Viewpoint

The forecourt of the futureWith a disruptive lifestyle and technological changes ahead, the fuel retail business will need tocreate a new customer experience on the forecourt

The traditional forecourt model is at its inevitable end. Electric vehicles (EVs), autonomous cars, data analytics, and theInternet of Things (IoT) are only a few of the emerging technologies threatening the classic fuel-station customerexperience. What will the next-generation forecourt scene be like?

Transformation of the fuel retail business should not be
underestimated. Its huge dimension (over 300,000 sitesglobally) implies that it will not only impact existing players, butalso revolutionize its customers and adjacent markets.
Number of sites (in thousands) for major retail players – 2019
Top 3 fuel retailers’ sites: +100K
44423137
28

27

12Shell

Sinopec

Indian OilCorporation

SubwayMcDonald’s Starbucks

WalmartSource: Arthur D. Little analysis

When predicting the near future at local fuel stations, key trends
concerning how we commute, eat and shop will be the coredrivers that ultimately shape the forecourt.
Increased demand for grab-and-go eating – As the world
becomes faster paced, time and efficiency are becoming agame changer for retail businesses. Busy agendas demandthat services become quicker and better. People now eat a lot
less at home, which makes convenience shopping and “graband-go” eating a major global trend. In the US, food spending
away from home has surpassed that for food consumed athome since 2010. Particularly, customers now prefer healthierfood alternatives to the usual fast-food burger or doughnut.
Additionally, more people are working and interacting outsideof formal office settings, traveling to provide services, andalternating sales with administrative tasks “on the road” – taking
advantage of fuel retail sites for higher efficiency.
A shift in the mobility energy mix – The transport sector isshifting. It is leaving behind a petroleum-dominated segment
and looking towards cleaner sources of energy, such as gas,hydrogen, and electricity.
Demand for eco-friendly outlets – Awareness has been
growing among consumers about their carbon footprints,
which is making their purchasing choices greener. In response,
retail sites are adapting their buildings into eco-friendly
layouts, pushing for sustainability and minimalism, and publicly
committing to more conscious use of energy and materials.
Food-spending trends in the US

CAGR
2017-1997

Nominal billion dollars
900
Retail store food expenditures
growing at 5.4% CAGR
800

4.8%
3.4%

700
600
500
400

Food at home
Food away from home300
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Source: Arthur D. Little analysis; USDA

Hyper-connected customers – Smartphones have become
indispensable in our lives. We rely on them for almost
everything: choosing routes, estimating travel times, ordering

1Viewpoint

and paying online. The trend is irreversible. Users’ ability toperform a variety of tasks over their smartphones is not only
beneficial for them, but also for businesses, as the businesses
can access enormous amounts of data generated every minuteby consumers. The stream of information leaves us hyperconnected, which allows for new features in the retail world,such as omnichannel and individually targeted mobile marketing.
Quest for easier living – Fuel retail has been commoditized,with consumers choosing between one retailer and anotherby price, location and availability of specific services. People
are more likely to decide on one station over another forcompelling reasons, and while location will remain a key factor,
the presence of diverse convenient services is becoming more
important as a differentiator. Consumers are reaching out toservices that ultimately make their lives easier, but preferences
are not the same for everyone.

The forecourt of the future

plus annual growth.) The petroleum-dominated retail world isfading. Shell has set an ambitious target of reaching 50 percent
non-fuel profits globally by 2025.
Attending to multiple customer needs
What are their needs?
Flexworking

AgiledriverDigital
nativeWhat to offer?

Wants a comfortable place to▪
work outside home
Values ambience and experience ▪
▪
▪

Sophistication in food & beverages,
coffee and bakery
Digital and value-added services
Exclusive/VIP area
Frequent-visitor deals

Wants to streamline the fuelingprocessIf possible, avoid getting out ofthe vehicle▪
▪
▪

Access to priority/fast-lane
Package collection from e-commerceAll-in-one e-payment and transactions▪

Wants to interact through theirsmartphone

▪
▪
▪
▪

Mobile app platform
Digital services
Targeted marketing
Package collection from e-commerce▪

The station is a meeting point▪
▪
▪

Will probably spend in convenience
store and/or coffee and bakery
Entertainment services
Parking▪
▪
▪
▪
▪

Convergence of retail stores
Banking, pharmacy, grocery, laundry
Package collection from e-commerce
Cross-selling bundles
Parking▪
▪

▪
▪

Socializing

One-stopecosystem▪
▪

Wants efficient use of time
One stop for multiple purposes

Source: Arthur D. Little analysis

In order to remain relevant and thrive in such a context, theforecourt of the future should consider the following key topics.

