CHRIS BLASINSKY
NACS online
Given that nearly every service—from renting a DVD to buying groceries—has been disrupted in the last decade by companies such as Uber, Netflix, Amazon and Airbnb, is it a stretch to think the 100-year-old act of refilling a gas tank would remain untouched?
For an industry that has been around since the internal combustion engine in the 1880s, innovation in fuel retailing has largely been marked by three key dates:
- 1901: The first gas station designed to specifically to sell opened (previously, fuel was sold at shacks and other disparate locations).
- 1964: Technology allowed true self-serve at the pump.
- 1982: Pay at the pump was introduced in Europe.
And, about four years ago, Silicon Valley startups began delivering fuel directly to consumers with pay-as-you-go, member- and subscription-based business models. This new concept—on-demand or scheduled fueling—also gained an “Uber for gas delivery” distinction for its potential to turn the century-old gas station model on its head, leaving some traditional fuel retailers rightfully wary that a core function of their business could be disrupted by on-demand mobile fueling.
Is on-demand mobile fueling the next evolution of full-service?Or, will on-demand mobile startups struggle to gain market share among a well-established retail fueling industry?
Earlier this year, ExxonMobil announced its investment in San Francisco-based Yoshi Inc., which operates in six states and expects to quadruple its market coverage this year. As a strategic investor, ExxonMobil gains a voting seat on Yoshi’s board of directors and provides the company with Exxon- and Mobil-branded fuels.
“The on-demand economy is changing nearly every aspect of our everyday lives, including consumer expectations about the way fuels and lubricants are purchased, delivered and used,” said Adam Wariner, fuels and lubricants innovation manager at ExxonMobil, in a press release. “We believe the simplicity and convenience of this direct-to-vehicle care service will attract new customers to Exxon and Mobil branded products.”
Yoshi CEO Nick Alexander noted in the joint ExxonMobil press release that his company “has a big opportunity to be part of the transformation underway in the automotive industry relating to how vehicles get fueled and serviced.”
So, is how consumers fill up their vehicles moving toward a completely frictionless process, or is on-demand mobile fueling the next evolution of full-service? Or, will on-demand mobile startups struggle to gain market share among a well-established retail fueling industry?
THE STARTUPS
Companies that received media attention at the onset of on-demand fueling, such as Purple and Instafuel, are no longer in operation. While the circumstances of their demise are unclear, it could speak to the fact that retail fueling is not for fast followers.
But it also could speak to the evolving nature of the structure of the offer. Previously, the offer was focused largely on how customers could add convenience with a “small” delivery fee, but with price sensitivity so intertwined with fuel, it was a tough sell. But what if the price was baked into a subscription, like a cable bill or a gym membership? This concept may be at the heart of why on-demand fueling seems to be gaining traction in some areas.
A few companies continue to operate in a specific market, such as Phantom Fueling in the Raleigh-Durham area, while some companies boast multiple markets under their belt. Meanwhile, several on-demand fueling companies have shown growth potential since entering the market by expanding their customer base, creating valuable partnerships and securing venture capital: Yoshi, Booster and Filld.
These three companies are executing business plans and strategies for long-term growth. And while there is no immediate expectation that on-demand companies will take away market share from traditional fuel retailers, they have the potential to become permanent fixtures in a competitive retail environment.
SHELL TESTS TAPUP
On-demand mobile fueling is developing outside U.S. borders. In May 2017, Royal Dutch Shell PLC began testing its own app-based service in the Rotterdam region of the Netherlands called Shell TapUp. Customers order fuel via the Shell TapUp app and request the time and location their vehicle needs to be refueled, without the need to be present for the fill-up so long as the vehicle’s fuel flap is open.
Vicky Boiten-Lee, general manager of lubricants B2C marketing, downstream–global commercial at Shell International Petroleum Co. Ltd., explains that Shell’s motivation for developing its own on-demand mobile fueling service was born from the company’s philosophy of “disrupt ourselves, or risk being disrupted by somebody else.”
Boiten-Lee says that on-demand services have skyrocketed in popularity in response to demand from busy, convenience-craving customers. “In an age when you can get pretty much anything delivered, we chose to test customers’ interest in fuel delivery with just a quick tap of their phone by piloting Shell TapUp in Rotterdam,” she said.
Since the pilot began, Shell has found that the service appeals to a range of customers such as those who work from home and corporate/business customers. “Fleet managers see significant cost savings by getting one of our 1,000-liter electric trucks along to refuel a fleet of 10 to 20 vehicles in one go instead of driving each vehicle to a forecourt,” she explained. For example, slow-moving street-sweeper vehicles can save time by having Shell TapUp come to them instead of them going to the gas station.
“Shell TapUp has an agile culture cultivated by a small entrepreneurial team of 15 people. This gives us the freedom to make decisions with speed and scale up or down, or pivot their approach as needed,” said Boiten-Lee. “In time, we plan to expand the pilot across the Netherlands and then to other countries. We are already working on ways to provide a wider range of fuels in the future.”
