anuj angirish

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FACTOR BEHIND THE SUCCESS OF PETRO RETAIL

OUTLET IN INDIA

Dissertation Project Report

Submitted in partial fulfillment of the requirements for the

Award of the degree of

IINNTTGG..BBBBAA++MMBBAA((OOIILL AANNDD GGAASS))

By

ANUJ ANGIRISH

Under the guidance of

Dr. Atul Razdan

COMES, UPES

University of Petroleum and Energy Studies,

Dehradun

2012


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UNIVERSITY OF PETROLEUM &ENERGY STUDIES

DISSERTATION REPORT

ON

FACTOR BEHIND THE SUCCESS OF PETRO RETAIL OUTLET IN

INDIA

UNDER THE GUIDANCE OF

Dr. Atul Razdan

College of Management and Economic Studies

SUBMITTED BY:

Anuj Angirish

R430209008

INTEGRATED BBA +MBA (O&G)

Semester VI


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ACKNOWLEDGEMENT

First and foremost, I would like to express gratitude to my Institution, University of Petroleum &

Energy Studies for providing me a magnificent opportunity in the form of this dissertation to

work and learn.

I would like to express gratitude to Dr. Atul Razdan for sharing the journey of conceptualizing

and developing all the ideas. He stood in times of difficulty and despite of his busy schedule

devoted a major chunk of his time towards this project. He has been a part of all the activitiesand duly guided the project to its destination. I am indebted for his endeavour in making this

project a success. He has truly fulfilled

his role as a guide.

I would also like to acknowledge the help and support extended by all my friends whose names

could not be mentioned here. They all have been very co-operative and provided impetus to this

project. Without their help this project would not have reached its destination. I express mygratitude for their suggestions

and help they extended to this project.

I will not miss the opportunity of expressing thankfulness towards all my teachers and the faculty

of University of Petroleum & Energy Studies for sharing their knowledge, which provided

necessary ingredients to this project.

Date:

Signature

Place:


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INDEX

S.NO. CHAPTER PAGE

Nos.

1. INTRODUCTION 1-42. EXECUTIVE SUMMARY 5-63. RESEARCH METHODOLOGY 74. RESEARCH OBJECTIVE 8-95. LITERATURE REVIEW 10-136. FINDINGS 14-437. QUESTIONNAIRE 44-458. CONCLUSIONS 46-489. REFERENCES 49


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INTRODUTION

Indian Petroleum Sector

Over the years India Petroleum Industry has played an influential part in triggering the speedy expansion

of the country's economy by contributing 15% in the total GDP. Further to this, petroleum exports gave

new dimension to foreign exchange earnings in India.

Expansion of Indian petroleum retail market is triggered by the growth in automobile sales that resulted in

major foreign investments. The growth is estimated to sustain and the market is likely to expand further

by 20 million every year till 2030, placing India at the world map in terms of being the biggest

automobile market.

The business environment in India has undergone a significant change in the past few years, and

nowhere is it as pronounced as in the petroleum sector. Increase in refining capacity has

transformed India from a net importer to a net exporter of petroleum products. Petroleum

marketing has been decontrolled leading to entry of new domestic and international players into

the market. Government have provided operational freedom to the government oil companies in

a host of areas including determining their own market share, freedom to prepare and implement

their market plans , selection of dealers etc. We are also moving towards a market determined

pricing regime in letter and spirit. This liberalized scenario is making the sector intensely

competitive, and the oil companies, especially those in the public sector would need to adopt a

more customer focused approach to the retail end of their business.

Factors leading to success of petrol retail outlets

To gain a sustainable advantage, a retailer needs to understand and satisfy both the apparent and

the latent needs of the customer. This principle holds true in petroleum retailing too. All our

efforts in exploration and production, refining, distribution and marketing and finally culminate

at retail point after moving through a long complicated supply chain.

Some of the major factors over which success of a petro retail outlet:

a) Quality (no fuel adulteration)

b) Value added servicesc) Generating higher volumesd) Reaching the subserviced arease) Prompt servicesf) Convenience to reach the storeg) Good ambience etc


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EXECUTIVE SUMMARY

The Indian retail industry can be segmented in different segments viz. cosmetics, footwear,

sanitary products, entertainment etc. The downstream petroleum retailing is one of the largest

segments of the Indian retail industry and the petro-retail sector is one of the most organized

sectors of the retail industry

India had deregulated the petroleum retail sector in 2002 by dismantling APM and enabling newplayers to enter the market. The entry of private players like Reliance, Essar, Shell, NRL, and

many more have increased the competition by means of the quality of fuel and the non fuelofferings at their retail outlets

With a market determined pricing mechanism in place, prices will be lowered, which would

reduce the margins from fuel products. In such circumstances, the petroleum retailers will needto have differentiated value propositions to improve revenues. It will require customer centric

approach and building of a strong brand equity and identity. Non-fuel products tender

higher margins as compared to petroleum products and enable companies to sustain themselves,

especially during times when oil prices are high. However, it is to be kept in mind that petroleumretailing is a retailing of petroleum product and service, with differentiation possible in either or

both areas

Now, it is not all about offering fuel only at the petrol stations. The new look petrol pumps, apart

from dispensing fuels; now offer the best of retail chains providing a value added service to busy

consumers. This trend is in circulation in the international markets and the big petrol stationconvenience stores earn more than 30 to 40 per cent of their profits from the non-fuel activities.

