Future Outlook for POL

Retailing & e-Commerce

POL Retail – Significant Challenges
• The petro retail market in India faces significant challenges. The
product differentiation is practically non-existent. Customer loyalty
is lacking, branding is yet not an effective tool and prices are still
indirectly regulated. There is intense competition amongst players
to capture market share, which is putting downward pressure on
margins. The situation calls for new and innovative strategies.
• A petrol station which used to primarily function as a products
business is increasingly becoming a mix of products and services as
more auto care services (car wash, tyre repair, lube oil change etc.)
and non fuel offerings are being added to the business portfolio.
• The idea is to make petrol station a destination for customers by
leveraging non fuel element for differentiating in a commodity
market.
Changes in passenger and personal transport model

• The two major modes of transport in the country are roads

& railways. According to NHAI estimates, 85% of the
passenger traffic and 70% of freight traffic in India is carried
by the roads with the balance being carried by the railways.
Further, there has been a long-term modal shift towards
roads away from railways with the share of road transport
in the overall traffic flows increasing steadily.
With increased urban road congestion, most experts
acknowledge that persuading people to shift from personal
vehicles to public transport (buses and trains) is amongst
the most important elements of any strategy to meet the
growing urban travel demand in a sustainable manner.
 Developments that likely affect future of
Retail outlets in India
• Expansion of network – per pump throughput
not increasing
• Private players’ entry
• Impact of AutoLPG and CNG
• Alternative fuels – Electric Cars, hybrid cars,
fuel cells,
• Changes in passenger and personal transport
model
 Expansion of network
• Indian Oil, Bharat Petroleum and Hindustan
Petroleum on petrol pump expansion spree
• PSUs marketing firms Indian Oil, Bharat Petroleum and
Hindustan Petroleum are on an expansion spree-
setting up large number of ROs every year.
• No of Retail outlets have already crossed 64000 (on
01.01.2019).
• During November 2018, three PSUs OMC gave
advertisement for 74,000 new Retail outlet locations,
which is a huge number. During interactions with the
media, Oil companies informed that as per past
experience only 15 to 20 % sites materialize. Even if
10K to 15 K new retail outlets get developed in next 2-3
years, it is significant increase in the number of ROs.
 Private players’ entry
• PRIVATE PLAYERS PROMISE RETAIL MAKEOVER IN INDIA – story a few years ago
• Earlier petrol stations were merely used for filling fuel. The environment started changing,
when Shell “adopted’’ some locally owned pumps and did a makeover—as part of the
economic reform process. Improved signage, use of credit cards, lady attendants, and
carwashes soon became an integral part of the petroleum retailing makeup, especially in big
cities. Now, they are quickly getting converted into multi-facility joints.
• BPCL has created a national network of around 300 “In & Out” stores that offer banking and
shopping services round the clock. To draw more customers, reward points are earned on
purchases of products in the mall bought with the BPCL’s smart card – known as the Petro
Card.
• Similarly, the Hindustan Petroleum petrol station in Bandra Kurla Complex, Mumbai, has an
eatery serving pizzas and a coffee shop.
• IOC outlet at New Delhi’s business district of Nehru Place has a Domino’s Pizza outlet.
Another petrol station in downtown Mumbai houses one of the largest bookshops in the city.
• The idea – common enough in countries like Singapore and Malaysia — is to buy fuel, and
shop alongside.
• Union Govt. had allowed Shell to set up 2000 ROs. Though Shell is keeping its plans close to
the chest, the company is setting aside considerable funds for its first phase of investments.
• Reliance Industries Ltd and Essar had set up nearly 3000 ROs. Most of the ROs got closed due
subsidy issues.
 Private players’ entry
• Private Player entry – the story now
• Now with subsidies gone, Private players are again planning aggressively to re-
enter.
• PSU OMCs are also better prepared with the bad past experience, when private
