Petrol Retailing in Europe: The UK Market
Case Study

Petrol retailing current problems:
Petrol retailing is a constantly shifting business due to the environment affecting it. Various factors affect profit margins and the sources of income. Yet, petrol retailing needs to adjust its retail business to attain a competitive advantage and continue to thrive.
The retailers want customers to spend money in the shop as it can prove to be a valuable source of income due to the improvements in fuel efficiency and thus needing less fuel. On the other hand, oil companies want customers to quickly fuel up as it demonstrates proficiency. Therefore, this clash of interests can lead to a deteriorating relationship which harms profits and ultimately can close down the petrol station. Closing petrol stations mainly affects rural communities, as they are barely profitable. In addition, the loss of high streets reduced traffic flows and encouraged the uprising of shop sales, harming petrol stations.
The barriers of entry and costs in the business are elevated compared to other markets. Due to downstream refining, the companies have high levels of capital, making it less probable for organizations to leave because of the large investment. Furthermore, refineries have high fixed costs as of tougher environmental requirements and higher physical specification, forcing the closure of smaller oil companies. This trend amplified capital costs of supply chains, plant and retail sites which subsequently increased the number of sites owned by oil companies, alarming consumers about the shift of power.
The types of retailing structures adopted by the petrol stations is also an issue. The stations operated by the oil company have internal complications between employees, as they try to enforce their views even in the shop or fuel pumps, which deteriorates motivation and can lead to legal issues. They also encounter problems regarding national or local priority, which affects pricing and product sales.
Meanwhile tenants/licensee problems arise due to the conflict in deciding who selects offerings for the shop and petrol pump operations, as both parties believe their input is vital. Financially, the profit made by the shop is for the tenants, but as petrol sales decline, the company believes it needs greater return on the investment. As the company is taking the risks, they feel righteous to intervene and therefore various agreements are inserted in the contract. This conflict leads to legal battles that harms the overall image of the company.
Independently owned petrol stations are encouraged to maintain a specific design to gain the full value of the brand. Controversy is caused by the rebate requested, as the oil company wants a low rebate to improve profitability, while the petrol station prefers a higher rebate as it decrease costs.

Possible Solutions:
There is a variety of solutions, which petrol companies can adopt in order to increase their competitiveness and deal with the on-going challenges present in the marketplace.
Shop profits are rising due to less fuel consumption so it’s important for companies to catalyze on this aspect. Product offerings can be increased so that even if fuel is unneeded, customers will stop at the station and use other functions. Organizations such as Esso and BP encourage customers to stop by adhering to their evolving needs and implementing card-based saving schemes with high-standard shops. A card-based saving scheme which can be used on both petrol and shops will increase loyalty and encourage sales. On a larger scale, organizations that invest heavily in sites can open pharmacies, 24hr shops, or a garage for repairs. This will make the petrol station multi-functional, and if placed in strategic locations, can generate more revenue and spread risk across multiple platforms. Shell can implement this strategy to increase reputation and continue its expansion. On the other hand, structures will