The range of value added services is all beneath one roof. The new-look petrol pumps are now

the more advanced multi-purpose dispenser petrol-pumps. The petrol pumps are computerized,

thus reducing waiting time which not only ensures accuracy, but also saves a lot of time forcustomers and avoids misconception and arguments. The study gives a comprehensive overview

of petroleum industry in India, the way it has evolved through shackles of time and its current

status with respect to companies, regulations and customers. The study tracks the origin and the

journey of industry till date. It has also focused on the kind of services expected by consumers,which are being provided on retail outlets and which can be provided on outlets. These services

will cumulatively increase the revenue realization as well as optimal utilization of land available

on an outlet.There are various talks of the emerging retail boom in India, "with one modern store for every

400,000 population" at present. Among the factors that are driving this boom are convenience of

shopping, store accessibility, quality of products, loyalty programs and product assortment. Froma broader economic perspective, the diffusion of supermarkets can be conceptualized as a system


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of demand by consumers for supermarket services, and their supply in developing countries. Gas

retail sector is not far away.

The Indian Petroleum retailing industry is today poised to make giant strides both in

terms of new forecourt retailing opportunities and superior customer offerings at the retail outlet.

With the emergence of organized retailing in the country and a growing demand from

consumers for a superior shopping experience, Convenience Retailing has emerged as a key

business area for petroleum companies given their wide retail presence, existing customer baseand strategically located sites. Convenience need gaps have been felt in various fields and

research has shown that the urban consumer today seeks convenience in shopping for their basic

requirements so that their precious time is reserved for more fruitful pursuits. Petrol retail outletsprovide the right framework for setting up convenience retail chains where the consumer has the

opportunity of combining shopping with the fuelling occasion.

Petrol stations are widely recognized to be one of the highest traffic aggregators and retail

majors like hypermarkets such as Sainsbury, Tesco and Carrefour have added motor fuels intheir basket of services for the convenience of their customers. Hence alongwith strategic

locations, the availability of footfall in the petrol retail outlets give petroleum retail companiesthe competitive advantage. Worldwide, petrol station convenience stores have developed into a

serious business in itself with companies like Shell, Caltex, BP running their convenience store

chains very profitably. All of them have deployed best retail practices in their stores and offer awide range of services including laundry, postal services, courier services, fast food etc.


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RESEARCH OBJECTIVE

1. To highlight and analyse various factors responsible for the success of petro

retail outlets.

2. To find the factors that drive in customers into the retail outlet.

3. To know whether the customer is expecting anything more from the services

in outlets.

4. To find respondents reason for refueling in the particular retail outlet.

5. To know the importance loyalty program and additional services effect on

customer.6. To know the customer service satisfaction from the respondents.

7. To know the respondents opinion on the performance of their outlets.

8. To help the petroleum companies in knowing what are the factors which

factors would help driving more customers to their petrol pumps.

9. To analyze what are the factors which may help in marketing a petrol pump

better.


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RESEARCH METHODOLOGY

The type of research done to present this project is mainly descriptive type of research. Major

purpose of description research is the description of state of affairs as they exist at present. The

data used in this research is both PRIMARY DATA which include direct interview of owner and

customers. A part from this my study also contains few traces of SECONDARY DATA (also

known as desk research) involves the summary, collation and/or synthesis of existing research

Secondary research can come from either internal or external source.

3.1 Research Design

The formidable problem that follows the task of defining the research problem is the preparation

of the design of the research project, popularly known as "research design".

The methodology that will be undertaken to study the present study and to fulfil the above stated

aims and objective would be:-

Descriptive research studies are those studies that are used to describe the characteristics of a

particular individual or group.

3.2 Data Source

Primary source:-

Questionnaire and interviews.

A questionnaire will be created which will be subjected to 30 people to know whether the

questionnaire is suitable.

Secondary source:-

Magazine, Newspaper and Internet websites.


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3.3 Sampling Plan:-

A mixture of contact and convenience type of sampling will be used in this kind of research. The

survey is to be conducted at retail outlets in NOIDA. The city has been chosen as per

convenience and to get a better picture about the different strategies used for petro retailing

outlet.

Asample size of 250 (50 people per station) at 5 stations were interviewed by preparing aquestionnaire.


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LITERATURE REVIEW

Price uniformity and competition in retail gasoline market

Andrew Eckert1, Douglas S. West

Theories of price uniformity in a market

The competitive market model

A competitive market model of retail gasoline pricing has been adopted in a variety of

Canadian industry and government studies. This adoption is based on the belief that retail

gasoline markets in Canada satisfy the following assumptions:

(1) Consumers are mobile and can, at low or zero cost, check gasoline prices charged at different

stations in the same geographic market,

(2) Gasoline stations post their prices so that rival stations can check each others prices at low or

zero cost,

(3) Individual gasoline stations set their own prices, and

(4) Gasoline stations act as though they are undifferentiated firms competing in a spacelessworld.

