The 7 Elements

for Fuel and

Convenience
Retail Success
What they are and how to apply them.
Executive summary
Fuel markets change. This change can be fast or slow, and for a number of reasons, but inevitably
competition increases. Pricing becomes more volatile, margins decrease, and volume becomes
harder to retain.
Every retailer is challenged to navigate increasingly complex market dynamics and consumer
behavior. Some retailers are happy to survive, while others thrive.
In this white paper, Kalibrate explores what makes a successful retailer, highlights areas for focus to
improve performance, and explains how to quantify the potential value of that improvement using
the 7 Elements for Fuel and Convenience Retail Success. behavior.

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Fuel retail and the rise
of convenience
Fuel retail has become more complex. Over the past 20 years, markets have become more volatile,
competition more fierce, and customers more educated. Technology has changed the way we do
business. It has also changed the way we expect to interact with companies. As consumers, we
want to make the most of our time and money. We demand more value.
Successful retailers have sharpened their understanding of what customers want beyond fuel.
They recognize consumers’ changing priorities and increasing sophistication. They meet a broader
set of consumer needs.
The winners will be the retailers who can bring consumers to their site — not two or three times a
week, but two or three times a day — becoming part of their everyday routine.
The future of fuel retail points to convenience retail — diversifying to answer a broader range
of consumer needs. But how can a fuel retailer make that transition in the most strategic and
intelligent manner?

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Considering the comprehensive
customer experience
In an era of convenience, no single factor can sustain growth, profitability,
or performance.
After analyzing detailed site characteristics and performance statistics for over two million outlets
in more than 70 countries, we have identified 7 Elements for Fuel and Convenience Retail Success.
Together, they encompass the end-to-end consumer experience and value-chain for sustained
fuel retail performance.

“Many retailers in the past have relied on relentless development of

only a single, volume-generating factor. Typically, that single factor
was price. But data and experience have proven that focusing only
here is the incorrect strategy. Concentrating on total site visibility
helps you chart a path to total site profitability.”
Anila Siraj
Chief Product Officer

Retailers need to fully understand the impact of Location, Market, Brand, Facility, Merchandising,
Price, and Operations within individual sites and across entire networks. The 7 Elements
Framework enables retailers to drive volume, and maximize profitability.

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Moving beyond return
on investment
Return on investment (ROI) is only part of the picture in the new era of convenience fuel retailing.
Focusing on the 7 Elements goes beyond ROI. It drives value on investment. When fuel retailers
understand the overall customer experience, including elements like customer service or brand
recognition, the sum of the 7 Elements becomes greater than its parts.
When all elements are optimized, customers experience quality and reward retailers with loyalty.
The stronger a fuel retailer is across the 7 Elements, the higher sales will be. As a filter for decision
making, the 7 Elements support both strategic and operational decision making.

No element in isolation
No element alone can predict sales performance with any reliability. The consumer
experience is multifaceted, so no single factor drives a consumer’s purchase decision.

Retailers can be held back by their weakest element. The fuel retail experience is
a sum of components.

There is no single formula for influencing consumer behavior. Optimizing the 7

Elements depends on a market-by-market, product-by-product, and consumer-by-
consumer analysis.

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The 7 Elements for Fuel and
Convenience Retail Success
The 7 Elements for Fuel and Convenience Retail Success are:

Location Market Brand Facility Merchandising Price Operations

Best-practice fuel retailers maximize performance by considering the role of each element in the
daily tactics and strategic horizon of their sites. Optimizing the 7 Elements depends on
a fuel retailer’s specific business, but only an integrated focus ensures that every area of
value is leveraged.

Six of the 7 Elements act as “volume magnets” to bring customers to site.

Location | Market ∣| Brand ∣| Facility ∣| Merchandising ∣| Operations

The remaining element, Price, provides the ability to make a decision. When you perform well
in the volume magnet areas, you earn the right to make a decision on pricing. The 7 Elements
framework informs all Kalibrate strategies and solutions. The practical application of this
perspective is underpinned by extensive market data and sophisticated analytical models.

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 Location
Selection of fuel retail locations is a complex process with many variables to consider.

