As if the cold, dull days weren’t enough to depress us all, almost every year the winter months tend to bring figures that make grim reading in this industry, and this one is proving to be no exception. Although at the time of writing we are still compiling the final figures for 2005, there is already enough in the way of statistics to suggest that it was a lousy year for petrol retailing. True enough, fuel volumes seemed to have recovered from a poor start and between April and November were much the same as in 2004 – no mean feat considering that many motorists found the steep price rises last year were seriously affecting their spending power. Some commentators even suggested that for the first time since the 1970s fuel prices were actually starting to affect drivers’ car usage habits.
We did hear comments from some site owners who welcomed the opportunity to trade-off some volume in return for the realistic margin improvements that were available as fuel price rises hit the hypermarkets along with everyone else. But for a large number of readers of Forecourt Trader, in an industry dominated by ‘direct-managed’ and ‘commission-operated’ sites, fuel volume itself is not a major contributor to their bottom-line profits. Volume is only there to drive the shop sales from which many derive their real income. On that front, however, the news was definitely worse. In fact the latter months of 2005 produced ‘real’ shop sales figures at their lowest for three years. Stripping out retail price inflation, both September and November 2005 returned sales figures that were 2% lower than for the corresponding months in 2002 – that’s right; we did say ‘2002’ – while October’s were virtually identical to those from three years earlier. In an industry that is so reliant on shop turnover, those figures are disastrous.
Of course, that is now all history – well, maybe. But remember that although December is usually the one decent sales month of the winter, January and February are usually two of the quietest months on the forecourt. At the time of writing there’s no sign of the ‘coldest winter in 40 years’ that the weather forecasters had been threatening, and while there might still be time for a few cold snaps to help shift the ‘seasonal’ stock, the outlook isn’t too encouraging. The only ray of sunshine from the statistics is that at least gross profit percentages have continued to improve during the sales slump, with every month between May and November recording in excess of 21% GP, which shows that some retailers are managing to maximise their returns on every sale. That’s one thing that the rest of the retail sector has found extremely difficult in the past few months.
How to survive this winter? Well, those who can’t or won’t keep their sites up to a decent level of customer offer will go to the wall. Simple as that. Customers will not bother coming back to dirty shops with out-of-date merchandise haphazardly thrown onto the shelves; nor in this industry will they return to sites that can’t get their fuel ordering right and manage to run out of grades on a regular basis. Remember also that the Chip & PIN rules come into full effect this month – those retailers who’ve avoided the issue so far are about to hit trouble.
Assuming that you’ve got those basics right, the chance to survive, and even prosper, will be greatly improved by the practice of good old-fashioned business efficiency. That means knowing exactly what’s going on at your site on a day-by-day, week-by-week, month-by-month basis. Things like how much stock you’re carrying; how much of it is actually within its ‘use-by’ dates; and how much credit you’re due from suppliers for returns, and whether you’ve actually received it (particularly for those selling news and magazines).
None of it is particularly exciting – not even to accountants – but it’s basic housekeeping for business. To do it you need accurate, timely information about your site, and about what else is going on in the business environment. You may also need some practical advice and an objective view of your business from outside, rather than trying to make decisions purely on the basis of the view from inside your goldfish bowl. Remember, you’re not alone. Don’t be afraid to ask for help and advice – and cheer up, spring is just around the corner.