Happy New Year although what a start as increases in VAT and fuel tax conspire with rising crude prices to send fuel prices rocketing to new record averages almost on a daily basis.
This is bad news for the fuel retailing industry as motorists start to avoid service stations like the plague. Even the wealthier drivers are noticing; thinking twice about where and by how much they fill up, and giving greater consideration to the fuel-efficiency of the next car they purchase. When fuel prices peaked in 2008 many people balked at the cost and changed their driving habits for good.
This time could be no different, with many retailers having seen the stuffing knocked right out of their volumes, with little hope of them returning. Only those with well-developed convenience store operations are in a strong position, according to Neale Smither, BP’s UK supply, marketing and retail manager (see industry focus on page 18). He says that following a review of both co-owned and dealer sites, he discovered that the stronger the convenience offer on a service station, the better its fuel performance. Some sites even showed growth in fuel, where the overall market was in decline.
Meanwhile, a report from food and grocery analyst IGD (page 7), said the UK convenience sector was continuing to outperform the grocery market and was projected to increase sales by 5.8%.
However a major investment in a convenience store may not be an easy option for many traditional fuel retailers, and for them hard decisions lay ahead as to which direction they go but hopefully not just downwards. One retailer I know wanting to flex his entrpreneurial instinct took a gamble on a few thousand sledges and snow shovels long before winter set in last year. Not a long-term strategy, but I dare say it paid off for him! In the meantime, the only saving grace is the high cost and lack of flexibility of public transport. People still need their cars!