Non-fuel revenues and contribution shares from a selectionof players

Diversification of energy offering

Selectedplayers fromvarious regions

Traditional offering adapted to a broader set ofcustomers
Stations have evolved from fuel-exclusive businesses to mini
supermarkets or convenience stores where consumers can buy
snacks or even full meals. The forecourt of the future should
maintain the traditional offering, while adapting to cater to abroader set of customer requirements. Some customers mightrush in to refuel, some may enjoy cups of coffee while theywait for their EVs to charge, some will stop by for quick lunch
breaks, and others could settle at tables and work for a few
hours. Fuel stations will act as meeting points for various typesof consumers, each having a different purpose.
Developed countries are already experiencing about half of theirfuel stations’ profits being non-fuel related. Emerging countries
still have lower non-fuel contributions, but will eventually catchup because non-fuel sales is a faster-growing segment. (Forexample, China’s Sinopec and CNPC are undergoing 20 percent2The forecourt of the future

50%USAfrica 1

Emerging

Europe50%30%

Emerging

75%15% 15%Europe

Asia 2

US1%

Asia 120%1%

Latam 2

Latam 1

EU 435% 30% 35% 30%

EU 3

45%20%

Latam 1

EU 2

EU 1

15% 15%

EU 1

US 3

Ecosystem
partners’revenues

Future forecourt60%

US 440%25%

US 420%US 2

60% 60%

US 2

Non-fuel
contribution
share

30%

US 325%

US 1

Non-fuel
revenue share

US 1

Forecourts of the future will have to offer a wider range ofsources (electricity, natural gas/CNG, gasoline, diesel, LPG,biofuels, hydrogen). This will require adjusting their real estatelayouts (tanks, batteries, pumps, etc.) and coming up withsmart strategies to provide smooth fueling services to different
customers. In Japan, for example, cars are fueled from hoses
coming down from the ceiling, with no pumps occupying spaceon the forecourt. We expect “no petrol” stations to emerge,
and countries such as Germany, UK, Japan and Korea will leadhydrogen supply growth.

Current forecourt

Target 1x fuel andnon-fuel revenues

Source: Arthur D. Little analysis

As the customer experience becomes ever more complex,
retailers will have to modify their infrastructure into modern,clean buildings with innovative interior designs, using
environmentally friendly materials and smart technologies tocreate pleasant micro-climates for people to enjoy. Fuel stations
will convert into multi-use ecosystems, with separate relaxing
spaces for those who want to read or work, clean and brightareas for eating, and even green terraces for social gatherings.
Bigger parking lots will also be necessary to cater for larger
crowds that stay for longer periods. Fuel stations possess a key
asset which retailers can leverage to build a new ecosystem
containing multiple businesses: real estate. In this context,
customers will be able to enjoy a wider set of services. Entering
the e-commerce world is a likely scenario as well, and thepresence of omnichannel transactions will be a key feature forthe future of fuel retail forecourts.

Viewpoint

An omnichannel retail ecosystem
Decreasing revenue share
Lowermargin trend

Fossil fuels

SnacksAll-in-one process e-payment

Increasing revenue share
Highermargin trend
Alternative fuels
Coffee & bakery
Fresh and healthy
F&B

TobaccoLubes andspare parts
Tire control andcar washing

Banking, parmacy, other buzz

E-commerceEntertainmentDigital services
Priority and VIP
services

Source: Arthur D. Little analysis

Fuel stations play a critical role as infrastructure enablers infacilitating the EV transition. Availability of charging points is
one of the main drivers of EV adoption. While retailers offeringcharging points will certainly push the EV market, their own
businesses could contribute by capturing higher margins for EV
charging than for fuel. Station owners will need to revisit theirbusiness models and consider whether to enter the electric
market independently or by partnering with third-party chargepoint operators (CPOs).
Yet, oddly enough, the forecourt will no longer be the only place
for fuel filling. As digitalization moves forward and enables
better logistical services, it is no longer consumers approachingbusinesses, but rather, the other way around. This is also true
for fuel retail: some retailers already provide fuel delivery.
Shell’s TapUp application offers scheduled fueling at customer
locations. This opportunity is being seized by new entrants thatsell on-demand fuel at competitive prices, such as Zebra Fuel in
the UK, as well as WeFuel, Filld and FuelMe in the US.

Connected cars and automation
Although it could take decades before autonomous vehicles
become a common sight on our roads, car manufacturers are
already embracing big changes as more and more models
benefit from “connected services”. Payment will not be theonly automated service; so will some of the core forecourt
processes, such as pumping fuel and car maintenance.
Your future car will be able to locate your nearest station as you
run out of fuel, going so far as to check whether the station has
the type of fuel you usually buy in stock, or even how long thewaiting time will be. Cars and pumps will work together. Cars
will be able to transmit the required fuel volume upon arrival,
the pump will autonomously start filling, and with a one-click,in-vehicle payment, there will be no need to leave the car! Evenvehicle maintenance services could be automated, such as
checking engine oil, tire air pressure and lubricants.
Shell has partnered with Jaguar Land Rover in the UK and GMin the US, offering an in-car payment system at its stations.
This allows its customers to pay for their fuel from their cars’
touchscreens, without having to swipe credit cards or use theirphones.