Because these assumptions eliminate all spatial product differentiation and costly consumersearch, it has been predicted that retail gasoline prices (for the same type of gasoline)

will be the same everywhere in the market, irrespective of location, proximity to competitors,

or the characteristics of the retailers. In addition, it has been predicted that the retailprice of gasoline established in a market is a competitively determined price. The empirical

analysis carried out in this paper focuses on the first prediction of the competitive market

model.The competitive market model as stated may appear to be easy to reject: if all prices in

the market are not the same, then the model is rejected. However, rejection of the model on this

basis would not be sufficient to persuade its proponents that alternative models better explain

retail gasoline station pricing. What is required is the specification of an econometric model

that contains variables that the competitive model suggests should not affect the probabilitythat a station charges the market price.. In the absence of a clear rejection of the competitive

market model as the explanation for retail gasoline pricing, antitrust policy decisions will


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continue to be guided by the belief that retail gasoline markets are competitive, and anti-

competitive conduct in these markets cannot succeed.

Brands

Brands are controlled for by using two dummy variables: Majoritequals one if the stationsells a major brand of gasoline (i.e. Esso, Shell, Petro-Canada, Chevron, Husky-Mohawk)

and equals zero otherwise. Arc Temp itequals one if a station sells ARCO or Tempo brand

gasoline and equals zero otherwise. Majors have a greater incentive to set the tacitly collusive

price, so one would expect their stations to have a higher probability of matching the modeprice than either other brands or ARCOTempo. Conditional on characteristics, INC would

not predict brand specific differences in the probability of matching.

Contracts

Whether or not a station sets the mode price could depend on whether it is the station

dealer who sets the stations price or the supplier, which will depend on contractual

arrangements.At company operated stations and stations with commissioned dealers, the supplier

owns the station and sets the price. At lessee operated stations and branded independents,

the station operator or dealer sets the price.

While we were unable to obtain the contract type used by each major brand station,sufficient information was available to construct a proxy; the variable contract itequals one if

the station is a major brand station that is predicted to have pricing power at the supplier level

and zero otherwise.While the competitive model would suggest that contract type does not affect the

probability of setting the mode price, both tacit collusion and INC models would predict positive

coefficients on contract.

Distances

The competitive model predicts that the distance of a station from its competitor should

not affect whether the station matches the mode price. First, in the competitive model,

commuting makes consumers aware of prices at many stations. Second, either the transportationcosts faced by consumers in buying gasoline are zero or they do not vary by station choice

station that has nominal price control may in fact have little real control over its price. If lessees

and branded independents know that the supplier has a preference for uniform brand pricing,then a stations persistent


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deviation from the suppliers price could result in loss of a facility lease or of the suppliers

brand banner. It could also result in a loss of price support from the supplier. The British

Columbia Inquiry into Gasoline Pricing (1996), found that major companies will protect retailingmargins at branded stations by lowering wholesale prices to match decreases in retail prices

during price wars, but only if the retailer did not start the price war. since a commuter passes

many stations along her commute.Under the tacit collusion hypothesis, distances may have an effect on the probability ofmatching. A greater distance of a station from one that is not setting the tacitly collusive price

should have a positive impact on the probability of matching since the closer a station is to a firm

that is undercutting, the more likely the station will need to match the undercut to maintainmarket share. On the other hand, the closer a tacitly colluding firms station is to a tacitly

colluding station owned by a different firm, the greater the likelihood of setting the market mode

price in order to prevent the breakdown of tacitly collusive pricing. An INC model would predict

that the greater the distance a station is located from its competitors, the greater the likelihood ofcharging a higher price. In this context, a higher price would be the mode price or a price above.

The effects of distance will be controlled through the variables maj dist it ,Arc Tempdist it , and

odistit .

Distances are measured in kilometers with maj distit

measuring the distance of a stationfrom the nearest major brand station of a different brand. Similarly, Arc Tempdist itmeasures

the distance to the nearest competing ARCO or Tempo station, and odist itmeasures the distance

to the nearest other brand station. The coefficients on these distance

variables are allowed to differ according to whether the station from which distance is beingmeasured is either a major brand, ARCO/Tempo, or other brand, for a total of nine

distance coefficients.

Traffic flows

The competitive model would predict that stations that are not on roads that are a part of

the commuter network would charge the same prices as stations on the major roads. If firms

are behaving in a tacitly collusive fashion, whether or not the station is on a major roadmay determine the likelihood that the station matches the mode price. For tacit collusion to

be sustainable, mode pricing is most important at stations whose prices are easily observed

and for whom undercutting would attract the largest market share from rival firms. AnINC model would also predict whether a station being on a major road should affect the

probability that the station matches the mode price; stations on major roads would be less

likely to match because station locations on major roads should result in more intensive

competition between stations.

To control for this effect, the variable roaditis defined to equal one if the station is located

on a major road and zero otherwise. A station is classified as being on a major road if the

Vancouver Street Atlas, published by MapArt, indicates that the road is either a major arteryor a highway. As with the distance variables, separate road variables are defined for whether

the station is a major brand, ARCO or Tempo, or other brand.