players snatched around 15 % market share.
• Promising road ahead – Automobiles sales are increasing very rapidly.
• For almost 30 years the government strictly controlled public-sector
companies, dictating prices, and directing the expansion of their dealer
networks. Objectives such as job creation had taken precedence over purely
commercial goals, including profitability when running the business. Now PSU
OMC are also demanding freedom in dealer selection procedures.
• Retail site headache – Real estate prices high, acquiring real estate is mired in
red tape.
• Recently Government has permitted BP to open Retail outlets in India.
• Private players like RIL, NEL (formerly Essar Oil) and Shell with 6583 ROs has
again captured 7.9 % market share in Petrol and 8.9 % in Diesel.
 Home delivery of HSD
• India’s first home-delivery of Diesel kicked off in Pune by IOC
• “Another milestone in customer convenience. IndianOil launches
FIRST PESO APPROVED Mobile dispenser for door delivery of diesel
to its esteemed customers at Pune,” IOC said on twitter.Bilal
Abdi | ETEnergyWorld | Updated: March 16, 2018, 23:33 IST
• New Delhi: In a first of its kind move in the country, Indian Oil
Corporation (IOC), the nation’s largest fuel retailer, has started
home-delivery of diesel in the city of Pune and intends to start pan-
India soon.
“Another milestone in customer convenience. IndianOil launches
FIRST PESO APPROVED Mobile dispenser for door delivery of diesel
to its esteemed customers at Pune,” IOC said on twitter.
 Impact of AutoLPG and CNG
• Both AutoLPG and CNG have quickly captured the attention of
public transport operators in the urban areas of India. The
chief reason is the considerable cost benefits offered by these
alternatives. In addition, the mandate for reducing urban
pollution through introduction of less polluting transport fuels
is a further catalyst.
• In the cities where CGDs and OMCs have created infrastructure
for CNG and AutoLPG dispensing, the 3 wheeler auto
rickshaws, the taxis and the city bus systems have converted
their vehicles to allow use of CNG and AutoLPG.
• More and more cities are expected to develop CGD networks
in due course.
• The net effect of these developments on consumption of MS
and HSD is quite visible – CNG sale alone has displaced petrol /
diesel sale to an extent of around 3 million MT per annum.
Customer Loyalty
 Non Fuel Sales & Customer Loyalty
To retail their position Oil companies are promoting Non fuel sales and
Customer Loyalty
• Non fuel revenue growth – still in infancy stage
• Customer loyalty
• Loyalty Marketing is the effort to identify, maintain & increase the yield
from Best Customers, thru long term, interactive, value-added
relationships.
• Loyalty Program Strategy:
• To win new customers & to acquire and retain loyalty of one-off customers
• To reward existing customers for their patronage and ensure their long
term loyalty
• Target Audience for: HSD users are the largest segment, primarily long
haul segment
• Fleet Owners
• Drivers
• A driver is the key influencer on the owner on where to fill the fuel. If he
decides he does not want to fill at a particular retail outlet/with a
particular company, the owner will in all probability abide by it. This is one
segment that is ignored by current loyalty programs offered in the market.
 Loyalty Offering
• The Loyalty Offering – 5E Loyalty Experience:
• Easy to enroll - User friendly application form , availability of forms
thru multiple channels – retail outlets, website & at third party
locations like web store
• Easy to operate - All transactions tracked thru use of the fleet card,
all touch points to have infrastructure and connectivity to swipe the
card
• Easy to understand - Rewards/points earning ratio simple &
transparent
• Easy to redeem points - Redemption for drivers at the retail outlet
itself, simple redemption system, redemption from any location
across network
• Easy to address issues/complaints - 24 hours dedicated Call Centre,
assistance in multiple languages, speedy resolution of issues.
Environmental Pollution
 CARBON EMISSION CONTINUE TO RISE

IEA 450 scenario by

Source : 2035 require
2016 BP unprecedented
Energy improvement in
Outlook both global energy
intensity and carbon
intensity
HIGHER CO2 EMMISSIONS FROM FOSSIL FUELS

