Forecourts have evolved beyond the traditional role of petrol station to become a multi-purpose convenience shopping destination.
We are currently seeing big changes in forecourts as they evolve into multi-role shopping destinations. In fact, if one word sums up the emerging profile of the modern petrol filling-station (PFS), it is this: Convenience.
That’s just as well, because after peaking in the 1970s when the UK boasted 37,000 forecourts, there remain only around 8,000 even though we are driving more than ever. Apart from a degree of consolidation (no more single village pumps outside blacksmiths’ forges, for example) there is a simple reason for the decline in forecourt numbers: the average new petrol vehicle increased its fuel efficiency by nearly 48 per cent, and diesel by 38 per cent, between 2000 and 2015 . Modern cars only drink half what they needed last century.
This means filling the tank is now only fourth on the list of reasons why consumers visit a forecourt, and the boundaries between gasoline and grocery are becoming increasingly blurred – to the extent where some of the most innovative retailers are reporting that petrol is fuelling just 50% of sales.
And while groceries are making up an ever-larger part of the forecourt spend it is a particular offer which is powering the change: food-to-go (FTG), which when you think about it is really “food-as-a-service”, fitting in well with all the other sorts of “pit-stop” solutions that forecourts are perfectly suited to offer.
Brian Madderson of the Petrol Retailers Association (PRA) says that although ambient Convenience sales across the channel might have nearly topped out, they still keep good economic pace at a useful 3% compound (4% according to Christie & Co’s Steve Rodell), while incremental sales and growth extend sales through fresh trends: “Food-to-go is now a better growth opportunity at over 6%” in the forecourt sector, says Madderson.
This transformation is being powered by the same demographic changes and swerves in consumer taste and behaviour that are affecting the entire retail landscape. The younger generation both eats and lives out more, and is impatient of spending tedious hours in a supermarket at weekends: in a busy schedule they feel time is precious and want to get everything done as quickly as possible. This means services on tap, and cramming in many facilities under one roof – as Timpson, now the proud owner of Snappy Snaps, is profitably demonstrating.
Likewise, more people seem to prefer shopping daily for the evening meal and otherwise to snack on-the-go during the working week. “We’re seeing a real trend towards less defined meal times and this presents forecourt retailers with a real opportunity to drive food-to-go sales throughout the day,” says Sean Russell, Marketing Director of Costcutter. This means commuters need the multi-convenience shopping solution that forecourts are increasingly turning into. The PFS is rapidly becoming the new car-led, on-the-hoof Convenience sector, literally a place to fill up.
“We have developed strong working relationships with several coffee houses including Seattle’s Best, ExpresscoPlus (Lavazza), Selecta, Tchibo and tea specialists Yorkshire Tea, and see a real increase in sales when brand signage is used outside a store to entice local residents and passing trade in,” says Russell, referencing the current nationwide “barista bubble”.
This trend might appear to benefit the largest sites: Maxol spent nearly £4m on its award-winning 8,000 sq ft forecourt, Tannaghmore Services in Antrim, which has several world-food eatery franchises ranged enticingly across its frontage to the right of the ample-sized Spar.
Then there is the impressive Rontec forecourt on the A20 near Sidcup and also David Charman’s site at Parkfoot, West Malling – already voted the UK’s best Convenience store way back in 2014 – where visitors adored the range and the always-open in-store butcher.
Forecourt and Convenience got married and are now having monster-size babies: “One only has to visit the multi-million pound new-to-industry development, Frontier Services, recently opened by EG Group on the outskirts of Blackburn, to appreciate the FTG sector,” explains Madderson. The UK’s first dual lane drive-thru KFC facility cost in excess of £1.25m and employs 35. “Across the car park is a drive-thru Starbucks open all hours and with 27 staff, while the large Spar brand store also houses a separate 24-hour Greggs and a 16-hour Subway with a sit-down area for eating and drinking.”
But actually, smaller and standard-size sites can pack a lot of customer-satisfaction into a relatively constrained space, and still prove a solution to almost all shopper missions. Patrick Mitchell-Fox, senior business analyst at IGD concurs: “Across the forecourt sector, operators of every stripe are focused on upweighting their in-store offer to build the maximum ‘stopping power’ for their sites and significantly enhance the role of food and drink in their profit mixes.”
This process of turning forecourts into Swiss-army-knives of essential and enjoyable fast-services has accelerated over the past year, with fresh and FTG proving the irresistible catalyst. With interest rates still low and credit widely available, the present time is perfect to invest in a “knock-down-build-up”, and many of these re-builds have been taking place across the UK, including independents.