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Degree of local market concentration and competition

The competitive market model predicts that neither the number of nearby competing

stations nor the extent to which local competition is dominated by the majors will have

any impact on the probability of matching. Under the tacit collusion hypothesis, one would

expect the tacitly collusive price to be set more frequently in areas dominated by the majorsand where there is a smaller number of local competitors. To determine whether the intensity

of local competition or dominance by the majors matters, the variable stations itis defined to

measure the number of other stations within a 2 km radius of stationi. This variable couldhave either a positive or negative coefficient under the tacit collusion hypothesis depending

on whether localized competition is dominated by major brand stations or not. An INC

model would suggest a negative sign for this coefficient. The variable maj share itis defined

to measure the fraction of stations in station is municipality that bears the brand name ofone of the five major brands.12 An INC model yields the same positive sign prediction as

the tacit collusion model for the coefficient of this variable.

Income

The competitive market model would predict that a demographic characteristic such as

income will have no impact on a stores probability of matching the mode price. If, however,firms are engaged in tacit collusion or INC, the level of income of consumers located close to a

particular station could have an impact on the price set by the station. Higher income households

may face higher search costs or may have a higher willingness to pay. Therefore, one mightexpect that the mode price is more frequently set in neighborhoods with high incomes.

To control for income, the average household income of the census tract in which each station is

located is obtained from 1996 census data. In cases in which a station is located on the border of

two census tracts, the average of the two census tract incomes is used. The variable inc dum it

equals one if the station is in a tract with income higher than the average across all tracts in the

sample and zero otherwise. This variable allows for a potential threshold effect as opposed to

simply including income


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Changing the rules of fuel retailing

The article by Archana Chaudhary provides the factors that affect fuel retailing in India. It says

that this RIL-owned petrol pump has been around for more than seven months, but the Reliance

sign still takes the Indian driver by surprise. Ditto with the attention-grabbing deep crimsonEssar Oil signage quietly lining interior roads along the West coast.

Do these ROs (retail outlets) make any difference to customers? Mr Ketan Vakharia, a Navi

Mumbai businessman,who has been buying fuel at RIL's flagship RO, for the past six monthsbelieves that the brand is new to retail business and hence away from the adulteration networks.

Reliance has a computerised system for fuel delivery - complete with GPS-fitted trucks. The

trucks carrying fuel from the company's Jamnagar refinery to the retail outlet and the

underground fuel tanks are sealed with special Finnish Abloy locks worth Rs 2,500 each, says asenior Reliance official. Tanks and fuel dispensing units are all connected to a mother computer,

which keeps a tab on fuel volumes.

There is an obvious emphasis on standardisation at all outlets (almost all Reliance ROs are

company-owned-company-operated) with uniformed attendants wielding computer-linked hand-

held devices, operating imported Japanese pumps.

Issues in the deregulation of the oil and gas sector

This research paper by R.K Narang addresses the factors affecting fuel retailing. It says that

Under the APM, all entities are assured a minimum return on their investments. While the

ONGC (Oil and Natural Gas Corporation Limited) and OIL (Oil India Limited) are allowed areturn of 15% on employed capital, the downstream companies get 12% (post tax) on their net

worth. Though there are incentives for exceeding the norms laid down by the OCC (Oil

Coordination Committee), it is widely accepted that the system neither fosters innovation nor

offers any significant incentive for efficiency. Some of the criticisms of the system are

enumerated below.It puts a low premium on innovation and efficiency.

It leads to non-optimal investment decisions that are not inconformity with market dynamics.

Since the government controls product prices, political forces exert pressure on price levels. In

the electricity sector, this has led to non-viability of most state electricity boards and in the oilsector, the result was an oil pool account deficit of 150 billion rupees. With an oilgross


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domestic product elasticity of more than unity, India has been one of the worlds fastest growing

oil markets

FINDINGS


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1.2 Government Controlled Companies:

OIL, ONGC, IOC, BPCL, HPCL and GAIL. CPCL, BRPL and IBP are now the subsidiaries ofIndian Oil Corporation whereas,. KRL and NRL have become subsidiaries of Bharat Petroleum

Corporation Ltd..

1.3 Joint Sector Companies:

MRPL was the joint venture of Aditya Birla Group and Hindustan Petroleum. However, ONGChas bought the stake of the Aditya Birla Group making it a completely public sector company.

1.4 Private Sector Companies:

Reliance Petroleum Ltd. (RPL), Gujarat Gas, Essar Oil Ltd., etc

Retailing has been the most vigorous and eye-catching sector of last decade.

Retailing industry has been present since ages in our country; it is only recently that it has

witnessed so much vitality. The impetus to retailing in India has been due to the increased

purchasing power of buyers (especially post-liberalization), increase in product variety and

availability, and increase in economies of scale, with the aid of modern supply and distributions

systems. The retail sales are at their peak and new technologies are enhancing retail productivity

CHAPTER 4

FACTORS LEADING TO SUCCESS OF A PETROL RETAIL OUTLET


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There are galaxies of factors that lead to the success of a retail outlet. There are differentapproaches followed by various retail outlets. Some follow the customer centric approach while

others may follow the profit maximization approach.

In case of a petrol retail outlet some of the major factors over which success of the retail outletdepends are:

a) Qualityb) Value added servicesc) Generating higher volumesd) Reaching the subserviced arease) Convenience to reach the store(location factor)f) Availability of loyalty programmes

1. QualityThe customer, for whatever reasons, has little faith in the quality of product dispensed throughpetrol pumps. While his demands are high, his expectations remain low. Bereft of choice, he is

satisfied as long as he gets an unadulterated product. Our oil companies interpret quality to mean

no adulteration.

