What sells petrol?

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Viv Corinaldi, the Acting Director at SAPRA, gives us further insights into the factors that contribute to increasing the sale of petroleum and convenience store products through a service station and what can be done to increase the Capture Rate. This is a follow on to his article in the March edition of Automobil.

Overview

The current economic climate and lack of economic growth in South Africa is having a major negative impact on liquid fuel volume growth. This is particularly true for petrol which is sold though the forecourts of the +/- 4 600 service stations in the country. When the lack of volume growth is coupled to the relatively flat margins and continuous increase in operating costs, it is not hard to see the problem that retailers have to maintain margins and profitability. This necessitates a focussed look at how volumes can be increased given all the factors in the trading area impacting on the site and its ability to attract motoring and c-store customers.

Calculating the potential volume of a service station

In my previous article we considered the four major contributors to the volume at a service station which were:

  • Location – up to 70% of the establishment volumes
  • Brand – 10% of the volume
  • Facilities – 10% of the volume
  • Operations – 10% of the volume

We also considered how the potential volume of a service station is calculated using a tried and tested industry model where a number of facts and assumptions are combined to project potential volumes.

The projected fuel volumetric thru-put of a new site is calculated as follows:

  • The number of vehicles passing the site per day (VPD) multiplied by
  • The assumed capture rate (CR) or % of vehicles that will drive onto the site and buy petrol multiplied by
  • The assumed average transaction value in litres or average fill (AF) multiplied by
  • The number of trading days (TD) in a month given the site location and trading area

Thus by example: 15 000VPD x 3%CR x 30ltAF x 30TD = 405 000lpm projected volume

Given the fact that the number of vehicles passing the site, the average fill and the number of trading days are a given or assumed, the only element that the a retailer can have an impact on to increase volumes, is capture rate. The capture rate is influenced and determined by location, brand, facilities and operations. For a retailer to thus influence the capture rate, he or she has to address ways to improve the factors impacting the location, brand, facilities and operations which are collectively called the Retail Factors.

The Retail Factors

The Retail Factors are those aspects which must be managed and can be changed and improved to ensure that that the maximum opportunity is created for motorists to drive onto the forecourt and purchase petrol or c-store products. Some of these aspects may appear to be elementary and even self-evident, but the reality is that the lack of dedicated attention to secure a 100% efficiency will negatively impact a service stations volume. These are all “on-site” factors and exclude other tactics to attract customers such as Oil Company national advertising, promotions and loyalty programmes. These retail factors also include those related to the establishment criteria of the site – i.e. those factors which were considered and implemented when the site was originally built. The on-site retail factors include:

  • Visibility
  • Accessibility
  • Appearance and Housekeeping
  • Equipment and systems
  • Staff
  • On site marketing
  • Safety and health
  • Competitiveness

Visibility

The visibility of a service station to approaching and passing traffic is a vital factor in influencing the motorist to drive onto the forecourt. In many cases the buying decision is made some distance before the motorist reaches the entrance to the service station, so if the visibility is poor the motorist may miss the site and drive on to a next one. Key elements in visibility include:

  • Signage
    • Main Identification Device (MID)
    • On the canopy
    • On the building
  • Obstructions to the site and signage visibility
    • Trees
    • Other signage
  • At night
    • Signage illumination
    • Canopy and building lights
    • Entrance lights

Retailers, in collaboration with their suppliers should constantly maintain and where possible upgrade the level of signage to ensure maximum visibility. This could include repositioning the MID and installing more luminous lighting.

Accessibility

Accessibility – the ease and convenience of entering and exiting a service station property is probably the most important of the retail factors. Many service stations succeed or fail based on this one aspect, the importance of which cannot be overestimated. Retailers should not only ensure that the entrances and exits are in good condition and free of obstructions but also explore opportunities to improve the access and egress where road regulations allow for this. Accessibility includes:

  • Entrances/Exits
    • Condition
    • Obstructions
  • No Parked vehicles at the entrance/exit
  • Entrance lights at night
  • Other directional and traffic signage
  • Road marking directional arrows
  • Pump attendants directing traffic

Appearance and housekeeping

This vital part of many retail service stations is unfortunately neglected and where this is the case, does not contribute to attracting motorist and growing volumes. Motorists are becoming more and more discerning and their choice of service station is definitely influenced by the quality of the operation and the attractiveness of the forecourt and buildings. The key elements are:

  • Clean and inviting forecourt and buildings
  • Forecourt free of litter and other unnecessary items
  • Canopy painted and clean
  • Clean and fresh ablutions
    • Accessible
    • No locked doors
    • Clean and hygienic
    • Hot Water available
    • Floors clean
    • Rubbish bins available
    • Soap and paper towels available
  • Pump island neat and washed
  • Pumps clean with no broken pieces
  • Pumps attendants in neat and clean uniform
  • Gardens neat and tidy
  • Perimeter fences and wall neat and tidy
  • Signage clean and in good order i.e. no broken pieces hanging off
  • Buildings and canopy supports free of posters and other untidy decals, etc.

Equipment and Systems

Although not always considered as such, the quality and condition of equipment and systems can play a role in attracting (or deterring) customers. All equipment should be in proper working order and point of sale and payment systems must be user friendly and allow for quick and efficient transacting. Equipment and Systems include:

  • Pumps and related equipment
  • Other forecourt equipment
    • Air hoses and gauges
    • Window cleaners
  • Point of sale systems
  • Payment transacting systems
  • C-store and bakery equipment
  • Fridges neat and clean and in good working order
  • Air conditioning working effectively
  • Compressor working
  • Generator available

Staff

All the staff at a service station should be trained and directed towards achieving the same common goal – happy customers. To achieve this the retailer must create a working environment where the staff are motivated and encouraged to provide the best possible customer service at all times: The following basic yet often absent steps are essential:

  • Smiling and friendly attitude
  • Courteous and professional approach
  • Confidence and product knowledge
  • Service steps for pump attendants
    • Greet and welcome
    • Ask to fill up and clearly take order (no wrong fuel transactions)
    • Offer to clean windscreen and check oil
    • Check battery water and pump tyres on request
    • Confirm purchase and process payment
    • Greet and ask to call again

On site marketing

There are many value add actions that a retailer can take to improve the overall marketability of the service station and its products and services. Many of these require the retailer to interact with customers and potential customers and to increase his visibility and availability to all. Some of these include:

  • Community involvement including free coffee for security services, water point for runners/cyclists, safe haven for children, etc.
  • Business collaboration including a courtesy visit to all businesses in the immediate trading area and membership of local business associations and forums to raise personal visibility
  • Bakery and c-store goods delivery service to selected customers
  • Install additional ATMs
  • Visit schools/churches/other societies and find ways to collaborate and support
  • Meet and greet every single customer and get on first name terms with all of them
  • Become the community hero and the first choice respected and trusted service station business in the area

 Safety and health

This retail factor is included because the safety and health of both customers and staff is not negotiable and in many cases is not tested or investigated until there is an incident. It is thus imperative that the retailer and his staff apply 100% adherence to all aspects of the site operation where safety and health is concerned. This can include:

  • Functional firefighting and related equipment available
  • Staff safety training up to date
  • Evacuation route and designated assembly area clearly indicated
  • All emergency numbers clearly available
  • Food safety rules and hygiene inspections done daily

Competitiveness

The one area that many retailers neglect is measuring the competitiveness of their service station in comparison to other competitors in the trading area. Retailers should at regular intervals visit the competitor to gauge how their sites stack-up against the competitor and ensure that their service station is the best in the area in all aspects. Areas that can be compared include.

  • How good are competitors in relation to all the retail factors?
  • What do they offer that we do not have?
  • Benchmark their standards against ours
  • Are we competitive and are they looking at us to compare?
  • Are we leaders or followers in product and service offerings?

Conclusion

After 37 years in petroleum retailing in South Africa I can categorically state that focussed and dedicated attention by the retailer to ensuring complete adherence to the Retail Factors not only improves site efficiency but will also over time, increase capture rates and volumes and turnovers. When all the factors are in place and aligned, they achieve the volume and profit goals through excellent customer service by valued employees who protect the retailers’ investment and respect the environment.

Viv Corinaldi

May 2017

 

4 Responses to “What sells petrol?”

  1. Pieter de Weerdt says:

    excellent article!

  2. Very insightful article and very true. It boils down to the heart of fuel retail.

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