“Even singleton operators like Salim and Mumtaz Patel at Shell Crown Services in Brighouse, West Yorkshire, have the confidence to borrow money to create a superb new forecourt and Nisa shop after many years serving their local community,” says Madderson.
“To ensure their forecourts provide an enticing place to ‘dwell’, retailers must then invest further in creating compelling in-store environments with a focus on the look and feel of fit and décor, and even comfort and space,” concludes Mitchell-Fox: “We are expecting forecourt retailers to really up their game in the coming years, to create new, enticing and exciting locations for motorists to stop, shop and even spend time.”
The idea of spending family time in a forecourt, a perverse notion just a few years ago, is in part due to futuristic visions of electric cars displacing gas-guzzlers entirely before very long. Lounging around waiting for a charge to finish (actually it should only take about 5-10 minutes after 150KwH outlets are introduced a few years hence), the EV driver will eat, work or even see a movie with the kids …
But the decline of gasoline and diesel has probably been over-predicted. The take-up of EV cars is likely to take a lot longer than expected. Only 13,894 EVs silently hit the road 2018, a few hundred more than the previous year, representing a market share of just 0.6%. Steve Bridge, MD of Mercedes Vans, recently told Asian Trader that the UK in any case simply cannot generate enough electricity to power a nation-full of EVS: “There’s not enough power in the grid.”
Other problems also remain. “Imagine this,” Bridges wondered aloud. “You park your car outside, and you’re sat here and you’re thinking have I enough battery to get home? Imagine you went on holiday and you parked at Heathrow for ten days whilst you’re away and then you come back and your battery’s flat – what do you do? No car parks in the UK, not a single one of them, have got a charging point.”
There are now over 4,000 public electric vehicle charging points in the UK and while Nissan expects this figure to soon increase to 7,900, saying that “public electric vehicle charging points will outnumber traditional filling stations by the summer of 2020,” we need to remember that a single petrol forecourt can easily fulfil the needs of average 4,500 motorists. So – what is the phrase? – “expect long queues,” even if there were sufficient electricity generated to meet demand. Drivers’ “range anxiety” will not be allayed anytime soon, while charges remain expensive and will probably be best sipped as top-ups, meaning fuel hybrids (which can recharge cheaply overnight at home) remain the way forward for the foreseeable as far as mass-motoring is concerned.
Any sharp braking in petrol sales is already being well-hedged by the increase in food services and other innovations helping to develop the 50/50 revenue model – and it is important to note that margins on FTG are much bigger than on gasoline and diesel.
Meanwhile the government, perhaps worried about electrical capacity and an ageing nuclear sector, has decided to encourage traditional fuel consumption by again freezing duty on petrol and diesel for another 12 months from April 2019. This means average savings of £1,000 per car, £2,500 per van in fuel costs over the year.
One thing forecourt owners have had quite enough of in 2018 is “bilking” – the crime of driving off without paying. The police seem mostly incurious about this crime and its depressing prevalence, which cost the industry £30 million in 2018. In fact Devon and Cornwall Police will no longer even investigate forecourt crimes unless there is “obvious proof of criminal intent”, meaning that if thieves don’t use false number plates, they are in the clear!
New moves to counter the criminals include the development of facial recognition technology – which all Convenience stands to benefit from hugely within the next couple of years – evidence-capture systems such as Forecourt Eye, and the PRA’s campaign to pressure the Home Office into granting petrol retailers electronic access to the DVLA’s Vehicle Keeper database, so they can give chase through the civil courts if the police remain, as they are, altogether too light on the pedal.
In conclusion, despite the crime, which now seems general everywhere, forecourts have a bright future, with the independent, Dealer sector in such robust health that the oil companies and national distributors returning to the UK retail fuel market to protect their interest and share in the retail profit growth.
Steve Rodell certainly believes the sector is very attractive to corporates and investors big and small: “The interest is in the underlying real estate-backed roadside retail offer, underpinned by consumer behaviour,” he says, highlighting the trends and exciting revenue forecasts the industry is now experiencing.
Retailers can increasingly weather a loss on fuel sales and make it up selling groceries and FTG: “Convenience retail and foodservice will increasingly form an important pillar of this business so investment in petrol stations is likely to remain compelling for some time to come,” Rodell says.
And whether the future is petrol or electric, forecourt retail is becoming the perfect hedge.