2. Value added servicesHere, we will have a glimpse of some of the facilities which are expected by a customer andcan be offered to them on an outlet:

ATM (Automated Teller Machine or Any Time Money)An ATM is the most expected facility at an outlet. Almost every customer now has a debit/credit

card and he/she expects an ATM at the outlet.

Benefits from implementing an ATM:-a) Customer will get an additional facility along will fuel and it will help to draw more

customers.

b) Increase in revenues due to the lease rent from the bank.

Quick care point :-A mechanic who can quickly give a service to the concern vehicle and also he can do theair check. In the quick care point, various lubricants and coolant can be displayed with thepurpose of advertisements as well as enhancing customer awareness. The facility of tyre

puncture should also be offered. This will further enhance the revenue of company.

Windscreen cleaning facility


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A cleaning man can wipe the windscreen of four wheelers and front or body of the two-wheelers

while customer is getting his/her vehicle fuelled. This will augment the customers perception of

brand as well as organization. An extra attendant can serve for the role of cleaner.

Free health check-upIn the outlet some free health check up camps can be organized by the company doctor. This willillustrate the responsibility of the organization towards the society. Some of the camps which canbe organized may include the Pulse-polio camp and AIDS awareness camps.

INDE-PAYIt is e- recharge machine which will provide a recharge of six different telecommunications

companies along with the railway reservations

The facilities offered by Inde - pay machine are as follows:

Recharge Vouchers (mobile top-ups)

Flight tickets

Rail tickets

Utility Bill-Pay Cinema tickets

Budget Hotels

ContestsThe benefits of Inde - pay machine to the end user are:

Alternate revenue stream

High ROI

Major Value added services under one single terminal

With the purchase of the terminal in addition to the value added services, PCO and POSthe retailer gets the following

IRCTC authorized e-ticketing agent certificate

Airline ticketing (IATA sub-agent license)

The end user will be able to accept payments in cash, credit card and cash card

3) generating higher sales volumes

A good petrol pump that aims to provide comfortable and convenient service to the customers

requires as high an investment as Rs. 50 to 75 lakhs. Depending upon the location and the

number and quality of services, the investment levels could go up to Rs. 1.5 crores. However, the

per pump throughput has been declining and hovers around 160 180 KL/month. The

profitability, may even the sustainability, of the retail business at such high investment and lowvolumes needs to be addressed. Paradoxically, even in such a scenario, the oil companies have

launched a very ambitious, and at times reckless, programme of network expansion. Obviously

the assessment of the market growth made by the oil companies indicates high potential in

future. However, my view is that companies should target to generate higher volumes per retail

outlet rather than concentrating only on increasing the numbers.


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4) reaching the subserviced areas

Rural agricultural market has a large untapped potential for diesel sales, and the oil companies

should make efforts to develop these markets. It is not a correct position that social obligationsof the PSUs adversely affect their commercial interests. If non essential consumer goods like soft

drinks and cosmetics can penetrate the far flung rural markets, why cant the essential mass

consumption petroleum products?

5) location factors

The location of the retail store plays a very important role in its success. It is an integral and

crucial part of the retail strategy. It includes how easy or convenient it is for a customer to reach

the retail outlet. A customer would generally prefer a petrol pump that is near to his residence oron his daily travelling route.

6) Availability of loyalty programs

Loyalty programs are structured marketing efforts that reward, and therefore encourage, loyal

buying behavior -behavior which is potentially beneficial to the firm. In marketing generally and

in retailing more specifically, a loyalty card, rewards card, points card, advantage card, or club

card is a plastic or paper card, visually similar to a credit card or debit card that identifies thecard holder as a member in a loyalty program.

Petrol retail outlets offer a no. of loyalty programs to its customers.

For example:The XTRAPOWER Fleet Card program by IOCL is a complete smart card-based fleet

management solution for fleet operators and corporate for cashless purchase of fuel & lubricants

from designated retail outlets (petrol pumps) of Indian Oil through flexible pre-paid and creditfacilities. The fleet card also offers an exciting rewards programme and unique benefits likepersonal accident insurance cover and vehicle tracking facilities.

CHAPTER 4


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INDIA AS A NON FUEL RETAILING DESTINATION

1INTRODUCTION

Till a few years ago, petroleum retailing in India was a staid and dreary business. Cars, buses and

two wheelers drove in, got the vehicles fuelled, paid cash, and drove out. The environmentstarted changing when Shell did a makeover of some petrol pumps as part of the economic

reform process. Improved signage, use of credit cards, and carwashes soon became an integral

part of the petroleum retail outlets. Earlier petrol stations were merely used for selling fuel; nowthey are quickly getting converted into multi-facility joints. The idea, common enough in

countries like Singapore and Malaysiais to buy fuel, and shop alongside.

In last few years, opportunities in petro retailing have risen in two key areas:

Sale of Value Added Fuels Branded Fuels

Value added products and servicesNon Fuel products and services

The Indian Petroleum retailing industry is today poised to make giant strides both in terms of

new forecourt retailing opportunities and superior customer offerings at the retail outlet. With theonset of the post APM deregulated scenario, the spirit of competitiveness amongst the petroleum

companies augurs well for the consumer with each of the companies adopting innovative ways to

capture a larger part of the consumers mind share.

