Two things, really.
In some European markets entire networks have been sold by majors to national licensees (Spain, Sweden, Norway are examples), who operate the brand on behalf of the majors, and take over control of supply, pricing and operations. In others, dealer groups are snapping up either individual sites or groups of them, and building considerable multi-brand networks (good examples are the UK and Benelux). So Europe is seeing significant consolidation of “independents” in the fuel retail space.
But why is it happening?
A few factors are at play.
1. Europe is a relatively low-margin market for retail fuel margins (though these vary considerably from country to country). Majors would rather free up cash to invest in higher growth, higher margin geographies (or, indeed, upstream in exploration and production projects). So, they divest in search of better returns on capital employed.
2. In many European markets, majors have been forced to understand that they play not in the fuel business, but in the retail business. And then to ask themselves the question: “are we really retailers?”. Can they out-Tesco Tesco or out-Leclerc Leclerc? No. So, they get out. Statoil’s sale of its Fuel Retail arm to North American convenience retailer Circle K is a perfect illustration of the thinking.
3. With a different and opportunistic perspective on the potential of fuel retail, convenience retailers like Eurogarages piece together their own multi-brand networks, transforming sites into shops, cafes and fast food outlets – with fuel a “hook”, but only part of an overall P&L.
And? Why does that mean change for fuel card markets?
Hmmm.
Firstly, we’re likely to see a change in the balance of power when it comes to fuel card acceptance dynamics. At present, dealers, dealer groups and licensees are still – to whatever extent – bound by the acceptance frameworks of the major brands they work under. This is changing, and will continue to change – as those independents seek full control over the fuel cards and payment instruments they accept.
Secondly, independents may look at the opportunity to issue their own fuel cards or other payment instruments. If you have several hundred outlets under your umbrella, the economies of scale exist to target customer groups with your own card. Only the mix-up of acceptance and acquiring technology stands in the way (however complex those issues may be).
Oh. So what might be the likely outcomes?
The million dollar question.
What seems certain is that the relatively rigid fuel card acceptance frameworks of the past, built on tightly controlled cross-acceptance deals, multi-major issuing JV’s and multi-party acceptance consortia, are going to liberalise as the market reconfigures itself.
Whether or not they elect to issue their own payment instruments, the growing independents will take their own decisions on what to accept, what not to accept, and on which commercial terms. Channel fuel card margins will probably, to that extent, see a shift in emphasis from major issuer to independent retailer.
Will any segments be most acutely affected?
Clearly.
The segment the majors have had the greatest problems in serving has been the local SME segment. “The butcher, the baker and the candlestick maker”. Ever since old-fashioned paper accounts, held at an individual site or two, were drawn away onto major fuel card schemes, the segment has struggled. Majors have found it hard to attract and retain local b2b customers – being no experts in mass marketing to SMEs and largely ineffective at leveraging individual sites as a sales channel.
It’s in this “local van” segment, where very small fleets operate within a very tight radius, that we can expect the independents to take advantage of emerging issuing and acquiring technology, to assume far greater control of the SME customer base around them, and to develop tailored local offers around individual sites or small groups of them.
Now that wouldn’t be such a bad thing, would it?
