By Karen Keylock

For a variety of reasons, the fuel retail sector has been in decline for several years, which is expected to continue. The long-term expectation is a 9.2% decline in global value to $79 billion in 2030, driven by efficiency improvements, regulations to curb emissions, and the rise of electrification and shared mobility.

On top of this, consumer behaviour is changing, with more people working from home and shopping online. However, the decline in fuel retail income is expected to be offset by gains in non-fuel retail, with global forecourt value expected to increase by 36% to $30 billion in 2030.

South African trends reflect global developments

A study undertaken by our research partner, Trade Intelligence, shows that South African trends align with global expectations. While fuel retail sales in South Africa have dropped by 7.6% over the past 5 years, the number of fuel station forecourts has increased significantly, with forecourt convenience store turnovers increasing by 14% last year alone.

Interestingly, Lightstone research indicates that the average South African visits a fuel forecourt 10 times a month. Few of those visits are for refuelling: 74% of visitors shop at the grocery store, 68% buy takeaways, and many use the ATMs and grab a coffee on the go.

The Fuel Retailers Association (FRA) – another key Nedbank partner in the sector – believes that South African fuel and convenience retailers need to shift their focus from servicing vehicles to meeting the needs of drivers and passengers. This means viewing fuel forecourts as ecosystems that include fuel, ATMs, quick service restaurants, grocery stores, and more, essentially replacing the old-school corner café or tearoom.

A playbook no longer exists: Be creative and bold

Toreally thrive, fuel retailers must think outside the box to create a competitive edge. International fuel retailers are way ahead in this sphere, and South Africa can learn from countries like Thailand, Brazil, and Japan. At a recent FRA Conference, Mark Wohltmann from the National Association of Convenience Stores (NACS) in the US outlined cutting-edge trends in forecourt convenience store retailing.

According to Wohltmann, several interconnected trends can help fuel retailers diversify their reliance on fuel income:

• Architecture: Prioritise design over function to create atmosphere. Consider making the forecourt the backcourt, as the fuel is no longer the main attraction.
• Urbanisation: Increased urbanisation presents opportunities, with people now living in smaller apartments needing conveniently located laundromats and ready-made meals. Stylish, comfortable co-working spaces with great wifi, coffee, and food are also in demand.
• Food service: Beyond basic offerings like milk, sweets and pies, a food service offers great potential, particularly coffee. In unofficial research conducted by Wohltmann at conferences held globally, he learned that close to 50% of fuel retailers offer filter coffee and other basic options, followed by 23% offering a Barista-style experience. But the fuel stations that are truly maximising this opportunity are the 15% offering the full coffee shop experience, with seating, coffee shop-style food and co-working spaces. A solid example is Thailand’s Café Amazon, owned by PTT Public Company Limited, which is Thailand's largest state-owned oil and gas company. Since its launch in 2002, Café Amazon has become the world's sixth largest coffee chain.

Wohltmann adds that success in convenience retail hinges on understanding the local customer and matching the perfect experience. For example, a coffee shop at a fuel station in Helsinki will have a vastly different look and feel than one in Dubai. The first is likely to have a warm and cosy atmosphere with dark wood and plush seating, while the latter will probably be lighter and brighter with pale wood accents and a feeling of openness. Wohltmann references Japan, especially Tokyo, as being particularly successful in terms of stores having adapted to meet specific, local needs. 

Valuable advice from global experience

In his presentation, Wohltmann made some useful suggestions to help South African fuel retailers differentiate themselves:

• Be bold if you need to refurbish.
• Think beyond the classic categories.
• Be known for something unique.
• Don’t use technology for the sake of it. Implement tech that supports your operations and enhances customer experience.
• Offer excitement beyond the usual, bland offering and upsell to encourage longer dwell time. People want to be entertained.

Keylock is the National Retail Services Manager at Nedbank Commercial Banking.

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