Whether on-demand mobile fueling becomes the next major innovation in the retail fueling industry remains to be seen, said Boiten-Lee. “Right now, we are using our pilot to test the concept as well as the technology and to find out more about what customer segments fuel delivery makes the most sense for, and what creates a winning user experience.”
Yoshi operates in the most markets: Atlanta, Austin, Boston, Chicago, Cleveland, Houston, Los Angeles, Minneapolis/St. Paul, Nashville, Raleigh-Durham, San Francisco, Silicon Valley, St. Louis, Tampa/St. Petersburg and Warren, Michigan. Beyond fueling, the company also offers basic vehicle maintenance services such as an oil change and wiper replacement, and even car washing and detailing.
Yoshi states on its website that it believes the automotive industry will change more in the next five years than it has in the last 50. “And to allow that, the infrastructure required to fuel and service vehicles must transform as well.”
Founded in 2015, Filld is operating in the San Francisco Bay area; Seattle; Portland, Oregon; and Vancouver, and has plans to enter the Washington, D.C., market. Filld is building partnerships with ride sharing/hailing companies such as Car2Go, SilverCar, ReachNow and Enterprise, as well as with automakers Daimler, Audi and Volvo. The company calls itself a last-mile mobile fueling company “that delivers fuel to vehicles, so drivers and fleets never have to stop for gas again,” per Filld’s website.
Booster markets its services as an employee incentive to Silicon Valley companies with large campuses, such as Google and Facebook. The company also lands a direct hit on the traditional gas station model, stating on its website that it exists to “eliminate the gas station errand for everyone. … With our model, we can deliver gas more affordably, conveniently and sustainably than gas stations.” The company also says that its service is a safer alternative for customers who want to fill up: “It’s our hope that Booster will make late-night gas errands and dirty, unsafe gas stations obsolete.”
Jeff Lenard, NACS vice president of strategic industry initiatives, commented that one of the best ways to advance a new concept “is to compare it to something familiar, but companies that are aggressively pushing a negative image of our industry may not be doing themselves any favors in terms of long-term thinking. As the model for on-demand fueling seems to be moving toward partnerships, convenience stores may ultimately fit into the business model and would likely be wary of working with groups that demean their business.”
All three of these companies, while offering different services and pay structures for customers, have one theme in common: disrupt the traditional gas station and fuel delivery process. It’s not where consumers go to refuel, but how—and how quickly—the fuel comes to them, which could essentially redefine the c-store industry’s core competency: convenience.
ASK THE EXPERTS
Q: Is on-demand mobile fueling an innovative approach to how consumers get fuel?
“This is an innovation building on many converging trends, the most important of which is ultimately the Internet of Things, where we are going to have millions of cars connected at all times. Consumers can order and schedule their own service, order their own fuel and let the service provider know exactly where they are, and when they require fuel.
I see that innovation of leveraging the connected car infrastructure, which is now part of every new vehicle, as much more disruptive and creative than simply launching an app that a customer can use to order fuel. …We believe real scale in this business lies in the ultimate convenience of not having to worry about it at all—just let your car and authorized service provider take care of it [refueling] when needed.”
—Doug Haugh of Parkland USA
Q: Is there an opportunity for convenience stores to go mobile or “on demand”? Or, are there other services that could be offered in addition to fuel?
“This is definitely an area of interest for us, and it makes sense given the scale of our global network with 44,000 locations. For example, in Holland we have stations within five minutes of 90% of the population, so food and drink delivery for that precious ‘last mile’ makes sense.
The last mile has been seeing disruption from new business models for some time now as well as new technologies such as drones and autonomous ground vehicles. This is an area we are watching with interest.”
—Vicky Boiten-Lee of Shell
REGULATORY ARENA
The fire potential surrounding a truck containing about 400 gallons of gas driving through cities and residential neighborhoods is a worthy concern. A May 2016 article appearing in The Guardian ran the headline, “Gas delivery startups want to change the world—but will they blow it up first?”
Early on-demand fueling adopters literally were putting large volumes of fuel in relatively unsecured gas cans in trunks of cars, an obvious red flag and extremely dangerous. Others, however, established a viable business model and abided by the rules and regulations as best they could—although not without roadblocks.
Around 2015, on-demand services caught the attention of Lynne Kilpatrick, fire marshal in Sunnyvale, California. “We were in a situation where we thought the business model was interesting, but the code didn’t allow for it,” she told the NFPA Journal, which is published by the National Fire Protection Association. As such, she noted that early on, these fuel deliveries were taking place “inside parking garages and alongside properties where there could be unknown ignition sources.”
Although some companies were using the International Fire Code to abide by safety regulations, cities such as Santa Clara and San Francisco wanted the NFPA Code to be amended to provide more clarity around on-demand fueling. California code (NFPA 30A–Code for Motor Fuel Dispensing Facilities and Repair Garages Scope) now states that mobile fueling is not allowed on public streets, on public ways or inside buildings—including the roof level of parking structures or other buildings. Granted, fire code is highly localized and falls under the fire marshal’s discretion.