With the emergence of organised retailing in the country and a growing demand from consumers

for a superior shopping experience, Convenience Retailing has emerged as a key business areafor petroleum companies given their wide retail presence, existing customer base andstrategically located sites. Convenience need gaps have been felt in various fields and research

has shown that the urban consumer today seeks convenience in shopping for their basic

requirements so that their precious time is reserved for more fruitful pursuits. Petrol retail outletsprovide the right framework for setting up convenience retail chains where the consumer has the

opportunity of combining shopping with the fuelling occasion.

Petrol stations are widely recognized to be one of the highest traffic aggregators and retail majors

like hypermarkets such as Sainsbury, Tesco and Carrefour have added motor fuels in their basket

of services for the convenience of their customers All of them have deployed best retail practices

in their stores and offer a wide range of services including laundry, postal services, courierservices, fast food etc.

India as a Non Fuel Retailing Destination

The Indian Petro retailing industry is now poised to make huge tread both in terms of new

forecourt retailing opportunities and better offerings for the customer at the retail outlet. With the

onset of the deregulated scenario, the character of competitiveness among the petroleum


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companies augur well for the consumer with each of the companies espousing innovative ways

to capture larger part of the consumers mind.

The emergence of organized retailing and a growing demand from consumers for asuperior shopping experience has made Convenience Retailing a key business area for petroleum

companies due to their wider presence at strategically located sites and the existing mammoth

customer base.

Convenience need gaps have been felt in various fields and research shows that the urban

consumer today seeks convenience in shopping for their basic requirements so that

their precious time is reserved for more productive activities. Petrol retail outlets provide anexcellent framework for setting up convenience retail chains. Here, the consumer enjoys dual

occasion of, opportunity of combining shopping with the fuelling. Hence, along with the

strategic locations, the number of footfall in the petrol retail outlets gives petroleum retailcompanies the competitive advantage. Worldwide, petrol station convenience stores have

developed into a serious business in itself with companies like BP, Shell, Exxon running their

convenience store chains profitably. All of them have deployed best retail practices in their

stores and offer a wide range of services including laundry, postalservices, courier services, fast food etc.

Options for Non-Fuel Offerings

To deliver the many conveniences and services, various oil marketing companies have associated

with leading brands and companies like ICICI Bank, Coca Cola India, Fed Ex, Caf Coffee Day,Western Union Money Transfer, US Pizza, Barista, Dominos Pizza, Skypak, etc. The facilities

on a particular outlet would depend upon the purchasing power of the people. The facilities like

Caf Coffee Day, Barista, Dominos Pizza, US pizza, Crossword, Skypak, etc and other

expensive outlets may not work everywhere. Apart from them there are many other facilitieswhich can be offered to draw more and more customers, thereby increasing profitability and

level of customer satisfaction.


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CHAPTER 5

COMPARISON OF 5 PETROL RETAIL OUTLETS


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R K Service Station

Sector 41

DSC Road, Sector-41, Noida

01202575099

more..

Jain Packers and Movers

Sector 12

Z-Block Market, Near 12-12 Red Light, Sector 12, Noida

01203104166

more..

A S Aircool

Sector 22

Shop-1, Sector-22, Main Road, Noida

9711763486

more..

Bhardwaj Hospital

Sector 29

Near Ganga Shopping Complex, Sector 29, Noida

01202450111

more..

Anjali Tours and Travels Pvt Ltd

Sector 18


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307, P-3 Krishna Apra Plaza, Sector 18, Noida

01204332220

more..

During my visit I spoke to the owners of 5 petrol pumps in Noida and also interviewed a sample

of 250 people (50 people per station) at each stations by preparing a questionnaire.

During this visit i drew a comparison between the two retail outlets and the customers visiting

these outlets. There is a common trend that customers give more weightage to a few factors than

others like:

1. Convenience to reach the store

2. Prompt services

3. On daily travelling rout

4. No adulteration in the fuel etc.

Based on this comparison I have prepared a set of pie charts that will explain the factors that lead

to the success of a retail outlet which are given in the next chapter

CHAPTER 5

ANALYSIS THE FACTOR BEHIND THE SUCCESS OF RETAIL OUTLET


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DATA TABULATION

1: No. of consumers who prefer going to a particular petrol pump.

Preferences No. of Respondents % of respondents

Yes 145 58%

No 105 42%

During the survey, it was found that 58% people prefer going to a particular retail outlet due to

several reasons like a particular retail outlet is near to their residence or they like the behavior of

pump attendants or they have trust regarding Q&Q on a particular retail outlet, etc. Rest 42%prefers RO whichever is on their way.

2: Reasons for preferring particular petrol pump.

1

58%

2

42%

1.No. of consumers who prefer going to a particular

petrol pump.


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Preferences No. of Respondents

Near to Residence 24

Prompt Services 30

Acceptance of fleet/ loyalty cards 16

Good Ambience 50

On daily travelling route 40

No fuel adulteration 60

Availability of Free Air Service 20

No queing 10

From the above graph we can see that maximum people prefer going to a particular retail outlet

because they have trust that there is no fuel adulteration, rest go because they like the ambience

there or they feel that services are good, etc.

2430

16

50 4060

20 10

2. Reasons for preferring a particular retail outlet


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3: . Do you prefer any other services to be provided in the petrol station.

