We'll fight them on the forecourts
Does the BP merger with Mobil herald a long overdue retail revolution for the dull old petrol station? Nigel Cope reports
Friday 01 March 1996
The forecourt formula has not changed much in those 20 years. Not quite a building, but not an open space, these structures are among the most ubiquitous and ugly in our culture. They are all roughly the same size. Their basic organisation - a few pumps, somewhere to pay with a few sweets, car products, drinks and cigarettes - is largely unaltered from the mid- Seventies. While retailing elsewhere has undergone a revolution - the arrival of US fast food chains, the rise of out-of-town shopping centres - the petrol station has been untouched.
But change may be in the wind. Yesterday's announcement that BP and Mobil are to merge their European petrol retailing businesses is probably the first stage in a long-awaited shake-up in an over-supplied and in some ways still old-fashioned industry.
The Mobil name will disappear from Britain but it is unlikely to be the last to go. Petrol retailers are under such pressure, both from the supermarket operators grabbing market share and from each other, that more mergers, takeovers and even perhaps bankruptcies are inevitable. In a few years both the number of petrol stations and the way they operate could be very different.
Having moved from the greasy, overall-wearing petrol pump attendant in the 1950s and 1960s to the self-service operation with shops in the 1980s, the market is set for the next stage in its evolution.
The number of petrol stations is already falling fast. There were 17,000 at the beginning of 1995. Forecasts suggest there could be just 10,000 by the end of 1997.
The shake-out began in earnest last year when Frost Group, which trades under the Save name, took over Burmah's petrol stations. Elf's stations are up for sale and several other operators could soon decide to quit.
Paul Sykes, head of the Independent Petrol Retailers Association, says: "This is the first of many such deals we are going to see. Other oil companies will pull out of the UK - certainly by the summer. They are losing money selling petrol." Those under pressure include Repsol, Q8, Murco, Gulf and Fina.
The main problem is over-supply. There are just too many brand names and too many stations chasing too few cars. The supermarkets have played a major part in the shake-out. From a standing start five years ago the big four supermarket chains now have almost 25 per cent of the UK market. Their higher sales volumes have enabled them to cut prices forcing BP, Shell and Esso to follow suit, which has narrowed their profit margins. When Esso launched its PriceWatch campaign in January, pledging to match the lowest prices within a three-mile radius, the game plan was clear - it wanted to grab share back from Sainsbury and Tesco.
But competition need not necessarily be on price alone. To date, petrol stations have done little to differentiate themselves from each other by the quality of service they provide. Petrol stations seem terribly alike: similar prices, almost identical stations and the same tired promotions offering free wine glasses in return for a handful of tokens.
The entrance of the supermarkets into the competition is forcing others to change tack.
There are two main routes the petrol stations can take to respond to the competition. They can either become more streamlined, to cut costs and prices. Or they might seek to differentiate themselves by offering a distinctive service.
One obvious cost-cutting route is to introduce unmanned stations. Both Shell and Q8 are testing unmanned stations where customers pay by credit card. Unmanned petrol stations have proved hugely popular in Scandinavia. They are the norm in Italy for sales after dusk. Previous UK trials have foundered on concerns for customer safety. Ron Frost, chief executive of the Frost Group, is sceptical. He says unmanned outlets have been "a monumental failure" in the past because they rely on credit card payments while three quarters of all customers still pay for their petrol by cash.
The other route is to bring back the pump attendant. It is easy to imagine what MacDonalds would do with petrol stations. There would be staff in neatly pressed uniforms with baseball hats offering a sharp line in patter and a winning smile. Or there could be Virgin-style petrol stations, with loud music, bright colours and lots of young people serving you.
One of the reasons for the shortcomings of petrol retailing is that it is largely in the hands of oil companies who are better at finding, drilling, producing and refining the stuff than they are at selling it in an attractive and friendly way.
