New Challenges of Network Planning in the Retail Forecourt Sector

Investment in sites is continuing apace within the retail forecourt sector, as oil companies and independent forecourt retailers seek to extend and improve their consumer offer. Whilst there is a strong forecourt convenience store tradition in many markets, recent years have seen a significant increase in emphasis on the shop and food-to-go, as the retail forecourt sector seeks to capitalise on the growing consumer trends for convenience, top-up shopping and out-of-home consumption of fresh food and drink. The UK is a good example of this trend with the Institute of Grocery Distribution (IGD) estimating that the food-to-go market will grow by more than 6.5% per year over the next 4-5 years.

This shift in behaviour is important for forecourts, not only in terms of investment and revenue, but from a site planning perspective too. Investing in a new or bigger shop, or an in-store or standalone fresh offer at the right site opens the forecourt to a new set of competitive and local market influences. Their main competitors are no longer just the forecourts along the road but also neighbourhood convenience stores, local coffee shops and nearby fast-food outlets. The level of potential walk-on trade also needs to be considered, as well as whether there are local adjacencies that could generate additional footfall. Whilst the convenience and food-to-go markets are elastic, with new facilities often generating new spend, both the level of local provision within a forecourtís trade area and the size of the local market set the competitive context within which the new or extended forecourt shop or fresh offer will operate.

Network planning now requires a new holistic approach that addresses site investment decisions, whether new build or site improvements, across all aspects of the fuel convenience market; a solution that enables oil companies and forecourt retailers to optimise the mix of an integrated offer at a given location through a detailed assessment of the local market opportunity for each component of their retail offer.

To address these changes and the increased complexity, Inform Information Systems, the global specialist in providing Fuels Pricing software solutions for both retail and B2B customers, trading as FuelsPricing.com, has entered into a partnership with international retail network planning and predictive modelling specialist, Adept Insight. This collaboration has facilitated the design and development of a next generation of network planning thinking and software. It harnesses FuelsPricing.comís class leading technology and sector knowledge to provide new and innovative data-driven predictive modelling and performance analytics solutions. Adept Insightís retail forecourt sector experience as well as work in other retail sectors, including convenience and fresh has helped inform our new holistic network planning solution.

A key step in the network planning process is to accurately forecast shop and/or food-to-go sales within their differing competitive environments. As a key footfall driver, retail fuel volume predictions are an important component, but focus must switch away from forecourt competitors to local standalone shop and food-to-go competitors, a better understanding of the consumer opportunity and other non-fuel footfall generators.

The demographics of the site trade area also become more important, not only the number of people living nearby, but also understanding their consumer profile, spend levels and brand preferences. Many forecourt retailers are working with partner brands to provide their shop and food-to-go offers. Again, they need a greater understanding of the brand preferences of consumers within a siteís trade-area, to ensure the right level of consumer engagement and spend.

Presence of workers, or adjacencies such as offices or hospitals within a siteís walk-on trade area is another important sales driver, particularly for food-to-go. Similarly, residential sites are likely to support a broader top-up shopping offer whilst more transient sites are likely to have a greater focus on food-to-go. Shop and food-to-go transaction data analytics, including profile and split by time of day and day of week helps to identify this customer mix.

Ultimately, the network planning challenge is to assess the influence of these different competitive and local market influences to accurately predict shop and food-to-go sales and to allow forecourt retailers to optimise the mix of facilities and floorspace across these two offers. In themselves, the shop and food-to-go offers may subtly compete with each other, so even deciding whether food-to-go should be in-store or a separate facility will impact their respective sales potential.

It is also important not to lose sight of accurately predicting retail fuel volumes for a site, rnot least because it is still a key revenue generator and remains the primary footfall driver. A recent study by the Association of Convenience Stores (ACS) in the UK estimates that only 7% of forecourt top-up shop purchases do not include fuel. Retail fuels is a closed market, in the sense that new facilities do not generate additional demand for fuel but rather improve the overall attractiveness of a site and its ability to capture a greater share of the fuel demand within its surrounding trade area.

Whatís also really innovative is that the FuelsPricing.com and Adept Insight partnership is also bringing together outputs from the network planning process and measurements of actual performance from the pricing systems in an integrated way to provide operational insight. Furthermore, leveraging fuel pricing together with insights from shop and food-to-go transaction and customer loyalty data analytics is a powerful combination. This will enable forecourt retailers to maximise the operational synergy of a truly integrated retail offer at a site, and so achieve their objectives to broaden consumer missions, increase visit frequency (both important as cars become more fuel efficient), extend dwell time (important as electric cars will require recharging points) and grow (non-fuel) spend. Interesting timesÖ

Dr Chris Duley is Founder and Director of Adept Insight and a Visiting Fellow at the Leeds Institute of Data Analytics, University of Leeds

FuelsPricing.com (IIS) has been providing Fuels Pricing solutions to the retail and Wholesale B2B and Rack markets globally for nearly 30 years.

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