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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
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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
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Challenges
Low Product Differentiation
Lack Of Customer Loyalty
Intense competition : Moving Towards Deregulation
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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)
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NON- FUEL ALTERNATIVES
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Non fuel services grouped
Convenience Stores (C Stores)
Auto Care Services
Ancillary Services
NON- FUEL SERVICES GROUPED
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KEY CONSIDERATION FOR NON-FUEL RETAILING
0%
10%
20%
30%
40%
50%
US FRANCE EUROPE UAE INDIA
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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%
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Non-Fuel Retailing Initiatives
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
Non-Fuel Retailing Initiatives
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Non-Fuel Retailing Initiatives
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.
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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