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FACTOR BEHIND THE SUCCESS OF PETRO RETAIL

OUTLET IN INDIA

Dissertation Project Report


Submitted in partial fulfillment of the requirements for the Award of the degree of INTG. BBA+MBA (OIL AND GAS)

By ANUJ ANGIRISH

Under the guidance of


Dr. Atul Razdan

COMES, UPES

University of Petroleum and Energy Studies, Dehradun 2012


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UNIVERSITY OF PETROLEUM &ENERGY STUDIES

DISSERTATION REPORT ON FACTOR BEHIND THE SUCCESS OF PETRO RETAIL OUTLET IN INDIA UNDER THE GUIDANCE OF Dr. Atul Razdan
College of Management and Economic Studies

SUBMITTED BY: Anuj Angirish R430209008 INTEGRATED BBA +MBA (O&G) Semester VI

ACKNOWLEDGEMENT
First and foremost, I would like to express gratitude to my Institution, University of Petroleum & Energy Studies for providing me a magnificent opportunity in the form of this dissertation to work and learn. I would like to express gratitude to Dr. Atul Razdan for sharing the journey of conceptualizing and developing all the ideas. He stood in times of difficulty and despite of his busy schedule devoted a major chunk of his time towards this project. He has been a part of all the activities and duly guided the project to its destination. I am indebted for his endeavour in making this project a success. He has truly fulfilled his role as a guide. I would also like to acknowledge the help and support extended by all my friends whose names could not be mentioned here. They all have been very co-operative and provided impetus to this project. Without their help this project would not have reached its destination. I express my gratitude for their suggestions and help they extended to this project. I will not miss the opportunity of expressing thankfulness towards all my teachers and the faculty of University of Petroleum & Energy Studies for sharing their knowledge, which provided necessary ingredients to this project.

Date: Signature Place:

INDEX

S.NO.

CHAPTER

PAGE Nos. 1-4 5-6 7 8-9 10-13 14-43 44-45 46-48 49

1. 2. 3. 4. 5. 6. 7. 8. 9.

INTRODUCTION EXECUTIVE SUMMARY RESEARCH METHODOLOGY RESEARCH OBJECTIVE LITERATURE REVIEW FINDINGS QUESTIONNAIRE CONCLUSIONS REFERENCES

INTRODUTION

Indian Petroleum Sector


Over the years India Petroleum Industry has played an influential part in triggering the speedy expansion of the country's economy by contributing 15% in the total GDP. Further to this, petroleum exports gave new dimension to foreign exchange earnings in India. Expansion of Indian petroleum retail market is triggered by the growth in automobile sales that resulted in major foreign investments. The growth is estimated to sustain and the market is likely to expand further by 20 million every year till 2030, placing India at the world map in terms of being the biggest automobile market.

The business environment in India has undergone a significant change in the past few years, and nowhere is it as pronounced as in the petroleum sector. Increase in refining capacity has transformed India from a net importer to a net exporter of petroleum products. Petroleum marketing has been decontrolled leading to entry of new domestic and international players into the market. Government have provided operational freedom to the government oil companies in a host of areas including determining their own market share, freedom to prepare and implement their market plans , selection of dealers etc. We are also moving towards a market determined pricing regime in letter and spirit. This liberalized scenario is making the sector intensely competitive, and the oil companies, especially those in the public sector would need to adopt a more customer focused approach to the retail end of their business.

Factors leading to success of petrol retail outlets To gain a sustainable advantage, a retailer needs to understand and satisfy both the apparent and the latent needs of the customer. This principle holds true in petroleum retailing too. All our efforts in exploration and production, refining, distribution and marketing and finally culminate at retail point after moving through a long complicated supply chain. Some of the major factors over which success of a petro retail outlet: a) b) c) d) e) f) g) Quality (no fuel adulteration) Value added services Generating higher volumes Reaching the subserviced areas Prompt services Convenience to reach the store Good ambience etc

