These fuel retailers earn most of their profit (about 60%) from convenience stores and ancillary services, such as car washes and vehicle maintenance. Thus, they have a strong incentive to promote the retail store and other services to consumers. Oil companies, on the other hand, do not benefit from these additional services. They have little direct involvement with convenience store operations and don’t connect with their customers.
In this partnership, suppliers and franchisees aren’t collaborating effectively and therefore miss out on potential synergies and new revenue streams. Despite having the necessary scale and capabilities, oil companies lack the motivation to generate and provide consumer insights and other business operations support to retailers. And without this additional support, franchisees face greater hurdles in developing targeted services and promotions and better pricing models.
Perhaps in a steady market, these missed opportunities could be overlooked or brushed aside. But today, the economic landscape across the oil and gas sector is far from stable. The pandemic and subsequent drop in oil prices have made it more necessary than ever for oil companies to generate alternate revenue streams.
The consequences of the energy transition pose an even greater threat. By some estimates (LMC Automotive and Bloomberg), electric vehicles (EVs) will make up half of global vehicle sales within 10 years. In tandem with this paradigm shift, regulators, policymakers and investors are pushing a decarbonization agenda.
Perhaps most crucially, the rising demographic tide of Generation Z (Gen Z) will set the pace for change in all industries. A majority (61%) of Gen Z feels “very or extremely” worried about the future, citing global worries such as climate change.