Fuel forecourt retailers set to capture a larger share of the R240bn convenience market
Fuel forecourt retail has emerged as the fastest growing segment of the South African convenience retail market as fuel retailers seek to diversify their offerings and insulate their businesses against volatile fuel prices.
Worth around R40 billion a year, this market has expanded in recent years as fuel stations have partnered with big-brand retailers and fast food chains to create compelling shopping hubs.
Steven Heilbron, CEO of Capital Connect, a fintech that offers fast and flexible business funding to South African retailers, says that forecourt shopping today isn’t just about selling bread, milk or takeaways to drivers that have stopped to get fuel.
It has also become a shopping destination in its own right for consumers doing their regular shopping or buying a quick takeaway when they’re facing load shedding.
Trade Intelligence’s Forecourt & Convenience Report shows that consumers are increasingly going to forecourt shops for scheduled shops, not just when other stores are closed or when they’re commuting between places. This trend is particularly pronounced among Generation Z consumers, with a fifth doing their weekly or monthly shop at a fuel forecourt retailer.
Says Heilbron: “Major supermarket chains have upended the fuel forecourt retail sector in recent years, bringing a wider selection of products, lower prices, more reliable supply chains, and their loyalty programmes to fuel station shops. This has enabled fuel station owners to attract a time-strapped consumer with 24X7 retail offerings that give them everything they need at a single stop.”
Despite the growth that fuel forecourt retail has experienced in recent years, the channel accounts for only a sixth of the total R240 billion convenience market in South Africa. This highlights that competitive, flexible fuel retailers still have enormous scope to grow their share of the pie, says Heilbron.
Some of the opportunities he highlights include:
- Targeting the grab-and-go dining market—Grab-and-go dining is a pandemic trend that has never gone away. Fuel retailers without a takeaway offering can profit by investing in the right franchise for their area. Those with existing takeaway counters can profit by expanding their range or improving quality.
- Attracting price-sensitive shoppers with specials and promos—Forecourt & Convenience Report shows that perceptions around price are the biggest barrier to shopping at forecourts more often. Promotions and specials can be a great way to change this perception.
- Expanding product range and inventory—Fuel forecourt retailers can expand the product range they offer and ensure they have enough stock available of key products, so they don’t lose a sale.
- Investing in new tech—Surveillance cameras to fight shrinkage and shoplifting, digital payments acceptance and other technologies can help fuel forecourt retailers to improve their profitability.
- Expanded reach through new channels—Fuel retailers can use delivery apps like Uber Eats or MrDFood to target home shoppers.
- Creating workstations for remote workers—Some fuel stations are creating workstations with power points and Wi-Fi to encourage people to meet, work and spend money in their forecourt shops.
Reggie Sibiya, CEO of the Fuel Retailers Association, says: “With fixed margins for fuel, rising operating costs and volatile fuel prices, fuel retail is a challenging business. Convenience has emerged as an essential supplementary income stream for fuel retailers, helping them to weather difficult economic times and get an edge in a competitive market.”
Heilbron says: “There is plenty of opportunity for fuel forecourt retailers, but to take advantage, they need fast access to opportunity capital. Fintech providers are making it easier for them to access the funds they need to buy stock, invest in their forecourt shopping experience (shoppertainME) or drive a promo.
“With Capital Connect, you can apply for business funding of up to R5 million from our app and the funds will be in your bank account within 24 hours, or the same day, so that retailers do not miss out on business opportunities.”