EXECUTIVE SUMMARY

The Indian retail industry can be segmented in different segments viz. cosmetics, footwear, sanitary products, entertainment etc. The downstream petroleum retailing is one of the largest segments of the Indian retail industry and the petro-retail sector is one of the most organized sectors of the retail industry India had deregulated the petroleum retail sector in 2002 by dismantling APM and enabling new players to enter the market. The entry of private players like Reliance, Essar, Shell, NRL, and many more have increased the competition by means of the quality of fuel and the non fuel offerings at their retail outlets With a market determined pricing mechanism in place, prices will be lowered, which would reduce the margins from fuel products. In such circumstances, the petroleum retailers will need to have differentiated value propositions to improve revenues. It will require customer centric approach and building of a strong brand equity and identity. Non-fuel products tender higher margins as compared to petroleum products and enable companies to sustain themselves, especially during times when oil prices are high. However, it is to be kept in mind that petroleum retailing is a retailing of petroleum product and service, with differentiation possible in either or both areas Now, it is not all about offering fuel only at the petrol stations. The new look petrol pumps, apart from dispensing fuels; now offer the best of retail chains providing a value added service to busy consumers. This trend is in circulation in the international markets and the big petrol station convenience stores earn more than 30 to 40 per cent of their profits from the non-fuel activities. The range of value added services is all beneath one roof. The new-look petrol pumps are now the more advanced multi-purpose dispenser petrol-pumps. The petrol pumps are computerized, thus reducing waiting time which not only ensures accuracy, but also saves a lot of time for customers and avoids misconception and arguments. The study gives a comprehensive overview of petroleum industry in India, the way it has evolved through shackles of time and its current status with respect to companies, regulations and customers. The study tracks the origin and the journey of industry till date. It has also focused on the kind of services expected by consumers, which are being provided on retail outlets and which can be provided on outlets. These services will cumulatively increase the revenue realization as well as optimal utilization of land available on an outlet. There are various talks of the emerging retail boom in India, "with one modern store for every 400,000 population" at present. Among the factors that are driving this boom are convenience of shopping, store accessibility, quality of products, loyalty programs and product assortment. From a broader economic perspective, the diffusion of supermarkets can be conceptualized as a system
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of demand by consumers for supermarket services, and their supply in developing countries. Gas retail sector is not far away. The Indian Petroleum retailing industry is today poised to make giant strides both in terms of new forecourt retailing opportunities and superior customer offerings at the retail outlet. With the emergence of organized retailing in the country and a growing demand from consumers for a superior shopping experience, Convenience Retailing has emerged as a key business area for petroleum companies given their wide retail presence, existing customer base and strategically located sites. Convenience need gaps have been felt in various fields and research has shown that the urban consumer today seeks convenience in shopping for their basic requirements so that their precious time is reserved for more fruitful pursuits. Petrol retail outlets provide the right framework for setting up convenience retail chains where the consumer has the opportunity of combining shopping with the fuelling occasion. Petrol stations are widely recognized to be one of the highest traffic aggregators and retail majors like hypermarkets such as Sainsbury, Tesco and Carrefour have added motor fuels in their basket of services for the convenience of their customers. Hence alongwith strategic locations, the availability of footfall in the petrol retail outlets give petroleum retail companies the competitive advantage. Worldwide, petrol station convenience stores have developed into a serious business in itself with companies like Shell, Caltex, BP running their convenience store chains very profitably. All of them have deployed best retail practices in their stores and offer a wide range of services including laundry, postal services, courier services, fast food etc.

RESEARCH OBJECTIVE

1. 2. 3. 4. 5. 6. 7. 8. 9.

To highlight and analyse various factors responsible for the success of petro retail outlets. To find the factors that drive in customers into the retail outlet. To know whether the customer is expecting anything more from the services in outlets. To find respondents reason for refueling in the particular retail outlet. To know the importance loyalty program and additional services effect on customer. To know the customer service satisfaction from the respondents. To know the respondents opinion on the performance of their outlets. To help the petroleum companies in knowing what are the factors which factors would help driving more customers to their petrol pumps. To analyze what are the factors which may help in marketing a petrol pump better.

RESEARCH METHODOLOGY

The type of research done to present this project is mainly descriptive type of research. Major purpose of description research is the description of state of affairs as they exist at present. The data used in this research is both PRIMARY DATA which include direct interview of owner and customers. A part from this my study also contains few traces of SECONDARY DATA (also known as desk research) involves the summary, collation and/or synthesis of existing research Secondary research can come from either internal or external source.

3.1 Research Design

The formidable problem that follows the task of defining the research problem is the preparation of the design of the research project, popularly known as "research design". The methodology that will be undertaken to study the present study and to fulfil the above stated aims and objective would be:Descriptive research studies are those studies that are used to describe the characteristics of a particular individual or group. 3.2 Data Source Primary source: Questionnaire and interviews. A questionnaire will be created which will be subjected to 30 people to know whether the questionnaire is suitable. Secondary source: Magazine, Newspaper and Internet websites.

3.3 Sampling Plan:A mixture of contact and convenience type of sampling will be used in this kind of research. The survey is to be conducted at retail outlets in NOIDA. The city has been chosen as per convenience and to get a better picture about the different strategies used for petro retailing outlet.

A sample size of 250 (50 people per station) at 5 stations were interviewed by preparing a
questionnaire.

