And then in 2008, something happened.  Cars became much more fuel efficient.  Customer dynamics changed.  Loyalty meant less to the customer.  People wanted more from their stop.  People wanted the C-Store to be a destination, rather than a necessity stop.  And that’s okay, but it switched everything into a much higher-gear.  The changes from 1905 to 2000 were not what you would call fast, and really why did they need to be?  The only real shift in the fuel retail world came as a result of the supermarket entry into the fuel retail space, but overall, standard petrol stations did not really change all that much.

With the advent of the Prius, and with fuel economical cars, fuel retailers have appeared to move into overdrive, which changes happening much faster than they once did.  Customer’s demands post the 2008 financial crisis have evolved too, with a greater demand for quality in the c-store; gourmet food and coffee, more options, healthier options and prices comparable with grocery stores. 

Things are now moving at a pace which was previously inconceivable.  Petrol stations have become retail hubs, meeting spots to grab a bite to eat, do some shopping, pay some bills, deal with some post, and so much more.  According to NACS, today there are six different types of Convenience Store… Six! They are:

• Kiosk
• Mini Convenience Store
• Limited Selection Convenience Store
• Traditional Convenience Store
• Expanded Convenience Store
• Hyper Convenience Store (Think Buc’ees!)

NACS also notes in the US that Convenience stores stock at least 500 SKUs; and Product mix includes grocery type items, and also includes items from the following groups: beverages, snacks, confectionery and tobacco. However, lately, in Europe, even that is shifting more over to small format grocery and the number of SKUs is growing rapidly.

In their 2021 article, Fuel retail in the age of new mobility, McKinsey and Company point out, there are plenty of adjacent value spaces for retailers, but a new way of thinking will be needed to transform their business.  This is where AI can help.

Let’s start with EV, something that retailers are slowly installing on their forecourts in order to address the challenge of charging points.  In Europe, it seems that every power company and country has a different set of rules or guidance for how EV charging can be priced. For example, some governments are saying that the customer can only be charged a fixed amount for the electricity, and then the retailer can charge a service fee.  Okay, that’s fine, so you slap on a 10cent/minute service fee, right? 

Well…not quite.  Let’s flip this on its head and take a look at this from the top down. 

1. You give up a piece of your very valuable land to place a charger.  Let’s say, a parking place.
2. You charge a fixed amount for the usage of the space.
3. Your customers arrive during peak hours to charge – assuming 45 minutes per charge.
4. Your forecourt is already busy with classical customers, some wanting to shop.

So what is going to happen next? 

• The customer charging their car might buy a coffee and a sandwich, but more likely than not, they will watch Netflix in their car.
• Your classical customers will see a full forecourt, and either they’ll decide to splash and dash, or they’ll drive on.
• Your C-store customers will be unable to park, thus leading to a smaller shop.
• And eventually, the power-company will see an uptick in usage and go, “hmm, it’s time to start introducing variable pricing…” (as is beginning to happen in countries with high EV uptake).

What this means is giving up that one parking place to solve the EV problem, will most likely cost you more than the service charge will ever earn you.  So how to solve such a problem?  Well that’s where AI fuel pricing comes to the rescue.

PriceCast Fuel has the capability to take into account the influencing factors connected to the introduction of EV, and leverage them against an AI generated dynamic service fee, and also an adjustment to the classical fuel price in order to adjust when the customer stops at your site. It trains and sets expectations with the customer, in order to make sure that every customer is catered for in the right way.  PriceCast Fuel can work out all the relevant factors to not only price fuel, but to teach customers when to charge, in order to reduce time spent on forecourt during peak times.

This means that not only will fuel sales improve, but the c-store will see a marked uptick in sales thanks to better linearity in EV sales, and a freer forecourt area when you need it to be.

How else can AI impact Fuel Retail then?

Well, we know that most forecourts, in Europe at least, were built in a time where the focus was purely fueling, and the c-store was an after-thought.  Since those times, land has become much more expensive, and legislation makes it more difficult to greenfield new sites.  Knockdown and rebuilds help but space is still at a premium in a lot of cases.  Some retailers chose to go unmanned and whilst that solves one problem for now, it won’t last forever. 

If we are to transform these smaller stations into retail hubs, then we need to consider technology.  Reducing our IT footprint is a good way to begin; cloud computing, 5G and wireless technologies will help there.  But if we are now introducing choice and thousands of additional SKUs, do we have the stock space for such a large inventory?

Here is where AI adds an interesting benefit.  By understanding your fast-moving goods, what the store needs at a given time and what factors will influence the buying decision, we can begin to rethink the way we address inventory.  The stock journey could be as follows:

AI can help understand the demand dynamics and also the best distribution management for the FSLs.  An FSL can be a cheap storage location within a certain number of kilometers/miles of a cluster of sites, thus reducing land cost for the inventory, improving automation, and most of all, increasing the capacity of the site.  AI can determine whether or not a sporting event will lead to an increase in beer sales, or even whether or not a fuel pricing event is going to increase overall sales.  This is why AI is critical.

In our last blog article, we talked about how the forecourt is not going away, but is going to change, and this could genuinely be the moment where we start to see the forecourt and C-store make the transformation into a true retail hub. QSR is now staple in the C-store, but do we really know how best to price and build our products in order to reduce waste, cost, and increase sales?  Intelligently enabled kitchen is a game changer whereby customers can order how they want, and always walk away happy with their order – this isn’t anything new, but how often do we see this being observed?  A kitchen printer is cheap in the short term, but without intelligent kitchen management, how much does that printer cost in waste and customer satisfaction? 

