Situational Analysis

‘Fill and Go’ is an easier way of paying for petrol. The ‘Fill and Go’ card allows you to fill up your tank and pay with your card at a machine right next to your car. ‘Fill and Go’ is a private incorporated company, with the 3 shareholders being Macsen Adare, Leo Armati and Matt-Nichols Hunt. As the business is a private incorporated company, it provides the share holders with a separate legal entity, ensuring the shareholders safety if the business fails. However, one disadvantage of a private company is that it may be harder to obtain loans from banks compared to public companies, unless the shareholders are prepared to provide personal guarantees.

SWOT ANALYSIS

Strengths:

No real competitors
Innovative product
Large customer base
Low cost of production
Easy/quick to use
Online ordering reduces staffing needs
Upfront payment at time of ordering provides good cash flow
With no stores and only a warehouse to manufacture the cards, it provides rental savings.

Weaknesses:

Lack of experience amongst management
Limited promotional funds
Limited funds to start as well as shareholders in the business lack capital to expand.
Customer demand for the product is unproven
Cash flow will be tight in the early stages of the business
Lack of existing service for comparison for prices.

Opportunities:

Expand to other petrol stations
Create an app for easy ordering and tracking purchases
Expand into other services
Popular Industry
National and Global expansion
Due to increasing amount of supermarkets owning petrol stations, there’s an opportunity to expand into supermarkets.

Threats:

Difficult to diversify when the company hits the maturity stage
Lack of experience may lead to detrimental decisions
Other petrol stations may make their own cards
Petrol always changing price
Potential competitors.

Trends in consumer behaviour

Market Size and Growth

The annual revenue for Fill and Go will be derived from the demand of fuel in Australia. Ultimately, Fill and Go will be marketed just in Australia. The Australian fuel retailing annual revenue is around $37bn, with the total industry revenue averages a growth of around 2% per year. There are approximately 6600 petrol stations in Australia, which is a massive decrease from 2004 when there was around 8370 petrol stations.

Supermarkets now own 14% of petrol stations, a steady growth from 2001 when it was 9%, however, they sell over 40% of all road fuel, putting pressure on other petrol stations. With the increasing amount of supermarkets owning petrol stations, supermarkets have changed the way consumers shop and the way businesses operate. The ‘Fill and Go’ card is ideal for customers that don’t want to waste anytime, however this could be a threat to the petrol stations as they want customers to go inside and buy their products. This is explored through (figure 1), as service stations make 7% of their profit from non-fuel products. However, one way we could avoid this is buy expanding and allowing customers to either pay outside with our card, or go inside and scan after buying products in the convenience store.

The largest service stations in Australia are: Shell,7 Eleven, BP and Caltex. These four service stations control 75% of sites and 85% of fuel sales, whilst smaller fuel retail chains include Mobil and United.

In 2015, the average retail petrol prices ranged from 110 cents per litre to 134 cents per litre (as seen in figure 2) and consumption continued to trend upwards and the average Australian retail petrol price hit over $1 per litre.

(figure 1)

(figure 2)

Through research, the ‘Fill and Go’ team have identified multiple consumer trends that may impact or influence the business’s operations and sales. The first key trend identified is that price is a key motivator for fuel purchases. This means that consumers are highly sensitive to changes in the retail fuel price, and are more likely to travel further for better petrol prices.

This is further explored through the negative correlation between the price of fuel and the amount spent on non-fuel goods. For example, if the price of fuel increases, the purchase of non-fuel goods typically decreases. This is most likely due to the fact that customers are always looking for better prices and would travel further for a better price.

Due to this research, we anticipate making more money in areas with higher income where the customers are less sensitive to changes in fuel prices, in comparison to lower socio-economic areas, where they shop around for the best price.

Convenience stores within service stations are also developing a deeper understanding of consumers that cannot be serviced sufficiently by other retailers. In particular, the following types of customers have boosted revenues:

Time-poor, cash-quick consumers who are willing to pay a premium for quick dinner options and other household consumables

Trades people and early morning commuters who make purchases between the hours of 4:00am and 6:00am.

These trends come as a disadvantage to our business, as these type of customers would not feel the need to buy our product. This is because they need to go inside to get whatever they need, defeating the purpose of our tap and go card. At present, this is seen as a disadvantage to our business, however, in the long term, this could be seen as a potential way of expanding our business and increasing sales.

Market share

Due to Fill and Go being a new product, we anticipate rolling out the product into over 1800 Caltex service stations, over a 3 year period. However, in Australia, there is over 6600 service stations of which 1800 are owned by Caltex, giving us around a 30% market share. With this and other information, we can accurately pinpoint our sales over the next 3 years.

