Not any more.
With volumes and profitability collapsing around their ankles, fuel retailers and fuel card issuers face one certainty: that the old certainties have disappeared. As they rush to reconfigure the old business models that should have been reconfigured a decade ago, digitisation isn’t a buzzword any longer. It’s a “sine qua non”.
The strategy isn’t new – but the urgency is ….
So, if digital transformation strategies were the cherry on a more traditional marketing cake pre-Covid, then they have now become the urgent escape route. Costs to serve must be lowered – can technology help? Processing and back office costs have to come down – what can we do with systems? Sales channels need to be restructured – can we use technology? Transaction processing needs to be less resource intensive and nimbler – what can we do? How can we build agile new digital propositions with a platform that came off the Ark?
None of these are new concerns. Far from it – they’ve been important considerations for fuel businesses for many years. But in the old world where volumes were broadly stable, customers mostly loyal and competitors almost as sleepy as you, it didn’t really matter so much.
All of a sudden, though, there’s no time to lose. Pre-Covid operating models simply won’t support a leaner business – and those hoping that business will recover organically will be disappointed (and, probably, looking for a job). There is, now, real urgency behind the launch of radical new digital strategies and they are likely to be launched in ways which look nothing like the protectionist models of the past.
So given the time pressure, what do you do?
Buy, build, or marry?
It seems improbable to us that major oilco retailer-issuers will continue their build-in-house strategies – for three reasons. One – it’s expensive and resource intensive. Two – it’s slow, when time is very much of the essence. And three – they simply aren’t very good at it.
With oil majors channelling capital investment towards electrification and other alternative energies, it’s also hard to imagine them acquiring tech businesses – whatever the synergy. Independents with aggressive private equity co-owners (think Radius/Inflexion, Eurowag/TAA, DKV/CVC and more recently MSTS/Corsair) may well think differently – and you can expect this to be the arena where the market sees aggressive acquisition of digital solutions.
This opens up an interesting playbook: strategic alliance has never been a particularly big play in fuel retailing and payments, but it’s easy to see how low cost and high speed to market, plus a relatively low risk may well see majors building platform, product development and sales channel partnerships.
Why not let innovators innovate?
Key to this is a shift in mindset – and one which is long overdue. When revenue is stable, an “end to end” approach can work: we develop the products, own and run the platform, sell to and serve the customer directly, manage the back office, and build the data-driven services around the core product. We can even afford for some of those links in the value chain to be sub-optimal.
Not now, you can’t.
It’s highly likely that product, platform, process, channel, customer and data ownership is a thing of the past. Expect to see models developing where major players outsource one, several or all of those elements to partner organisations.
Twelve months ago, it may have been unthinkable. But this is the New Normal.
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 Insight Feature, where we’ll be looking at how data will more and more shape the “new normal”…..
