Jul 2

Big Oil to Flex Retail Muscle in Electric Car Era: Reuters

Stephen Bierman
Dec 10, 2020

Image: Total Media

A steady rise in electric car purchases has big oil companes downgrading their sales projections and shifting billions of euros into new strategies aimed at renewable power generation. However, there is a silver lining for at least one partly traditional segment of the business.

Royal Dutch Shell, Total, BP and others see major future opportunities in retail sales of groceries, snacks and meals from their vast networks of filling stations, according to a new Reuters report.

Selling Snickers and Cokes to the motorist filling up is already a highly profitable bolt-on business addition to core gasoline sales. While these sales represent a small portion of total revenue compared gasoline sales, they bring a higher profit margin.

For that reason, major European oil producers have long sought ways to scale up this segment. New patterns of energy consumption may finally present the opportunity they’ve been waiting for.

The big difference in the future era lies in the time it takes to charge electric cars. The fastest re-charge times for electric cars are in the 10-15 minute range. That allows much more time for shopping than the few minutes for a traditional top-up at the pump.

And even without the added time factor, oil companies have already been experiencing steady growth in retail sales. For them, the coming change is all the more reason to press ahead.

According to Reuters, Shell plans to expand its retail network of filling stations by more than 20% to 55,000 sites worldwide by 2025. BP aims to increase its network by nearly 50% to 29,000 by 2030 and boost its EV charging network to 70,000 points. Total, meanwhile, is planning to increase its EV charging network in Europe to 150,000 points by 2025 from 18,000 now, according to Reuters.

This has already led to oil companies forming partnerships that have nothing to do with fuels. BP works with Marks & Spencer in Britain, while Shell has a partnership with British celebrity chef Jamie Oliver in delicatessen offerings. And during the pandemic, when fuel purchases stalled, consumers continued to use filling station convenience stores and even accessed them via online delivery apps. So the expansion could either be collaborative — or potentially combative.

Companies also estimate that vast amounts of valuable data can be gleaned from interaction with filing station customers. This will allow retailers not only to tailor shopping experiences locally, but also provide insight on mobility and movement in the next generation of transport.

That data may become vital to market success, as it will be crucial to understand where electric car users are massing during the transition. This information can then be used to understand how filling stations can become the first movers in servicing their specific consumer needs, and capturing them for additional sales.     

Oil producers clearly want the investment community to recognize the additional value in their share price that could come from a sucessful retail business. The development strategy into electric cars is their push to get that recognition.

With oil company value multiples currently in the dumps due to listless crude prices, its not hard to find a retailer with a more expensive valuation. So oil producers may have a point in developing in that direction.

On the other hand, it isn’t as though current store counts and sales numbers aren’t in quarterly reporting. Therefore, much will depend on whether or not electric cars will transform the way we shop.

Physically expanding filling station networks may be the easiest part of the plan. The real test will be whether these networks can actually become quality retailers, leveraging their unique position to provide the required services, fulfill demands and gain loyalty.

Stephen Bierman

Stephen Bierman is a finance and energy reporter with over 15 years of experience, including at Bloomberg News and Energy Intelligence.

Tweets at: @StephenBierman1

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