Preferences No. of Respondents % of Respondents

1.Yes 147 58.62%

2. No 113 41.38%

When customers were asked that are they guided as they enter the retail outlet, it was found that

approx 59% of customers were guided rest 41% think they are not. Some people dont even

notice that someone is guiding them in, they overlook the Marshal.

1

58.62%

2

41.38%


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4: Trust upon the Fuel Quality & Quantity purchased by you at Fuel Station

of your Choice

81%

10.25%

4.37% 4.38%

Yes No Doesnt Matter Dont Notice

Preferences

No. of Respondents % of Respondents

Yes 202 81%

No 26 10.25%

Doesnt Matter 10 4.37%

Dont Notice 11 4.38%


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4.38% of customers are in hurry always so they never noticed the uniform of pump attendants.

4.37% of total customer doesnt mind whether pump attendants are in uniform or not, 10% of the

customers say that pump attendants are sometimes in proper uniform sometimes not and the rest

81% of the customers say that yes, it does matter to them if the pump attendants are in uniform

as their uniform separates them from the general crowd on retail outlets which helps them to

understand with whom they have to talk.

5 Do you find any difference in the Quality of Fuel at different Fuel Stations?.

Preferences No. of Respondents % of Respondents

Yes 214 85.87%

No 35 14.13%

85.87%

14.13%

Yes No


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14.13% of the customers are not satisfied with the attitude and services of the pump attendants

and rest 86% of the customers are satisfied with the behavior and services of the pump attendants

6: Services that attract customers to a particular petrol pump.

Preferences No. of Respondents

Air filling 40

Wind Screen Cleaning 41

ATM 38

Pollution Check 45

Drinking Water 43

Toilets 26

Departmental Store 6

Free vehicle Check- up 8

Puncture Repair 2

Wheel Balancing and

Wheel Alignment

1

40

4138 45 43

26

6 8 2

1

6: Services that attract customers to a particularretail outlet.


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QUESTIONNAIRE

Name: ___________________

Age: __________

Designation and company name: __________________

Date: __________

Q1. Do you prefer going to a particular petrol pump?

1. Yes

2. No

3. Sometimes

Q2. What are your reasons for preferring a particular petrol pump?

1. Near to residence

2. Prompt services


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3. Acceptance of fleet or loyalty cards

4. Good ambience

5. On daily travelling route

6. No fuel adulteration

7. Availability of Free Air Service

8. No queuing

Q3. Do you prefer any other services to be provided in the petrol station?

1. Yes

2. No

3. Dont notice

Q4. : Do you have trust upon the Fuel Quality & Quantity purchased by you at Fuel Station of

your Choice?

1. Yes

2. No

3. Doesnt matter

4. Dont notice

Q5. Do you find any difference in the Quality of Fuel at different Fuel Stations?

1. Yes

2. No

Q6. What are the services that attract you to a particular petrol pump?

1. Air filling

2. Wind screen cleaning

3. ATM

4. Pollution check

5. Drinking water

6. Toilets7. Departmental store

8. Free vehicle check up

9. Puncture repair

10.Wheel balancing and alignment


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CONCLUSION

Retailing is the most active and attractive sector of the last decade. While the retailing industry

itself has been present through history in our country, it is only the recent past that has witnessed

so much dynamism. It's the latest bandwagon that has witnessed hordes of players leaping onto

it. While international retail store chains have caught the fancy of many travelers abroad, the

action was missing from the Indian business scene, at least till recently. The emergence of

retailing in India has more to do with the increasing purchasing power of buyers, specially post-

liberalization, increase in product variety, and the increasing economies of scale, with the aid of

modern supply and distribution management solutions.

A definition of retailing is essential in order to be in a position to assess the impact of retailing

and its future potential. The current retailing revolution has been provided an impetus from

multiple sources. These `revolutionaries' include many conventional stores upgrading themselves


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to modern retailing, companies in competitive environments entering the market directly to

ensure exclusive visibility for their products and professional chain stores coming up to meet the

need of the manufacturers who do not fall into either of the above categories. Attractiveness,

accessibility and affordability seem to be the key offerings of the retailing chain.

Retailing is a technology-intensive industry. Successful retailers today work closely with their

vendors to predict consumer demand, shorten lead times, reduce inventory holding and thereby,

save cost. Wal-Mart pioneered the concept of building a competitive advantage through

distribution and information systems in the retailing industry. They introduced two innovative

logistics techniques - cross-docking and electronic data interchange. Today, online systems link

point-of-sales terminals to the main office where detailed analyses on sales by item,

classification, stores or vendor are carried out online. Besides vendors, the focus of the retailing

sector is to develop the link with the consumer. `Data Warehousing' is an established concept in

the advanced nations. With the help of `database retailing', information on existing and potential

customers is tracked. Besides knowing what was purchased and by whom, information on softer

issues such as demographics and psychographics is captured.

We are at a time when gaining a customers' trust is critical. It is a daily process, on purpose. It is

a time to maximize potential, ethically and to deal with conflict and problems, with credibility.