Artificial Intelligence is a game changer which will help us to define customer centricity, understand the customer better as an individual, and change the way address tomorrow’s challenges.  When it comes to AI, using such a powerful tool just to try to analyze competitors is never going to cut it. We need to analyze each customer and say to ourselves, can we reach that person?  With A2i, whether now with PriceCast Fuel, or in the future with our extensive roadmap, you’ll be able to do just that. 

Reach out to us today to discover how A2i can be your partner for all things AI today and in the future.

…but it doesn’t mean that change isn’t coming…

On the 11^th June, the BBC posted an article essentially announcing the imminent death of the forecourt.  Their justification, to summarise rather bluntly, is the incoming UK legislation around the ban on the sale of new fossil fuelled cars by 2030, with the exception of plug-in Hybrids (PHEV) until 2035. 

Now, I would and could point out a few minor details here; namely:

• UK legislation is not exactly in line with other countries.  Yes, some have European countries have announced similar legislation, but the dates are not aligned.
• Car owners want to get at least three (3) years out of their cars before they resell to the second-hand market.  That means we can assume a diesel PHEV vehicle will need to work until 2038 before being sold to the second-hand market where it will need to function for another five to seven years, preferably more.  Ergo, fossil fuels must still be around by 2045 at least.
• EV cars are not exactly the environmental saviour right now, and lithium mining doesn’t really do us many favours.  Couple that with the fact that the question of disposal remains uncertain, I don’t see how EV is the win-all answer to the environmental question.
• The second-hand market for EV is flat.  People are scared to buy a second-hand EV car because essentially, they know the batteries will need replacing and that’s a huge cost.
• What about tomorrow’s technology?  Here-in lies the million-dollar question!  What will we be filling/charging with in 2030?  We cannot work with EV charging as it is today because that is not an answer.  Hydrogen could work, so long as we can fix the green aspect of that by then. 

So I think we can all agree that there is no way the forecourt is dead, nor is it going away anytime soon.  However, it is going to change.  As 2030 (or other years in other countries) approaches, we will be forced into the “next generation” vehicle.  JLR recently announced their move for Jaguar to a complete EV range, which is quite a bold move given the success, or lack there-of, of the i-Pace.  What it all means is that fossil fuels are becoming less relevant (not irrelevant).  And I use are because this is not a new phenomenon; it’s been going on for a while now, from the advent of the Toyota Prius to the use of the one litre TSI engine.  The fact is, there are fewer stops required, cars are more fuel efficient, and oil companies have become QSR, Coffee and Convenience Store leaders in order to bridge the gap, such as Shell’s plan to cover 50% of their profit from non-fuel by 2025.

This needn’t be a bad thing though.  Change is, after all, inevitable.  Change can lead to some pretty fantastic things, and the fact is, we have been missing our Concorde moment in the retail industry; yes, we’ve seen some amazing ideas, singularly, but when do we get to walk into a store and truly experience omni-channel as was promised to us?  When will we really get recognised and rewarded just by turning up on the forecourt?  When will we really see these powerful computers we call mobile phones put to decent use?

Well actually, maybe it’ll be sooner than you think. 

As a retailer, you maybe just now thinking about installing QSR areas.  You maybe looking a mobile payment at the pump.  If you are super-forward thinking, you maybe thinking about Self-Checkout…you know, those things the supermarkets have been using for a couple of decades now?  That’s nice.  But you still have a number of large storage tanks under all that concrete filled with fuel, and yes, you do still need/want to sell it.  So the question is, do you still want to make a profit?  Do you still want to compete with fuel?

Artificial Intelligence is an opportunity for you to begin to address the issue of falling margins and volumes.  It is a lightbulb moment where you have to say, the market is becoming too complex now, and I need help finding the missing pieces.  With AI, you can actually address the wants, needs, and behaviours of the consumer, and isolate opportunities to find success, rather than spend hours looking at Excel sheets, visual charts and data, or even trusting legacy competitor-follower solutions which use high-school mathematics to guess what the competitor might do with their fuel price.

Let’s face it, our Concorde moment is here, and that is trusting true machine learning to understand and target customers in a relevant and timely manner.  Over the coming months, AI is going to help us more and more on the forecourt, as we transition from traditional retailers to customer-centric retailers; and by that we mean better granularity in our data, better ways to interact with our customers on a one-to-one level; private pricing, dynamic car-wash pricing, even ways to better couple the forecourt to the c-store by leverage dynamic pricing in-store and even AI assisted replenishment. 

AI is already changing the game on the forecourt.  Retailers already understand that it’s not a case of wait and see, but a case of do or die.  No, the forecourt is not going anywhere, but we are beginning to operate in a changed world – The Last Mile Forecourt.  Do you want to cut your journey short and cut your losses, or do you want to see it through to the last drop of fuel?

“With the industry at a crossroads, operators need to move quickly to rethink strategy, build new capabilities, and transform their businesses.”

An article by Álvaro Bau, Arjun Chopra, Mladen Fruk, Lazar Krstić, Klaas Mantel, and Florian Nägele, representing views from McKinsey’s Oil & Gas Practice.

This is a fantastic article by McKinsey and definitely worth a read. Klaas Mantel, the legend formerly from Shell, was an active influencer on this white paper, and we believe it highlights exactly our arguments about the need for advances in fuel pricing in order to stay ahead. No more can we sit back and play follow the competition.

We are at a crossroads in the fuel retail industry, where we need to decide what to do about traditional fossil fuels before government legislative sunset dates kick in on new car sales. If you want to remain relevant, and squeeze the last possible drops of margin out of your forecourts, you can only do it with artificial intelligence.

This article is a must read for any retailer looking to the future, to cloud, mobility and nextgen.

Read the article here.