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Journalism of Courage
Over two years after petroleum majors launched non-fuel retailing with much fanfare, Indian consumers are unimpressed. According to petro marketing firms, consumer offtake of groceries, fast-food, medicines, FMCG products at fuel stations has not met up to expectations.
Hindustan Petroleum Corp Ltd (HPCL), one of the later entrants into this segment, has non-fuel retailing revenues of around Rs 10 to 15 crore in its first year. The petro giant — which registered fuel sales of Rs 50,000 crore for 2003-04 — says its fledgling division will make Rs 50 crore this fiscal.
Considering non-fuel retailing is a proven business model in many countries — in the US, for instance, the petroleum sector sells the highest number of burgers — why are non-fuel sales not even one per cent of total fuel sales? Have the desi petro companies got it wrong? Or has the Indian consumer rejected the concept?
At one level, it’s an issue of priority. The industry is still being formatted. Mergers, entry of private players, issues on branding and consolidation in the upstream and downstream sectors have pushed non-fuel to the back-seat.
‘‘We are yet to tap the consumer psyche,’’ adds S Roy Chaudhury, director, marketing, HPCL. ‘‘Given a situation where a Apna Bazar is located near a petrol pump, the Indian consumer will still prefer to go to the retail store rather than buy grocery from a petrol pump.’’ As things stand, he says the non-fuel concept ‘‘looks good only on paper than in action.’’
But the industry in general says it’s early days yet. The fundamental error: lack of research on consumer taste. Offers Sanjay Kaul, director, School of Petroleum, ‘‘Companies have to first get the retail combination right and serve products and services based on the geographic profile and consumer taste. At present, there is no innovation considering all the players offer the same services.’’
Agrees Vikram Mehta of Shell, which is setting up 2,000 petrol stations in the country: ‘‘Non-fuel retailing is going to become increasingly important, a key component of profitability. Petrol and diesel in the end are commodities, it is non-fuel retailing that will attract a larger consumer audience in a competitive environment, based on the array of different services they offer.’’
Adds an Indian Oil Corp spokesperson: ‘‘Non-fuel will be a cushion when dealers suffer loss in volumes due to increase in the number of retail outlets.’’
The key will be in identifying and meeting customer behaviour patterns and changing demographics. ‘‘We focus on non-fuel on a need-basis rather than taking the locality into consideration. As our retail outlets are low-cost, the franchisee gets a decent return,’’ says a private player which is setting up a chain of pumps.
According to Kaul, very few experiments have been succesful. There have been some gains made by retail outlets in the rural belt that sell pesticides and seeds. Food is another area with promise. ‘‘There will be more tie-ups with food chains. We might also look into new segments like car insurance,’’ says Chaudhary. Adds Sanjay Krishnamoorthy, ED (Retail), BPCL: ‘‘The number of commodities sold through the stores will only in crease”.
For now, the existing players are expanding — cautiously. In a highly-competitive environment, it remains to be seen who will crack the consumer riddle.