The world is shifting towards easier and quicker payment
solutions using mobile applications, and fuel stations won’t
be left out. Retailers will develop their own apps with multiple
mobile payment alternatives, which will allow customers tocontrol their fill-up experiences through their smartphones.
These apps will also have convenient features such as feedback,receipts, transaction history, rewards through loyalty programs,
and third-party discounts, also processed automatically.
Shell has been a pioneer in this area, with its “Fill Up & Go”
app in the UK, which is powered by PayPal and now accepted
at more than 1,000 stations. ExxonMobil has launched its“Speedpass” app, available at more than 6,000 stations acrossthe United States. These enable customers to link the apps
to their loyalty programs and earn reward points with every
purchase. Alternatives have also been introduced, such as QR
codes.
Convergence on all-in-one process e-transaction
Non-fuel products andservices payment

Fuel payment
Earning points inloyalty program
Applying third-party
discounts and/orpromotions

All-in-one
process
e-transaction

Digital services
Priority and VIP services(e.g., preferred fast lineor access to special area)

Source: Arthur D. Little analysis

Behavioral analytics for one-to-one marketing andservice level1

Connected cars plus data analytics will lead to predictive
customer behavior, tailor-made services and targeted
promotions. Loyalty programs will become highly effective. By
using machine-learning technologies, customers will be able toprepare their fuel recharges, groceries or even coffee pre-orders
easily – and access better prices customized for these. In theUS, the GasBuddy app brings targeted offers to consumers whodrive past stations subscribed to this service. This is facilitatedusing location-based marketing, and boosts retailers’ c-storesales.
Data analytics creates the opportunity for retailers to profit fromincreased revenues by cross-selling with advanced one-to-one
marketing strategies and dynamic pricing. It also allows themto reduce operational costs with automated stock management
and maintenance.

One-of-a-kind service station models
We believe fuel stations will adopt some of the aspects
mentioned above. However, we recommend each retailer
identify its strengths and competitive advantages, as well as
consider its location and the type of community it is engaging
The forecourt of the future3

Viewpointwith in order to define the most suitable business model inthese new market conditions. These types of service stations
have already started to converge around a few main models(listed below), but other models will materialize.
nnnnnnnn

Community center station – full service, a wide range offuels, a meeting point for multiple customer segments(omnichannel)
Urban express c-store – a small convenience store withbasic groceries and snacks and a limited fuel offering (forexample, one EV charging point and one fuel pump)Multi-use highway station – spacious and modern storeswith multiple areas and fuel-based revenues
Long-haul station – resting and service areas for drivers andmaintenance, as well as other fleet management services
for trucks

Although this might turn out to be a medium-term trend, we
believe service stations will stretch their business models
further, becoming ever more tailor made for their types ofaudiences. Better customer segmentation with a targeted
offering will allow each station to run a model of its own.

Insight for the executivenn

nn

Take the lead in industry convergence – leverage real estate
assets and long-lasting relationships with dealers to attract
new players.
Find a strategy to steer customer-purchasing decisions,involving both own and third-party products.

nn

When partnering (e.g., for loyalty programs), make sure togain full access to the generated customer data.

nnCustomer experience is key – cross-selling to increase shareof wallet from the fuel customer’s total daily spending.

nn

Revisit potential for a new customer base – create the rightservice station model for the needs of various clusters.

How can Arthur D. Little support key players?
nn

Reviewing and optimizing fuel (and non-fuel) portfolionn

Planning fuel distribution and retail network transformationnn

Defining future retail-model types and scope of services for
return-on-capital optimization

nnTechnology selection and business cases

nnSupporting partner selection and developing collaboration
strategies

Contacts
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The Netherlands

China

NorwayCzech Republic

Russian Federation

FranceSingapore

Germany

Spain

India

Sweden

Italy

Switzerland

Japan

TurkeyKorea

UK

Latin AmericaUSAtaga.karim@adlittle.com
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song.ninghua@adlittle.com
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monzon.daniel@adlittle.com

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thurmann-moe.lars@adlittle.com
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Authors
Daniel Monzon, Catalina De Stefano, Carlo Stella

Arthur D. Little
Arthur D. Little has been at the forefront of innovation since1886. We are an acknowledged thought leader in linking
strategy, innovation and transformation in technology-intensive
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