There are lessons to be learned from other countries. In the US some operate a drive-thru system where a pad on the pump can take orders for a Big Mac, large fries and Coke. The driver then coasts towards the service point where they pay for their petrol and pick up their burger. Some UK companies such as Texaco have started opening drive-thru restaurants.
However, the UK market is sceptical about these innovations. Shell says the Japanese like more service because the car is seen as more of a status symbol. Drivers in this country might not like attendants banging the pump nozzle against the car, it says.
So it seems that perhaps very little will change, despite the ferocity of the competition. Petrol stations will continue to be drafty, oily, charmless places. Indeed the price war will drive out some of the weakest players. Small local petrol stations - the last bastions of the personal touch - will be the main casualties. In Scotland things have already got so bad that a development agency has awarded a pounds 50,000 grant to help a Highlands petrol station to stay open.
How they do it abroad
Italians love cars almost as much as their mothers. A good filling station will give you not just petrol but the automotive equivalent of a manicure. But after dark, when the only open garages are unmanned, you usually have to battle with unreliable automatic vending machines.
Over the past 25 years more than half of France's service stations have gone out of business, victims often of aggressive pricing policies by hypermarkets, which use low prices to attract customers. Almost half the country's petrol is now sold at such outlets, usually self-service. A big oil company recently introduced service with a smile - including cleaning windscreens - to help create jobs - but it seems unlikely to catch on.
Self-service has yet to reach petrol station forecourts in Hong Kong, but so has price competition. Every petrol station in the colony charges the same prices for all petrol products. So petrol stations attempt to lure customers with gifts such as tissues, bottled mineral water and other soft drinks. Very few petrol stations offer additional services such as windscreen cleaning, but as there are always a number of attendants on hand they will check oil, water and battery fluid.
The Fifties were the best time, in the words of the Esso commercial, to "put a tiger in your tank". Every gas station checked your oil and water, washed your windshield and filled your tank while you sat back and rested. Today you can still get so-called full service but your petrol can cost as much as 50 per cent more than for self-service.
Driving into a Tokyo service station is like being guided in to land a jumbo jet, with a small team of willing attendants on hand to help you. While you sit in a room with a television, they will fill your tank, clean your windows and check oil and water levels as well as tyre pressure before assembling to wave you off the forecourt.
- 1 Scottish independence: Ireland since 1919 is a lesson for Scotland in what a Yes vote means
- 2 Watch a man race the Circle line - and win
- 3 A bottle of wine a day is not bad for you and abstaining is worse than drinking, scientist claims
- 4 Grandmas keep accidentally tagging themselves as Grandmaster Flash on Facebook
Islamic State: Pope is 'being targeted by Isis', Iraqi ambassador to the Holy See warns
Jennifer Lawrence and Kate Upton nude pictures exhibition cancelled after artist concedes photos were 'stolen property'
Scotland independence: A nation divided against itself: Brown says SNP are liars. Darling joins in. Salmond fights back
John Travolta addresses former pilot's gay romance allegations publicly for the first time: 'That was the lowest I'd ever felt'
Richard III: Two years after his body was found scientists discover how he died
Daniele Watts: Django Unchained actress detained by Los Angeles police after being mistaken for a prostitute
The political class is doing what Hitler couldn’t – destroying Britain
Scottish independence: Nationalist leader Jim Sillars threatens pro-union companies with 'day of reckoning' after independence
Scottish independence: Yes campaign feels the heat as Alex Salmond's NHS claims come under furious attack
Portuguese academic says British are 'filthy, violent and drunk'
£23m Birmingham cycle scheme is attacked by Tory councillor for not catering to the elderly
£40000 - £45000 per annum: Ashdown Group: HR Manager / Training Manager (L&D /...
£35000 - £50000 per annum + benefits: Ashdown Group: Senior QA Engineer (Agil...
£26000 - £28000 per annum: Ashdown Group: Digital Marketing Executive (SEO, PP...
£40000 - £50000 Per Annum: Clearwater People Solutions Ltd: Our retail client ...