The key for the retail fuel sector is to take the cue from the success of these unconventional success stories, which few could have imagined 15-20 years back.
Fuel retail is an essential service, and even during the lockdowns when the rest of the country had come to a standstill, it stayed operational. However, a significant challenge faced by the Indian fuel retail segment is the low digitisation and restructuring of the retail processes in the country with changes in demand and consumption patterns. Petrol and diesel are generally sold through a network of petrol pumps all over the country. This traditional retail approach causes various challenges for the users and fuel retailers alike. For instance, most petrol pumps, especially in rural areas, didn’t have cashless payments until sometime back. However, now it is possible to make UPI based payments for fuel.
While the conventional retail system of petrol pump networks has been appreciably keeping the country running, the demand and supply gaps have widened, especially in the digital-first post-pandemic world. Petrol pump owners face many operational challenges with limited scope for growth and business expansion for companies operating in the traditional fuel retail sector. Many costs and conditions are involved in fuel retail operations that make it an extraordinarily cash-intensive and limited earnings sector. To open a fuel retail business in India, the land must be procured at prime locations, which is bound to be very costly and then there is the need to build infrastructure. Despite all these investments and cost-intensive operations, profitability remains low as the government controls fuel retail prices and policies. The industry also has several limitations due to a lack of practical innovations and changes in the operational processes. For instance, the majority of the petrol pumps are manned by male staff, especially in the non-metro areas. Hence, solo women drivers don’t feel safe visiting petrol pumps at night. Most Indian drivers see fuel stations as little more than a necessity and a place to endure. However, suppose the petrol pumps are converted into digitally operated self-service fuel outlets with add-on facilities such as convenience stores or bed and breakfast facilities on the lines of the western countries. In that case, there could be ample incentive for the fuel retailers.
Let’s look at different industry verticals such as education, healthcare, grocery retail, food delivery and even furniture retail. We can see plenty of digital brands command a strong market presence and growth. A decade ago, hardly anyone believed that groceries, fresh food and vegetables etc. could be delivered to the doorstep by e-commerce operators. However, today, brands like BigBasket, Amazon Pantry, Grofers, etc., are churning substantial revenues by easy, scheduled delivery of the food and grocery items safely and conveniently across major cities in India. Similar technology-driven revenue has been brought about by smartphone app-driven services such as Ola and Uber in the cab services domain, and Zomato in the doorstep delivery of restaurant food. What these mega-brands have done is that they have become not only multi-billion-dollar brands themselves but also built digital ecosystems
in their domain that is facilitating the growth of other brands and services. Launched in 2010, Zomato has emerged as one of India’s biggest food delivery apps and has expanded its operations to 23 countries. The company had a successful IPO of over a billion dollars a couple of months back and is now rapidly branching into various services and sub-domains related to food retail, including cloud kitchen and retail of branded food ingredients.
The key for the retail fuel sector is to take the cue from the success of these unconventional success stories, which few could have imagined 15-20 years back. If we look at the demand landscape, rapid growth and development are being seen in the rural areas and vehicular movement and usage of machines and equipment driven by fuels like petrol, diesel, and gas etc., is on the rise. While consumers are compelled to line up at the petrol pumps, they are not relishing the experience. There is plenty of untapped demand and growth potential that can be unlocked by digitising to smart app-driven processes. Smart app-driven fuel retail of diesel is already being experimented with great success. There is complete transparency of pricing, quantity, and quality. Fuel is transferred to the end consumer’s location in digitally monitored bowsers; customers can make cashless payments and receive the ordered quantity of unadulterated fuel with complete convenience and safety.
Such a technology-driven approach can transform the reach and scale of fuel retail operations and holds great potential for the government, fuel companies, and retailers and the overall economic and social wellness in the post-pandemic times. It is time India democratizes fuel retail by taking it online!
Source: Business World