The expertise of independent dealers in running successful ’local’ businesses is being sought by Total following a review of its company-owned network.
Retail director Marc Dagniaux says the company wants to get closer to dealer groups because he can see the benefit of working together in complementary partnerships, and he wants them to run up to 200 sites in the company-owned estate - a mixed bag of sizes and locations, which include 100 from direct operations and 100 from commission operations.
"With some of our directly-operated sites we have looked at what dealers could bring to the mix - what could be the best way of managing the sites," he says. "We believe dealers could manage our sites very well."
Dagniaux says the company has too many sites in direct operation, but it has no plans to sell them. It has 400 dealer sites and is currently approaching independents about possible partnership arrangements.
Marco Pannunzio, company operations and dealer manager, has been handling the negotiations: "We’ve looked at our company owned network and highlighted the sites that are not suitable for direct management," he says. "A solution was to look for good partners to get the best out of them in terms of the shop.
"Dealers have been successful in raising the quality of their sites so we think we can really mix our strengths and their strengths to get the best from our sites. We believe dealer groups will be stronger in the future, so we want to be close to them."
The proposed arrangement is that the dealers will manage the shops, while Total takes care of the forecourt and structural elements of the site. Fuel is supplied in a com-op-type deal. to avoid the financial pressure on a dealer who suddenly takes on a number of sites and could struggle to pay for fuel. The contracts will run for approximately five years.
So far dealers have shown a great deal of interest, according to Pannunzio, with the first transfers already under way - 99 direct-operated sites are in the process of going over to dealers. The first three were in June, and with the programme now under way, the rollout should be completed by the end of September.
"I think we can offer partnerships with dealers on the basis that we’re a big company and want to stay in the UK," says Dagniaux. "We’re the fourth largest oil company in the world, which gives us a lot of security and stability. Our strategy is to have quality sites where people are prepared to pay a premium. Included in that strategy is good customer service with the offer targeted to local needs.
"The majority of our service stations are residential so a lot of our customer base is local. So from our point of view we want our service stations to be thought of as the friendly, approachable forecourt around the corner.
"From a dealer perspective, running one of our sites fits very nicely, because I see a lot of fantastic examples of dealers who are integral to the local area. They know their customers, they know the area - something you can’t always achieve on a company-operated site.
"We are a national chain, with a national offer - our fuel card, for example - crosses over with BP and Shell. But in terms of communication and marketing, our strategy is to talk to our customers on a local level, about what matters to them locally."
Hence the launch of Total’s Little Learners, a new campaign to cut the number of road accidents involving children aged six and under. Something that is national, but locally relevant. Other initiatives will include forecourt checks for child car seats.
The current developments within Total’s co-owned network follow a three-yearly review, explains Dagniaux: "When I took over as retail director in October 2003 the UK strategy was more about the fact we needed to increase profitability and reduce site numbers. At that time we had 750 co-owned sites - now we have 515, with 350 of those being direct operations. As a company we have been quite responsible. Taking sites out makes the others stronger. We’ve done our culling. We’re not selling up. Our current market share is 9% and if we can stay at today’s margin...
"Looking back over the three years we have clearly reached our target in terms of profitability and at the same time, we have invested in the network in terms of convenience stores. As an oil company we’re probably one of the most active in terms of investment in our network.
"Our parent company still has a lot of faith in our ability to make a return for it. We are profitable - and would obviously like to be more so. But we are not in the same price storm as four years ago. We are improving - trying to adapt our network to give more reassurance to our group that we are stable and profitable despite the competitive UK market.
"When you are on a lower margin you have to be more creative, to enable you to compete. In the same way, if we have good quality sites we are not obliged to maintain the lower price to ensure customers come on to our forecourts. We are building ourselves an insurance against pricing."
On the subject of fuel pricing, Dagniaux is complimentary about Tesco: "Tesco is impressive. The company has worked out that if you’ve got a full forecourt, and you can’t get any more cars through it, then why not get more from those cars?"
"Three years ago, we aimed at putting Bonjour into 150 sites," says Dagniaux. "We now have more than 200 due to the success of this format. We have also done 30 knock-down rebuilds."
Investment in the network has included extending shops and putting in car washes where possible, to maximise the potential of each site. The company has also invested in sophisticated back office computer systems, which has been a big step forward in terms of information management.
When doing the KDRBs, Total also took the opportunity to give the four-year-old Bonjour store a new look, called Côté Sud. It has been in the UK for about a year, and the changes included terracotta floor, zoning and grocery lighting. The offer was also improved to include fresh food, alcohol, and fresh vegetables.
There has also been an ongoing trial with Spar. "What we’re trying to do is move the business forward," explains Dagniaux. "At the moment we are very happy with the Spar trials, which have been running for about a year on three sites. We’re looking at having 50 Spar stores, on sites with shops of 150-200sq m. We have a number of sites that we believe can make more money by having a brand such as Spar. Bonjour still has a very valid place in our market, but it’s a case of having the right offer for the customers in those locations. Café Bonjour, Total’s foodservice concept and destination category within the Bonjour stores, will soon be installed on a number of sites. The category includes fresh coffee, hot savouries, sweet pastries, sandwiches and salads and is specific to certain types of stores and the way customers use them.
"We need to be close to the customers in terms of offer, and to have several variations of the offer is good for us," stresses Dagniaux. "We’ve got to work hard at keeping the customer."