Source : World Nuclear Association

Dominating role of Transport Sector
Growth in global energy demand for road in transport sector dominated very
strongly during two decades (2000-2020). It is still expected to dominate, but growth
comes down due to energy efficiency gains. Source : 2019 BP Energy Outlook
Share of Electricity is fast catching up with natural gas. Note dominating position
of electricity in the growth of global energy in transport sector for road.
Source : 2019 BP Energy Outlook
Note that although by 2040, no of expected passenger cars is around 15 %, but
impact will be more as expected Vehicle KM will be more than 23 %.
Source : 2019 BP Energy Outlook
 Diversification
• We may expect the product and service mix of retail outlets to shift
as the new and alternative energy sources establish as a
commercially viable option. The retail outlets have already adopted
CNG and AutoLPG as the market developed for these fuel
alternatives. Similarly, electric and hybrid cars would lead to
development of battery charging / battery replacement business
becoming a part of retail outlet offering.
• Hydrogen dispensing may emerge as a possible retail outlet activity
as fuel cell / hydrogen run transport assumes commercial scales.
• In future, a gas station may be expected to enlarge service portfolio
by including a one-stop solution for all energy needs of a consumer
by combining petroleum based transport fuels, domestic and
transport electricity requirements and piped gas requirement by
appropriate collaboration with utility companies.
Alternate fuels – Electric /hybrid & fuel cells
• Carmakers and manufacturers of electric-car chargers
have already agreed on a common plug that'll work
across the wide range of equipment providers. Utilities,
carmakers and equipment providers now are working
out a key component -- a standard communication
protocol for electric cars to communicate with power
grids.
• Significant research work currently underway to
increase the battery capacity, make them lighter,
reduction in recharging time.
• Prospects of replacing petrol and diesel with
alternative sources of energy like biofuels, gas to liquid,
coal to liquid and hydrogen etc will also increase.
E-Commerce
 E-Commerce
• E-commerce online business is growing at an exponential l scale.
• The idea behind E-commerce business is to cut down middle
man’s margins and pass on part of it to Buyer.
• Like e banking, customer take all actions/decisions from the
service provider website. Buyer may never meet Seller. Buyer
come to know about identity of Seller only after receipt of the
Product or Services.
• E-commerce business in Petro retail may take some time.
However, items like lubricants and non fuel items which can be
easily packed, can be marketed through e-commerce. Such
initiatives may lead to more opportunities in future retail
business.
• Sale and services like spectacles are being offered on websites.
• In order to capture market share, many e-commerce sites are
offering unsustainable discounts.
• All e commerce sites are facing some major challenges like
rejection/return of goods by the Buyer/receiver.
E-Commerce Business Structure

Logistic
Partner

Buyer Service
Seller
Provider

Payment trust
AC/Payment
Gateway
 E-Commerce
• Let us look at key elements of e-commerce business:
– Business is done through online sites without any direct contact.
– Online Transactions are governed by a separate 2000 Act, which governs
all such electronic transactions.
– Online service only providers electronic platform i.e. website, which
facilitate the sales or services transactions between the Sellers and
Buyers. Third important link between Seller and Buyer is logistic
partner/courier agency (for picking up the product/item from the stock
point/storage location/dispatch location of the seller and delivery of the
product to the destination location as desired by the Buyer.
– All users of the website (including Seller, Buyer, Logistic partner and/or
their agents/representatives) are bound by the rules and terms &
conditions (T&C) governing use of the website. Any use (including mere
surfing of the online website) implies acceptance of all T&C for using the
website are accepted (although most of the users never bother to read
T&C, they just click accept/agree button).
– Sellers are also bound by the T&C for sale of product or for providing any
service as applicable to them. The online transaction (i.e. sale & purchase
of any product or service or both) is between the Seller of the product
and Buyer and Website operator does not accept any responsibility
whatsoever about product quality, after sales service, price etc.
Thanking You