There are 6600 service stations in Australia, with around 13000000 daily drivers, therefore if we divide 13,000,000 by 6,600, we can fin that on average, there are 1969 cars that go to each service station each year. As Caltex owns 1800 of the 6600 service stations, we can multiply 1800 by 1969 cars to find that 3,878,333 cars go to a Caltex service station once each year. On average a person fills their car up once a week and spend $60 on fuel each time. To make a profit, ‘Fill and Go’ add 0.5% off the price of a refill. Therefore, 3,878,333 multiplied by 52 weeks, 60 dollars and a 0.005% commission gives us a total sales of $60501994.

However, in the first year, due to limited marketing funds, we anticipate the take up of our product to be slow but progressive. Therefore, in the first year we anticipate a 10% take up, the second year we predict a 40% take up and finally in the third year we anticipate a 100% take up.

Following these predicted take ups, the potential total sales over the next 3 years can be seen below.

Total Sales:

2015/16

$6,050,199

2106/17

$24,200,797

2017/18

$60,501,994

Competitor Analysis

Support for Situational Analysis

‘Fill and Go’ is a unique product and aims to be the first of its kind. Right now, ‘Fill and Go’ is associated with just Caltex, a well-known petrol station based in Australia. As a revolutionary product, ‘Fill and Go’ at present does not have any competitors, however, we believe that once ‘Fill and Go’ is released to the public, we will gain a number of competitors. Some of these potential competitors could be existing petrol stations creating their own system, or new companies creating an identical system to ‘Fill and Go’. The established strength of large potential competitors may create a problem, due to their well-recognised brand names, strong national advertising budgets and their large team of workers. Therefore, once released, ‘Fill and Go’ must convince the major petrol stations to subscribe to our product in order to maximise customer choice and revenue for the company.

BP service station is one of the world’s six “super major” oil and gas companies, whose performance in 2012 made it the world’s sixth largest oil and gas company, as well as being the company with the world’s fifth-largest revenue turnover. BP is a globally known brand, therefore, if BP were to invent a touch and go card, it would be easier for them to promote their card to their customer base. This is further explored with a strong advertising budget allowing them to easily advertise their potential product to their community. Also BP has more than 1300 service stations throughout Australia, including a website and a 24/7 mobile service making it easier for customers to buy the product.

Another major petrol station, 7-Eleven, is the largest petrol and convenience retailer in Australia and one of the largest private companies in Australia. 7-Eleven stores Pty Ltd. operates more than 600 stores in Australia and conducts more than 180 million transactions a year and generating sales of approx. $3.6 billion. 7-Eleven has a partnership with Mobil to sell Mobil branded fuels in all Australian fuel stores. Similar to BP and other major petrol stations, if 7-Eleven were to invent a card, it would be much easier for them, as they have a much larger budget and customer base.

Growth could be limited by the fact that some petrol stations may reject our idea, as it may be a threat to their convenience store sales. The reason the card may be a threat to their sales is because our ‘Fill and Go’ card allows customers to pay right next to their cards, stopping them from going inside and being tempted by their products. One way of avoiding this is to give customers a 10% discount to all products in the convenience stores. Another way might be to create a similar card allowing customers to tap and go within the stores.

Once ‘Fill and Go’ is released to the public, we believe that we will gain a number of competitors, whether it be existing companies or a new company. If a new company creates a similar product to ours, it would have to move quickly to associate themselves with petrol stations in order to be successful. This is because we believe that once our product is released to the public, other major petrol stations will want to sign with us.

Please note that we found our information from these following sites:

http://www.retail.org.au/Portals/0/Research/ARA%20Final%20Report_060810_2%20%281%29.pdf

http://www.industry.gov.au/industry/Office-of-the-Chief-Economist/Publications/Documents/aps/2015/Australian-Petroleum-Statistics-222-Jan-2015.pdf

http://microsites.caltex.com.au/annualreports/2014/index.html

http://www.caltex.com.au/HELPCENTRE/Pages/FindUs.aspx

http://www.caltex.com.au/InvestorCentre/Documents/AnnualReports/Caltex%202012%20Annual%20Report.pdf

http://www.gasbuddy.com/GB_Past_Polls.aspx?poll_id=161

http://www.ibisworld.com.au/industry/default.aspx?indid=438

http://www.aip.com.au/pricing/facts/Facts_About_the_Australian_Retail_Fuels_Market_and_Prices.htm

http://www.consumerlaw.gov.au/content/mcca_consultation/downloads/fuel_price/Australiasian_Convenience_and_Petroleum_Marketers_Association.pdf

https://www.accc.gov.au/system/files/Monitoring%20of%20the%20Australian%20petroleum%20industry.pdf