The petroleum retailers are also not left behind. Forecourt retailing is yet to emerge in a big way

in India. But with renewed thrust from the oil companies, the concept is poised for the next stage

of evolution. The concept of forecourt retailing at petrol stations is not new. It began in the 1980s

when British Petroleum launched its first convenience store. In India, where consumer interface

was recognized as a key factor, the concept was taken up in the late 1990s by Indian Oil

Corporation, which started its multi-purpose distribution centers at petrol pumps in semi-urban

and rural areas. The concept has been in vogue ever since. But recently it shot into limelight with

oil companies trying to milk this revenue stream for more moolah.

The oil marketing companies need to clearly identify customer needs and establish a strong

corporate brand targeting select customer bases. The companies need to drive product and

service offerings at retail outlets based on identified customer needs. They should develop cost-

effective retail outlets, upgrade existing assets for better throughput and customer service. They


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should orient their distribution pattern and logistics in tune with demand in target markets and

develop superior franchisee selection and training systems along with appropriate risk-reward

mechanisms to drive performance.

In this respect, the oil companies have been coming up continuously with various initiatives to

differentiate themselves from other competitors and attract customers. They have come up with

various loyalty programs, cash card payment solutions, convenience stores, ancillary services,

food outlets, various other value added service at the retail outlets to give the customers value for

their money. Although the above matter to a large extent in bringing people to a retail outlet, the

main drivers include convenient location, branded fuels and assurance of quality and quantity.

Thus the companies should look for network expansion, supply chain optimization, steps towards

anti adulteration measures and aggressive branding strategies,etc. to give the consumers the best

they can.

Oil companies have made sporadic attempts at exploring non fuel retail(NFR)

opportunities in IndiaCar Wash, ATMs, Co Branded Credit Cards, Cyber Cafes, Convenience

Stores, Food Outlets, etc. Though one-off success stories have been reported no cohesive

strategy has emerged as yet on the NFR front. With the third largest distribution network (after

post offices and FMCG outlets ) there is a lot of untapped potential left for exploring in this

arena. The next few years should see all Oil Marketing Companies experimenting in this field.

Moreover, Gas Retailers can take British Gas as an example of effective Gas retailing, the

methods they have adopted, such as convenience to customer of paying bills online, the home

care scheme; with one call customers can update each and every one of their British Gasaccounts, from gas to burglar alarm support.

Ultimately,


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Its the customer who will emerge as the winner. The company who identifies its

customers and his needs and provides satisfactory services will emerge as the leader

REFERENCES

Websiteswww.iocl.com,www.bharatpetroleum.com,www.hindustanpetroleum.com,

www.ril.com,www.dgh.org,www.essar.com,www.shellindia.com,

www.indiainfoline.com/businessschool/archives/marketingstrategiescurrentlyfollowed

Address by Mr.S.C. Tripathi, Secretary, Ministry Of Petroleum & Natural Gas,

Government of India at Petrotech 2005, January 17-18, 2005 , New Delhi.

Presentation by Dr. C. Srinivasan, Chairman, A.T. Kearney India at Petrotech 2003, 10th

January.

Business Worldissue dated February 15th, 2005. Petroleum Retail Stuck in Pipeline.

The Hindu Business Line Reliance , Essar changing the rules of fuel retailing, Tuesday,

July 20, 2004, Archana Chaudhary.

The Hindu Business Line Strategy ReportIndian Oil & Gas Industry 2004, Chemtech,

December 31, 2003.

TERI, Background paper issues in the deregulation of the Oil & Gas sector, New Delhi,

R.K.Narang, Ardhendu Sen and Leena Srivastava.
http://www.iocl.com/http://www.iocl.com/http://www.iocl.com/http://www.bharatpetroleum.com/http://www.bharatpetroleum.com/http://www.bharatpetroleum.com/http://www.hindustanpetroleum.com/http://www.hindustanpetroleum.com/http://www.hindustanpetroleum.com/http://www.ril.com/http://www.ril.com/http://www.dgh.org/http://www.dgh.org/http://www.dgh.org/http://www.essar.com/http://www.essar.com/http://www.essar.com/http://www.shellindia.com/http://www.shellindia.com/http://www.shellindia.com/http://www.indiainfoline.com/businessschool/archives/marketingstrategiescurrentlyfollowedhttp://www.indiainfoline.com/businessschool/archives/marketingstrategiescurrentlyfollowedhttp://www.indiainfoline.com/businessschool/archives/marketingstrategiescurrentlyfollowedhttp://www.shellindia.com/http://www.essar.com/http://www.dgh.org/http://www.ril.com/http://www.hindustanpetroleum.com/http://www.bharatpetroleum.com/http://www.iocl.com/


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Presentation by Hemant D.P., Country Manager, Sales, FEDEX Express, India at

Petrotech 2003, 10th

January 2003.

Petro Retailing book (basic reference material) Published by UPES, Dehradun , 2004

Research methodology (basic reference material), Published by UPES, Dehradun , 2004

www.businessline.com

www.timesofindia.com

www.economictimes.com

www.hindustantimes.com

www.infraline.com
http://www.businessline.com/http://www.businessline.com/http://www.timesofindia.com/http://www.timesofindia.com/http://www.economictimes.com/http://www.economictimes.com/http://www.hindustantimes.com/http://www.hindustantimes.com/http://www.infraline.com/http://www.infraline.com/http://www.infraline.com/http://www.hindustantimes.com/http://www.economictimes.com/http://www.timesofindia.com/http://www.businessline.com/

anuj angirish

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