This article published November 2017. For latest news THIS MONTH'S ISSUE
Klaas Mantel, Shell GM Global Convenience Retail, gives an exclusive interview with Insight on the operation’s ‘Fuel Plus’ to ‘Plus Fuel’ transformation
A: The last few years have been very exciting for Shell CR. It’s been a bit like a sleeping giant waking up and we are now ‘all-in’ as a company to help ‘make life’s journeys better for our customers’ with great products and services for busy people on the move.
We have just launched the fifth generation of our global convenience retail brand Shell Select which, according to Euromonitor, is the #1 brand across the 32 markets where we operate.
We also entered the NACS/Insight Global International Convenience Retailer of the Year Award this year and were very pleased to make it to the shortlist.
The biggest change with the latest Shell Select concept is a much greater focus on food - fresh food and coffee - which responds to our retail shopper missions. The store design also incorporates more sustainable elements, with more natural and recycled materials and is inline with our strategy to lower our carbon footprint at our 43,000 retail stations globally.
We have also launched some exciting fresh food offers under the ‘Deli2Go’ and ‘Deli by Shell’ brands in over 20 markets with many more markets to come in the years ahead. Fresh foods are very local and specific. In the Netherlands, for example, there is a strong focus on freshly baked bread; whereas in Malaysia, it’s the curry puff and in the UK warm pastries are a key part of the offer. We find that in every market we need a different offer to be locally relevant. However, that’s underpinned by our core values of Deli, which are tasty, quality and fresh. That comes out in every market.
Sourcing for individual markets is challenging and we do go to great lengths to find the right supply partners. Provenance is important to the Deli offer, for example, and your readers may be surprised to learn that Shell has its own cows in the Netherlands, through our contracts with farmers. We make sure they are fed and treated properly because if you want to deliver a quality proposition, animal welfare is important.
Also, as a CR business, it is a record year for us, as we are gaining market share and are delivering strong global growth, despite a challenging operating environment in many of our core markets. Europe is still our biggest market and, although the market overall is flat, we are gaining share with 6% growth.
A particularly exciting region for growth is Asia, where we are enjoying over 20% growth. That’s being led by our Chinese network, which is also the largest in store count, which is posting even more impressive numbers. There’s huge excitement in emerging markets in terms of high, double digit growth, which we see coming in the next five to 10 years.
We are building extra stores in the region but most of the growth is like-for-like because people are busier, have rising incomes and smaller families; and there is a lifestyle trend to on-the-move consumption.
After a 10-year absence, we brought back Shell Select to Singapore with a whole new customer experience. The marketing for the new store states that “there are 10 things that you can do at a Shell service station and just one is to refuel your car”. The offer also includes McDonald’s, Deli by Shell, an in-store bakery plus a car wash and a bike servicing area, for instance. The site also features environmental benefits such as solar panels and rain water harvesting; which is aligned to our retail mission of making journeys better and lowering our carbon footprint. The Singapore store attracts over 100,000 customers per month and more than half of that traffic is for products and services that have nothing to do with fuel.
This focus on emerging market growth is also the reason behind an increase in investment and resources in the east, including my own relocation to Thailand, which enables a greater focus on key growth markets including India, Pakistan, Indonesia, the Philippines and, of course, China. We work with local teams and differentiate for the local market in these countries, but the decision making is quicker because I am based out of Asia.
A: Indeed, after a big investment in CR in the late 90s, where we built 10,000 Shell Select stores globally, the business refocused on fuels as it was seen as core business. This has served us well since we have built up a great V-Power premium fuels program in almost 70 markets and a leading position in brand preference. Shell is well known for providing high quality fuel and great customer service in most markets. However, it is fair to say that over time Shell reduced its involvement in CR. Thus, we are currently only directly involved with around 10,000 of the 35,000 stores that offer CR, in the Shell branded network of 43,000 service stations. The remaining stores are managed by indirect channel partners such as dealers, wholesalers and licensees. But we are now back in the game and unwinding some of the full third party alliances of the past and reintroducing Shell Select - as we have in Singapore, Indonesia and the Philippines. Our store count – both directly managed and those sites run through other operators - is growing rapidly again. Plus, we are entering new markets including Mexico.
The key driver behind this is the evolution of the forecourt industry from “fuel plus” to “plus fuel” formats, which help busy people get the most out of their day. In an increasing number of markets, we already have more CR than fuel customers and we see that this trend will continue to be supported by demographic and lifestyle changes. I would estimate that, as we plan to grow our customer base from the current 30 million daily customers to 50 million in the future, we will also pass the 50% mark for CR customers on a global basis. In other words, I believe more than half of our customers in future will visit Shell for products other than fuel.
It’s understandable many still see Shell as a fuels company, but in reality, we are a customer services company.
A: One of the privileges I have in my role as GM Global Convenience Retail is the opportunity to visit other markets – in total 35 in the last few years.
