There’s been a common theme emerging over recent months in one conversation after another with independent fuel retailers: the word ’pressure’ crops up quite regularly, but one very experienced retailer simply called it ’the squeeze’. He described a slow, inexorable process whereby it seemed that his options in how to run his business were continually narrowing on all sides.
While this isn’t in a new experience for small businesses most are used to operating under pressure a few are suggesting that they’re facing challenges serious enough to make them question how much longer they want to continue trading.
For clarity, it’s worth pointing out that by ’independent’ we mean owner-operators of single or twin sites; not those with 10, 20 or several hundred. Almost invariably they are people who’ve been in petrol retailing for many years. After a long apprenticeship as a licensee or commission-operator, they bought their sites during the wave of oil company sell-offs in the late 1990s and have managed to run them quite successfully so it’s interesting to hear why they feel that something’s changed beyond the normal over the last few years.
For one retailer it was a matter of supplier choice. His tie was due for renewal earlier this year, and he was surprised to find that his existing oil company dealer-manager wasn’t falling over herself to come out and renew it. After several awkward conversations she apparently implied that his site’s volume (hovering around 4.5mlpa) wasn’t really enough to make her company do any more than offer a straightforward repeat of his current supply arrangement take it or leave it. So the operator went out into the marketplace, only to find a similar attitude among other ’big name’ (or in his terms ’Premier League’) oil companies. There were a few potential alternatives, and on closer examination there were some decent deals on offer but all from less familiar brands. For that retailer, who’d been used to flying the colours of one of the biggest names in the industry on his site for 20 years, it was traumatic to find himself re-imaging the site with unfamiliar branding and all the other operational changes that follow a change of tie.
(Lack of) supplier choice
Another retailer again mentioned supplier choice this time in relation to her shop. A local supplier had long provided flowers, plants and solid fuel to her forecourt on reasonable credit terms in some cases sale or return. When the owners of that business sold up, it was bought by a larger concern. Three months later the rep informed her that all customers of the old business would have to switch to the standard supply terms which the new business already used elsewhere: direct debit payment 14 days after delivery, and no sale or return. It wasn’t necessarily a bad deal potentially better margins on some lines, assuming that she could sell them but certainly not as good in terms of cash flow. When it came to looking for alternative suppliers, she was a little shocked to find that many old names in her contact book had gone out of business. And that’s a story which we hear from many retailers: the number of potential suppliers for any shop line has declined.
Then we have the banks. A common story around the country is the closure of local branches; everyone is apparently using the internet. Tell that to a petrol retailer who’s used to taking a lot of cash to his local branch, two or three times a week. When they close that branch, his nearest alternative is maybe 45 minutes drive away with little or no parking outside! In some parts of the country there aren’t any alternative branches left, and even if there’s still another well-known bank reasonably close by, moving a business bank account isn’t done lightly.
What underlies these comments (or ’moans’ as one retailer was prepared to admit) and the feeling of ’being squeezed’ is the decrease in choice faced by operators, particularly in recent years. Where they were once able to choose between competing suppliers (of goods and services) offering more-or-less favourable terms and hence ultimately different profitable outcomes, today they find that there’s often little choice even in theory and sometimes almost zero choice in practice. No doubt for large corporate customers there’s still a queue of reps knocking on their doors from large corporate suppliers offering to do ’deals’; unfortunately for small business customers very often the only choice on offer seems to be ’take it or leave it’ no wonder they’re becoming upset.