Future of POL Retailing

8/11/2019 Future of POL Retailing

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FUTURE OF FUEL RETAILING IN INDIA

University of Petroleum and Energy Studies, Dehradun

9/7/2013 1CPM - HPCL

Dr. Suresh Malodia


2/18

2006-2011: Private sector make marginal dent on PSU market share

2

Company

RO's

(2002)

RO's

(2011)

Market

Share (2011)

IOCL 11724 19057 46.69

BPCL 7332 8988 22.02

HPCL 7304 9785 23.97

IBP 3474 NA 0

RIL 1316 1429 3.5

Essar 443 1391 3.41

Shell NA 94 0.23

Others 48 75 0.18

Total 31641 40819 100

8/19/2014

POST 25THJUNE

Shell Chairman Vikram Singh Mehta, This move will give a boost to private sector oil retailersone can

expect private companies to gain close to 20% market share in a year or two.

Nayyar,CEO ESSAR OIL As the largest private sector fuel retailer in India, we are well-placed to capture

additional sales for fuel and non-fuel items and expect to see significant volume growth in both areas

Source:indianpetro.com


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Causes of shift in Retailing in India


4/18

Challenges

Low Product Differentiation

Lack Of Customer Loyalty

Intense competition : Moving Towards Deregulation


5/18

Q:Low Product Differentiation?

Petro Retailing: Product? Or Service?

In Growth Markets

Increase Market Share growth & Profitable revenues: Differentiated Value Proposition

New Customer or increase share of existing customers wallet

Q: Lack Of Customer Loyalty?

Know Your Customer: SegmentationMobils Customer Segmentation in US

In India

Stringent pollution Norms

Growth in large car sales

THE FIRST MOVER ADVANTAGE

CHALLENGES HOW & WHY??

Q :Intense competition : Moving Towards DeregulationNon Fuel Sales


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HOW TO MAKE EDGE ??

COMPETITIVE

ADVANTAGE

COST

COMPETITIVENESS

PRODUCT

QUALITY

COMPETITTIVE

POSITIONING

NON-FUEL

SALES


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HOW TO MAKE EDGE ??

RVI (Retail Visual Identity)


8/18

NON- FUEL ALTERNATIVES


9/18

Non fuel services grouped

Convenience Stores (C Stores)

Auto Care Services

Ancillary Services

NON- FUEL SERVICES GROUPED


10/18

KEY CONSIDERATION FOR NON-FUEL RETAILING

0%

10%

20%

30%

40%

50%

US FRANCE EUROPE UAE INDIA


11/18

Non-Fuel Retailing Initiatives

Indian Retail SectorFirst Gear: (Create awareness)* New retailers driving awareness

* High degree of fragmentation

* Real estate groups starting retail

chains

* Consumer expecting 'value for money'as core value

Second Gear: (Meet customer

expectations)

* Consumer-driven

* Emergence of pure retailers

* Retailers getting multi-location and

multi-format* Global retailers evincing interest in

India

Third Gear: (Back end management)

* Category management

* Vendor partnership

* Stock turns

* Channel synchronization

* Consumer acquisition

* Customer relation's management

Fourth Gear: (Consolidation)

* Aggressive rollout

* Organized retail acquitting significant

share

* Beginning of cross-border movement

* Mergers and acquisitions

Indian Retail

Sector


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Non-Fuel Retailing Potential

India as a Non Fuel Retailing Destination

2nd Most attractive developing market

4th Largest economy after USA, China & Japan.

2nd Fastest growing economy in the world

Would be 3rd largest economy in next 15 years 5th among the 30 emerging markets for retailers

300+ million middle class - the Real consumers

Increased disposable Income

Among top 10 FDI destinations

Massive investment planned in infrastructure development in next 5years

Exponential growth is taking place in Retailing in India

Organized Retail Only 3% but growing at 30%


13/18


Bharat Petroleum Corporation Limited (BPCL)

In &Out stores

In & Out stores have a wide range of services which include ATMsof leading Banks, Music stores from Planet M and Music World,Beverages from Pepsi, Coffee and snacks from Caf Coffee Day and

Coffee Day Xpress, and a variety of impulse buys includingconfectionery, snacks, convenience foods, toiletries and selectrange of branded groceries and other FMCG products throughexclusive tie-ups with such FMCG majors like ITC, Cadbury andFrito-Lay

The In &Out stores offer Western Union Money Transfer facilitiesin Mumbai. They also offer prepaid mobile recharge cards and e-charging of mobiles. It also has music stores by the name ofSatellites and Unplugged from Planet M and Music Worldrespectively at select outlets for music cassettes and CDs.


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Non Fuel Initiatives of Indian PSUS

Indian Oil Corporation Limited (IOCL)

XTRACARE

innovative, plans to start fuel services at shopping malls

Convenience stores (they sell a wide range of packaged foods, hotand cold drinks)

the company has tied up with major retailers and set upconvenience stores, super markets and other formats

In urban areas, the stores are in two sizes, 300 to 700 sq feet and700 to 1,000 sq feet. They are between 1,000 sq feet and 1,500 sqfeet on highways

IOCL has 108 Kisan Seva Kendras (KSKs), its low-cost petrol pumpsthat sell agriculture inputs, equipment and daily essentials in ruralareas



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Hindustan Petroleum Corporation Limited (HPCL)

Club HP

HPCL has struck strategic alliances with leading brands like Fed Ex,

Coca Cola India, Western Union Money Transfer, ICICI Bank, Cafe

Coffee Day, Skypak, US Pizza, and many more. HPCL is also forging

service specific alliances with several automobile companies and

OEMs like Tata Motors to jointly recognize "Club HP" outlets,

which will be authorized service centers for leading automobile

brands

Club HP" outlets have been cataloged as Standard, Mega and Max

depending on the levels of services and amenities available


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Myth that Reliance broke:

The four public sector companies (IOCL,HPCL.BPCL.IBP) had reconciled to the above myth that

had been guiding the petroleum retail sector for decades.

In the petroleum industry

There exists a measure of a company's effectiveness in a particular market. It is measured in

terms of marketing effectiveness (ME).

An ME of '1' means that if a company's outlet share is X per cent and if it's market share is

also X per cent, then its ME = X/X = 1. For long, IOC, HPCL, BPCL and IBP were content with

achieving a ME of 1.

Reliance, from day one, challenged the myth of market share being dependent upon the

Retail outlet share. It patterned its thought-process on 'Flying J' -- a diesel retailer that with

just around 200 stations had become the Number 1 diesel retailer in North America, beating

the likes of Exxon Mobil, Shell, BP and Chevron.

"Market share of petroleum products depends on the retail outlet share.


17/18

Look beyond the ME of 1 and try and capture the ME of 3 or even 4. This means

that Reliance felt that it was possible to have just 3 per cent of outlet share and

yet have more than 12 per cent of market share. This dream was achieved by

Reliance during the financial year 2005-2006.

Reliance achieved a market share of 12 per cent with just 3 per cent station share

in 2005-2006. On the other hand the public sector companies held a market share

of 88 per cent while holding the retail outlet share of 96 per cent. This shows that

whereas Reliance achieved a market effectiveness of nearly 4; the combined ME

of PSUs was less than 1!

5 reasons behind Reliance's success

Employing the Best in business and emphasis on Training

Meticulous Planning

Dominating markets by new approach

Cutting edge technology

Company owned company operated stations (COCOs)


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For now, the existing players are expanding

cautiously. In a highly-competitive environment, it

remains to be seen who will crack the consumer riddle

Future of POL Retailing

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