What I enjoy most is the ‘mini-van tour’ with the local teams to get out and about to sample the local offers. Especially memorable trips were driving from Xian to Chengdu in China, from Penang to Johor in Malaysia and visiting the Southern Philippines and several big cities in Pakistan. What strikes me is that many of the trends are indeed truly global – a focus on freshly prepared food, increasing out of home consumption and service stations having the potential to become a community hub. In this connected world, it’s remarkable how consistent the trends are. Markets are, however, at different stages of the lifecycle, which gives us a great opportunity to generate the learnings from the markets where ‘the future happens first’ and pockets of true innovation. For example, in fresh food and coffee we look at many of the great cities in the world including London and New York. For supply chain, we try to learn from developments in Japan and for digital lifestyle and ’020’ (online to offline) we closely follow China. The Japanese convenience chains also remain highly influential, especially in the Asia region, and we are observing those players too. With our global presence and internal community way of working we are trying to leverage those insights and spread learnings across our markets so we can be at the forefront of innovation.
A: Convenience is the only growing ‘bricks and mortar’ format in many markets, as people lead ever busier lives and their shopping patterns evolve to ‘little and often’ or ‘fresh and frequent’. But there is no room for complacency, especially for the forecourt sector because convenience is a need state, not a channel. All bricks & mortar retailers are evolving their offer to become more convenient plus there is competition from e-commerce and home delivery. The key to sustaining our current strong growth is to focus on innovation, differentiation and partnering with strong and/or emerging brands with a growth mindset. For example, our collaboration with Costa started in the UK but we are now working in 10 countries with the brand and have introduced it to new markets such as Canada and Malaysia. We have been able to leverage our strong local presence, combined with 100+ years of experience in most markets and a highly connected global community of alliance managers to move fast and on a big scale.
A: It’s hard to predict the future but we must follow customer needs closely and we believe electricity/e-charging is a big growth area and we plan to be part of it. CR will become even more important for those customers, as they will make their site choice based on where they want to spend 20 minutes, while their vehicles are being recharged. In fact, we are planning a significant growth of our retail station network in the coming years, albeit with a significantly expanded offer of ‘non-fuel’ products and services, alongside a mix of fuels.
A: We ensure that innovation is led by the local markets who are closest to our customers and seek to globalize local proven success. We also work closely with suppliers and technology partners to develop innovation and it is really exciting to see what value can be created when companies get the best out of each other. The way we work as a community - by encouraging people doing the same job in a different country to talk - is a key factor in our success. If trends are catching on in certain areas, we can be better prepared for the future - it is one of the big benefits of being a truly global retailer.
For example, the trend to mobile payment is taking off at a remarkable pace in China with Alipay etc.; while the cash recall in India gave a tremendous boost to electronic payments. The next five years will probably be the most exciting in CR with much faster checkout. It could be a game changer and will make our stores really convenient, liberating the task of the cashier. Queues impact sales. And customer dislike for queues, understandably, is intense. Developing fast, convenient checkout is innovation with customers firmly place at the heart. .
In collaboration with Jaguar Land Rover, we have already initiated in-car, cashless payment using the cars touchscreen. . With a few clicks, customers can pay for fuel and then enjoy the other facilities at the site at their leisure - it’s de-stressing the whole fueling (both the car and customer) experience.
A: In our view, the nature of competition is evolving to become a world where networks compete with networks as opposed to companies with companies. We see our supplier partners as an essential part of our success - we will never be able to understand the trends in the beer market better than Heineken, or the snacking customer better than Mars/Wrigley, or the energy drinks consumer better than Red Bull, for instance. A lot of our partners have great innovation centers and have many ideas and new concepts all ready for testing. By leveraging those partnerships, in combination with today’s big data and analytics tools, we can win the customers’ response very quickly and can focus on the kind of value creation that would not be possible if we were working purely in a transactional way. When retailers and manufacturers work well together, they can create exceptional things. Our collaboration with Coca-Cola, who is our global captain for lifestyle choices, is a great example. Through our partnership, we have helped our customers to make the right choices for their lifestyle with a move to lower sugar and lower calorie drinks, for example. We have learnt things from Coca-Cola that we have been able to bring into Deli by Shell - it’s a beautiful example of where working in one category benefits another.
A: A key strategy for us is to engage very actively with the world outside Shell because, at the end of the day, as Shell Retail are perceived to be a ‘bit of a niche operation’, despite being a huge global energy company. We do this through the Consumer Goods Forum as well as NACS. For Shell, the NACS partnership provides many great benefits. We leverage the Convenience Summit - Asia and Convenience Summit - Europe; as well as the NACS Show to keep in touch with new formats and innovation in the industry as well as providing a platform for networking. We also use the NACS executive programs to develop our talent, plus the various leadership summits to strengthen our connections the industry.
A: Great question. As they say, making predictions is hard, especially about the future. Fifteen years ago, I was involved with a click & collect venture in partnership with Yahoo, yet even now click & collect is still more of a promise than a reality - there are very few profitable business models.
So instead I try to focus on supporting and encouraging our teams in the market to be externally focused, innovate on the customers’ behalf, test things out and then scale up the successes quickly. In so doing, we hope to continue to stay relevant for our customers, grow our business and have a lot of fun at the same time!
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