Michael Buhr, president and CEO of Filld, said his company works with fire code officials to ensure not only its business operates safely and lawfully, but also other companies in the on-demand fueling space do so as well.
“Given the rapidly evolving nature of the mobile refueling industry and the regulatory landscape intended to govern it, Filld recognizes it is vital that fire code officials have visibility into and accurate information about the many different companies and business models within the space,” said Buhr, adding that Filld actively engages with public officials to help develop regulatory codes that, “in combination with industry best practices that endeavor to go above and beyond, ensure public safety while also reflecting and supporting the increasingly diverse mobile fueling industry.”
INDUSTRY RESPONSE
Doug Haugh, president of Parkland USA, believes that on-demand mobile fueling is both disruptive and complimentary to the existing convenience store and gas station fueling model.
“The disruptive element I see is not so much in the consumer sector directly, but in how a larger portion of the gasoline market becomes ‘commercialized’ and converted into more of a B2B market, as compared with most gasoline being sold today directly to consumer,” he said. “If we consider all the ride-sharing services and think about how they evolve by offering more services to their drivers, we could see fuel being a big area of development, with the likes of Uber directing more of their drivers to preferred suppliers that can meet them along their route, since they know exactly where they are and where they are going to be.”
We see offering a delivered [fueling] option as another potentially valued choicethat builds on this commitment to customer convenience.
Haugh said he also sees how the trend could provide even more convenience to customers within the c-store environment, noting that Parkland is evaluating how to integrate delivered fuel services into its stores to provide customers with another option for buying fuel. “We believe in offering our customers the most convenience possible when it comes to the food, fuel or other products they may need to complete their busy day, and we see offering a delivered [fueling] option as another potentially valued choice that builds on this commitment to customer convenience.”
And no, despite the marketing tactics of some on-demand startups, not every customer who comes onto a forecourt loathes the process of filling up. In fact, NACS consumer research shows that 45% of customers who buy fuel also go inside the c-store to purchase items such as food, beverages and snacks, or to use the restroom or ATM. Filld believes its offer can, well, fill in, when consumers need convenience.
“Sometimes, you may love going to your local c-store to get gas, pick up lottery tickets, ice cream and milk. Other times, it’s more convenient for your car to be fueled at work, or at home overnight. Time and again, we hear how appreciative our customers are that they don’t have to stop at the gas station during their busiest hours,” noted Buhr, adding that Filld is offering customers the choice to save time during the hectic parts of their day.
“If we fill their tank at night, they have more time to sit down for breakfast with their family or leisurely step into a local c-store for a snack and a coffee on their way to work. Regardless of how much anyone likes or dislikes pumping gas, most people want more time back for the more important things in their life,” he said.
We can partner with existing convenience stores to support them in offering additional customer choice: fuel here, fuel at work or fuel at home.
CRYSTAL BALL
The convenience and fuel retailing industry conducts about 165 million transactions a day and sells about 80% of the fuel sold in the United States. With these stats in mind, it’s a fair question whether on-demand mobile fueling startups can successfully compete with the sales volume experienced daily by a well-established retail fueling business model.
“We can partner with existing convenience stores to support them in offering additional customer choice: fuel here, fuel at work or fuel at home,” said Buhr of Filld. “Customers can choose what’s convenient for them or their business.”
Given the number of products and services provided inside convenience stores, that’s a part of the retail operation with which Filld does not intend to compete. However, Buhr said that as consumer demand for fueling shifts along with growth in mobility options, such as ride-sharing, connected cars and autonomous vehicles, Filld’s model “can serve this market well” by fueling vehicles at their locations.
“Each Filld truck is built to safely carry a variety of alternative fuels in addition to gasoline, so as demand increases for new energy types, they are ready and capable to easily and cost-effectively deliver,” he said.
Haugh of Parkland believes that the new providers that create “a definitive technology advantage around automated routing and scheduling, the most efficient delivery equipment and the most robust connections to the largest number of OEMs [automakers] that are connecting” all their newer vehicle models can create a defensible business.
“That said, I think over time we’ll see most of them partner with existing fuel suppliers and retailers to gain access to better supply costs and established customer bases that can improve margins and add scale faster than a solo effort,” Haugh continued. “We have already seen that with Yoshi and Exxon, and I do not think that will be the last partnership or investment we’ll see in the sector.”
DEMAND DESTRUCTION?
Despite efforts to roll back Corporate Average Fuel Economy regulations, vehicles will continue to become more fuel-efficient as the fleet turns over. Additionally, fuel demand per capita could decline with the advent of new services—such as on-demand mobile fueling—and exacerbate traditional refueling occasions. Fewer gallons sold in general, compounded by a wave of new fueling services, could combine to produce a real threat to overall convenience store traffic.
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