is approximately Rs 35 lakh.” The company has three such outlets and plans to open soon another three outlets. Mr Garg informs that the company has invested Rs 1,700 per sq. ft to set up the outlet at petrol pumps.

 

Revenue share by oil companies

Commenting on ‘sharing of revenue’, Mr Chaudhry says that his company shares a certain percentage of turnover apart from receiving rentals. Mr Kumar informs, “IOC recovers licence fees and/ or revenue share from various alliance-partners for allowing them to set up various non-fuel facilities. However, increase in revenues is nominal as compared to fuel sales, which is a very high volume and high value business.” As far as the sharing of profit concerned, he states, “We generally receive a certain percentage of sales from the outlets as revenue share.” Mr Paul informs that his company shares the revenue in the form of signage fees. 

 

Commodities in demand

Mr Kumar admits that food joints have turned out as the most successful business in this format. It is followed by general merchandise, impulse items and car care products. He says, “ Items not so popular in this business format are electronic goods, cosmetics, music cassettes, toys and gifts.” However, he points out the important role played by locality and residents in the neighbourhood area in selling merchandise. Mr Paul informs, “In&Out convenience stores are mainly offering impulsive buying items, which enable customers to do top-up purchase from these stores. Beverages, chocolates, ready to eat items, personal care products, music and diet products are some of the major categories that are always in demand.”

 

How good for retailers?

Mr Gulri seems to be optimistic about such retail models – “Subway restaurants at petrol pumps have a bigger delivery base than other outlets. The retail space is cheaper in comparison with high street and malls but its has shortcomings too. Also, return on investment is good as the cost of real estate is low.”  Sharing this opinion, Ms Sablok says, “We are happy with the contributions our cafes at gas stations are making to the overall and will continue to open more outlets in future.”

 

Future

Mr Chaudhry acknowledges India’s potential to accept this kind of retail model. He is fully convinced that oil companies, like in the US, will be able to generate 30 to 40 per cent of their revenues from non-fuel retail, within four to five years. According to Mr Kumar non-fuel retailing definitely increases profitability of retail outlet dealership and generates non-fuel revenues of the company.  Mr Paul’s statement pronounces this point conspicuously:  “ Non-fuel retailing has definitely changed the complexion and ambience of the outlets.  It has enhanced retention of customers as well as added new customers. Currently, non-fuel initiatives are contributing only five to eight per cent of the total turnover. But, we believe that the contribution will go as high as 20 to 25 per cent in near future.” 

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