Site location must be understood relative to consumers and their habits — where
they live, work, go to school, run errands, and play. Concepts such as critical
mass, demand, natural barriers, and competitive environment are just a few of the
characteristics that distinguish marginal from exceptional site selections. Fuel retailers
adding new locations must also consider the impact on their existing network and
current competitors. For example, a location that’s great for one fuel retailer may be
poor for another, because its cannibalization profile could be dramatically different.

Market
Every fuel retail site exists in the context of a broader competitive landscape.

Successful fuel retailers understand their competitors and have insight into how they
might react to marketplace changes. They also know where their competitors are
building, what they are building, how they operate, and how they price. Although
hypermarkets have proven fierce competition to many, those who manage all 7
Elements are thriving even when competing with them.

Brand
Whether local hero or multinational giant, a company’s ethos, quality, and consistency are
reflected in its brand.

Retailers should understand the position of their brand relative to critical mass and
saturation. Before a fuel retailer reaches critical mass, the network is vulnerable to
competitive threats and acquisitions. Once critical mass is achieved, new sites added
to the network will experience greater gains in market share than in outlet share.
In other words, as new sites are added to the network, volume share increases at
a greater rate than outlet share. On the other hand, once a brand moves beyond
saturation, it risks cannibalizing other sites in its own network.

Facility
A facility must fulfill the needs and demands of customers. That goes well beyond
considerations about the physical building.

Efficient flow through the purchase and shopping experience is crucial. For example,
how easy is it to maneuver into the lot and around the property? Are there enough
fueling positions to meet customer needs at peak times? Is parking space sufficient
for the convenience store customer? What is the optimal number of cooler doors?
Network consistency is also a factor, as it promotes familiarity with customers who
like to know where to quickly pick up the products they need. Consistency is an often-
overlooked challenge for fuel retailers with multiple channels of distribution.

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 Merchandising
Offering the right products and services, at the right time, at the right price, and with the
right attitude, is the art and science of merchandising.

Success depends on the correct product and price mix, adequate inventory,
fresh merchandise, and a clean, neat appearance. Retailers with best-in-class
merchandising practices emphasize category killers. These low-priced, low-margin,
popular items draw customers into the store, and the right merchandising strategy
leads the consumer to make impulse, high-margin purchases.

Price
Thrift-conscious behavior has always existed, and now it’s become standard for a small set
of price-conscious customers to aggressively scout out the lowest priced sites.

As consumers, we all want to be sure that we’re getting good value for our hard-
earned dollar. But that doesn’t translate into low pricing being the only tactic.
Corporate strategies dictating pricing posture can be set to drive volume, profits, or a
combination of the two. No matter what the strategy, the price must be perceived as
competitive by customers.

Operations
Site-specific, personal, and intangible aspects of management and customer service should
complement the investment at any given site.

Finally, it’s important to note that even the best facility and location in the world
will have difficulty maintaining volume with inadequate operations. Customers
expect quick service, courteous employees, well-stocked shelves, well-functioning
equipment, and fresh food offerings. The impact of employees can’t be overestimated.
Well-trained, quality people who are retained over time will contribute positively to the
bottom line.

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The 7 Elements
methodology and scoring
Kalibrate uses a combination of proprietary modeling, extensive global market and site
data sets, and a profound understanding of fuel retailing to generate 7 Element (7E)
scores for each retailer in a market. That market can be a single city, a whole country,
or across continents. These 7E scores provide a standardized benchmark that allows
comparison to competitors in the marketplace.

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The 7 Elements in action
The chart in Figure 1 highlights the 7E Facility scores for a retailer with presence in multiple
markets across the USA. This chart highlights how this retailer has invested in building or
acquiring sites with better than average facilities in Seattle-Tacoma, while in Maryland they are
facing strong competition with better facilities.

