If there is one area in which fuel card issuers have been less than dynamic, it is in Corporate Fleet. The corporate vehicle parc in Europe has been growing gently but real stabil. By 2021 CFS forecasts a share of new car registration of 34% for the private and 66% for corporate channel. With total registrations expected to exceed the 15 million mark; in Europe. CFS expects more than 10,6 million new corporate car registrations in western Europe in one year, for the first time!
This equals a compound annual growth rate (CAGR) of approx. 3,1% between 2016 and 2020, Covid 19 considered!
Fuel as a share of overall variable operating costs is, for a corporate fleet, around 2-5%: compare that to ca 28-32% for a commercial transport business, and you see why margins are kinder, and negotiations milder for fuel companies in the corporate segment. Bless it.
So it must be a pain in the, err, neck for the issuers that COVID-19 has hit the corporate fleet market so hard. Overnight across Europe company cars were parked idle in driveways or sent back early to contract hire companies. Business travel of all kinds reduced by somewhere between 60 and 70% (Jun 2020 vs Jun 2019). Those steady volumes and those kindly margins were crushed. But the heavy costs of big field- and office-based sales teams and expensive customer service centres didn’t.
So what will happen next? Is the right strategy to sit and wait it out, hoping for a return to “normal”? Is it to slash costs and budgets? Or is there a third way?
Right at the core of these various dilemmas is one central question:
Will we do business remotely, or face-to-face?
Many issuers and many fuel network operators will hope for, and possibly trust in a return to normal. What does that mean? It means that once the rate of COVID infections is contained at whatever a nation considers “acceptable”, we all get back in our cars, head for airports and train stations, and fill up restaurants and hotels again for business meetings.
But will we? Is remote working not proving itself to be a cost-effective, efficient and workable substitute – pandemic or no pandemic? And if the corporate fuel market doesn’t recover to pre-COVID levels (it won’t) – then what are the implications for fuel retailers and card issuers?
Integration of services: is there a future for standalone fuel propositions?
For the sake of argument, then, let’s assume that corporate fuel volumes only recover in 2021 to 80% of 2019 levels. (That’s a fairly reasonable assumption, by the way).
Let’s further assume that, at 80% of previous sales revenues, market leaders in fuel card sales into the corporate fleet segment can no longer cover sales and customer service costs. In this case, the knee-jerk answer is to cull 20%< of sales and customer service costs, and carry on. Job done. Hmmm.
The thing is, corporate fleet customers themselves are going through a metamorphosis. So if you’re a fuel retailer or a fuel card issuer, it isn’t all about you. Corporates will be looking to rationalise, integrate and simplify services. And our guess is they will be far less interested in a standalone fuel proposition. They’ll almost certainly look more and more to integrate fuel with other driver expense areas (lease car; mobile phone; other travel costs; corporate card etc).
So isn’t the right strategy to work in alliance with strategic channel partners to integrate expense data and provide 360 degree propositions to the corporate fleet?
We think so. Even if it takes the courage and imagination that has been missing for a while.
Corporate Fleet operators will demand service and data integration in the “new normal”?
We suspect some fuel card issuers may have problems with the way the Corporate Fleet market is going. Protective of both customer and data ownership, they have been extremely reluctant to engage in any strategic alliance beyond a rigid sales agency structure (we own the customer, you make the sale, we pay a commission…….zzzzzzzz).
COVID may just change this – the pandemic and its effects may just force even the most conservative of fuel card issuers to seek out a radical change of direction.
Working with full service leasing companies and expense management platforms; partnering with corporate and hybrid card schemes; examining synergies with mobile phone service providers and app developers, we could and should see a re-engineered market developing. A lower-cost to serve market, with partnered solutions, strategic alliances and JV’s coming together to share costs, integrate data, and drive up customer value.
Well, we can hope – eh?
If you would like CFS to work with you in planning and executing a strategy to maximise your business opportunities in the “new normal”, then get in touch with us by email to mst@cfs-europe.cc or visit our website at www.cfs-europe.cc
Look out for our next mini-series of Insight Features, where we’ll be looking at the new technologies which will transform commercial fuel markets in Europe…..
