Service stations to be smarter in the future

A multinational engineering consultancy has forecast a changing business model for Australian service stations as cars become greener and consumers eschew private vehicle ownership.

Ashley Lang, director of oil and gas at AECOM, says that the future worth in service station sites will rest in accessing big-spending consumers of household goods, rather than the profit to be made by selling fuel for motor vehicles.

"The future value is not in fuel, although petrol stations will continue to offer that in some form for at least the next 20 to 30 years. The value is in their strategically significant locations," she was quoted saying in an article published by the Property Council of Australia.

As more and more people move into densely populated urban areas, the siting of traditional service stations lends itself to a broader retail consumer context than just supplying motorists with fuel for their cars. That's just as well for owners of those service stations, who would otherwise be staring down the barrel of diminishing revenue – and relevance.

According to the Property Council story, there were roughly 25,000 service stations dotted around the country in the 1970s, more often than not situated at major intersections. On average, each service station catered for up to 520 people, including kids.

In contrast, there are around 6500 stations in operation today. The change in the market over the past four decades has seen small operators sell out to larger operators, who could use economies of scale to boost profit and close down competitive sites that were then sold for other purposes. And the rise of convenience stores – with fuel supply facilities on the same sites – has further increased profitability.

The service station of today – all bright and shiny counters, fast-food restaurant facilities, toilets and ATMS – is a long way removed from the full-service sites of yesteryear, with their grimy retail spaces selling car parts and consumables.

As electric cars and plug-in hybrids become more popular, there will be reduced need for fuel outlets on every corner. Many owners will choose to recharge the battery from the household power supply. Reliance on fossil fuels for motoring should gradually decline.

Motorists will also be a rarer breed. Fewer millennials are obtaining a driving licence or a car, preferring public transport, taxis and surrogates like Uber, or – if they are licensed – car-sharing services. The 'Transport on Demand' report published by AECOM last year predicts each car shared in a major market like Sydney will take as many as 10 privately-owned cars off the roads by 2036.

While that reads like a major – and possibly rapid – transition away from traditional car ownership, the service stations won't be left to wither on the vine.

BP acquired 527 retail sites from Woolworths last year, at a cost of $1.8 billion. But it's not to get back in the business of retailing petrol. It's because the sites are well placed to connect with retail consumers. According to Lang, BP anticipates the retail sites presenting further opportunities as "one-stop-shops" to sell food and household items.

In Europe and Asia convenience store/service station chains are "pushing the envelope on what a petrol station can be", Lang says.

Shell is operating two sites in Bangkok (Thailand), where the customers are offered personalised bowser service, in something of a return to the past, and luxury cafes. The brand runs its sites in the UK with a Costa coffee shop as an annex. Shell sells as many as 60 million cups of Costa coffee in a year. Around 30 of the Shell sites in Britain also incorporate a Waitrose supermarket, which is more than just a compact-footprint convenience store.

In Australia, Lang says, Caltex is "ahead of the pack".

Contrary to what consumers might believe, convenience is "under-served" in Australia, says Karen Bozic, the acting general manager of retail at Caltex. Bozic also says that Caltex – a company with a 117-year history in Australia – will "shift with consumers’ mobility and convenience needs".

A new "convenience marketplace" named The Foodary (pictured) is being established throughout New South Wales, Western Australia, South Australia and Victoria. According to Bozic, the Foodary "delivers fuel and everyday needs from barista-made coffee to freshly-made food and local goods. In some sites, this will include parcel pick up and laundry services".

Customers can download an app (via iTunes) to place an order for food and coffee – and even pay for fuel without entering the premises. Caltex has opened seven Foodary sites since February.

"There is no doubt taking a marketplace approach resonates with consumers and we look forward to exploring that fully," says Bozic.

Lang foresees the complexion of service stations changing drastically in coming decades, as motorists shift from internal-combustion to electric power. In future, the service station may do away with the traditional forecourt in favour of garages with a robotic stacker, housing up to 50 autonomous EVs for consumers to share on subscription.

As the 'hazard profile' of service stations changes, other services will open up for the site owners and operators to offer. These would include community hubs for large-format 3D printing or other specialist manufacturing facilities, Lang says, describing these as "connected co-working spaces or maker spaces".

"Now is the time to look beyond the current horizon and consider a far more radical future for these sites," she explains. "The locations are too strategic to ignore."