Figure 1

However, further analysis — as seen in the Market Efficiency chart in Figure 2 — suggests
that despite having better than average facilities in Seattle-Tacoma, the other 7E scores for
this same retailer are contributing to a below average volume performance. A deep dive
into their other 7E scores will unveil areas of volume improvement opportunity and identify
their biggest threats in the market

Figure 2

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Taking this investigation even further, using Kalibrate’s Performance Potential Quadrant, the
retailer can focus their volume improvement initiative on sites with significant volume potential (7E
Location Volume) and below average actual volume. These sites are those seen in the bottom-
right quadrant in Figure 3. Not only can site volume potential be more accurately identified
and measured, but focus areas become more evident, providing real insight into the necessary
strategic and tactical changes required to achieve success.

Figure 3

Kalibrate’s global experience and detailed understanding of specific markets allow Kalibrate to
make specific recommendations that improve a client’s 7E scores, and quantify the financial benefit
associated with that improvement.

This definition and quantification of a roadmap allows the client and Kalibrate to continuously
improve performance – year on year – as the factors that drive success change over time.

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Market maturity and its 7
Element impact
Retailers should consider their subject market’s maturity in conjunction with the 7 Elements, to
properly plan their network strategy. As markets mature, elements for fuel and convenience retail
success vary in importance.
In a regulated market the government controls price, so the other six elements — especially
merchandising, facility, and brand — become important as the areas where retailers deliver added
value. Consumers don’t consider price, so retailers don’t have to either.
In a newly deregulated market, price suddenly becomes critical. It remains important through the
competitive market stage and into the volatile market stage, where prices might be changing
three or four times a day.

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Network maturity and
the 7 Elements
New to industry: forecast volume based on the 7 Elements and predict how much can be
achieved from a specific location. It’s also possible to run simulations that examine the impact any
changes would have. For example, if a retailer improved facilities at a location, how would that
impact volume?

Network optimization: undertaking Performance Potential Quadrant (PPQ) analysis lets a

retailer examine every owned site within a network. Once the retailer understands which sites are
performing well, or badly, against their potential performance, they can analyze them against the 7
Elements, to understand which element is driving poor performance.

Mergers and acquisitions: using PPQ analysis in acquisition strategy can help retailers avoid very
costly mistakes, gain great network additions at lower cost, and accurately predict what to expect
when making changes to the way the current vendor operates. By examining sites against the 7
Elements, retailers can gain a deep understanding of the potential of their investment.

Network rationalization: before divesting a site, retailers must understand its potential — or
dirt strength. This requires assessment of location and market, distinct from any of the other 7
Elements, to understand what a retailer can reasonably expect to achieve from that location.

Unexpected change: a new competitor, especially a strong one, changes the dynamics
completely within a market, so incumbent retailers will need to reassess their offering across all
7 Elements to make sure each site is working as hard as it can. This reassessment of their own
offering should be carried out with an eye on competitor strengths and weaknesses too. For
example, if the competition is weak in facilities, concentrate efforts there.

Read Understanding the total picture in fuel and network planning: a guide to market
landscape and site performance for more detail on how market landscape and network maturity
should impact network planning.

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“Fuel and convenience retail is
an evolving and increasingly
complex business.

The challenge today is maintaining

growth and profitability in the
face of declining fuel demand
and increased competition.”

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Conclusion
Successful retailers seek to understand and optimize a broader range of
factors in the customer experience. Kalibrate has identified 7 Elements
for Fuel and Convenience Retail Success, a perspective that informs our
strategy and technology solutions.
By leveraging Kalibrate’s global data, proprietary modeling techniques,
and extensive experience, savvy retailers are maximizing their return from
each retail location and increasing their overall success. These retailers
are not only being benchmarked, but they are working with Kalibrate
to define a specific roadmap to improve their business, measuring the
improvement, and refocusing effort on the new business challenges that
evolve over time.

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About Kalibrate
Kalibrate’s decision-making software empowers fuel and convenience retailers across
the globe with the market intelligence, micro-local data, and precision pricing and
planning tools they need to gain real competitive advantage. For over 25 years, Kalibrate
has been the chosen decision-making partner of 300+ fuel and convenience retailers in
over 70 countries. The firm is headquartered in Manchester UK, with local offices in the
USA, Canada, India, China, Australia, and Japan.

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Copyright © 2020 Kalibrate Technologies Ltd. All rights reserved. No part of this
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