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LITERATURE REVIEW

Price uniformity and competition in retail gasoline market Andrew Eckert1, Douglas S. West Theories of price uniformity in a market The competitive market model A competitive market model of retail gasoline pricing has been adopted in a variety of Canadian industry and government studies. This adoption is based on the belief that retail gasoline markets in Canada satisfy the following assumptions: (1) Consumers are mobile and can, at low or zero cost, check gasoline prices charged at different stations in the same geographic market, (2) Gasoline stations post their prices so that rival stations can check each others prices at low or zero cost, (3) Individual gasoline stations set their own prices, and (4) Gasoline stations act as though they are undifferentiated firms competing in a spaceless world. Because these assumptions eliminate all spatial product differentiation and costly consumer search, it has been predicted that retail gasoline prices (for the same type of gasoline) will be the same everywhere in the market, irrespective of location, proximity to competitors, or the characteristics of the retailers. In addition, it has been predicted that the retail price of gasoline established in a market is a competitively determined price. The empirical analysis carried out in this paper focuses on the first prediction of the competitive market model. The competitive market model as stated may appear to be easy to reject: if all prices in the market are not the same, then the model is rejected. However, rejection of the model on this basis would not be sufficient to persuade its proponents that alternative models better explain retail gasoline station pricing. What is required is the specification of an econometric model that contains variables that the competitive model suggests should not affect the probability that a station charges the market price.. In the absence of a clear rejection of the competitive market model as the explanation for retail gasoline pricing, antitrust policy decisions will
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continue to be guided by the belief that retail gasoline markets are competitive, and anticompetitive conduct in these markets cannot succeed.

Brands

Brands are controlled for by using two dummy variables: Major it equals one if the station sells a major brand of gasoline (i.e. Esso, Shell, Petro-Canada, Chevron, Husky-Mohawk) and equals zero otherwise. Arc Temp it equals one if a station sells ARCO or Tempo brand gasoline and equals zero otherwise. Majors have a greater incentive to set the tacitly collusive price, so one would expect their stations to have a higher probability of matching the mode price than either other brands or ARCOTempo. Conditional on characteristics, INC would not predict brand specific differences in the probability of matching.

Contracts

Whether or not a station sets the mode price could depend on whether it is the station dealer who sets the stations price or the supplier, which will depend on contractual arrangements. At company operated stations and stations with commissioned dealers, the supplier owns the station and sets the price. At lessee operated stations and branded independents, the station operator or dealer sets the price. While we were unable to obtain the contract type used by each major brand station, sufficient information was available to construct a proxy; the variable contract it equals one if the station is a major brand station that is predicted to have pricing power at the supplier level and zero otherwise. While the competitive model would suggest that contract type does not affect the probability of setting the mode price, both tacit collusion and INC models would predict positive coefficients on contract .

Distances

The competitive model predicts that the distance of a station from its competitor should not affect whether the station matches the mode price. First, in the competitive model, commuting makes consumers aware of prices at many stations. Second, either the transportation costs faced by consumers in buying gasoline are zero or they do not vary by station choice station that has nominal price control may in fact have little real control over its price. If lessees and branded independents know that the supplier has a preference for uniform brand pricing, then a stations persistent
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deviation from the suppliers price could result in loss of a facility lease or of the suppliers brand banner. It could also result in a loss of price support from the supplier. The British Columbia Inquiry into Gasoline Pricing (1996), found that major companies will protect retailing margins at branded stations by lowering wholesale prices to match decreases in retail prices during price wars, but only if the retailer did not start the price war. since a commuter passes many stations along her commute. Under the tacit collusion hypothesis, distances may have an effect on the probability of matching. A greater distance of a station from one that is not setting the tacitly collusive price should have a positive impact on the probability of matching since the closer a station is to a firm that is undercutting, the more likely the station will need to match the undercut to maintain market share. On the other hand, the closer a tacitly colluding firms station is to a tacitly colluding station owned by a different firm, the greater the likelihood of setting the market mode price in order to prevent the breakdown of tacitly collusive pricing. An INC model would predict that the greater the distance a station is located from its competitors, the greater the likelihood of charging a higher price. In this context, a higher price would be the mode price or a price above. The effects of distance will be controlled through the variables maj dist it ,Arc Tempdist it , and odist it . Distances are measured in kilometers with maj dist it measuring the distance of a station from the nearest major brand station of a different brand. Similarly, Arc Tempdist it measures the distance to the nearest competing ARCO or Tempo station, and odist it measures the distance to the nearest other brand station. The coefficients on these distance variables are allowed to differ according to whether the station from which distance is being measured is either a major brand, ARCO/Tempo, or other brand, for a total of nine distance coefficients.

Traffic flows

The competitive model would predict that stations that are not on roads that are a part of the commuter network would charge the same prices as stations on the major roads. If firms are behaving in a tacitly collusive fashion, whether or not the station is on a major road may determine the likelihood that the station matches the mode price. For tacit collusion to be sustainable, mode pricing is most important at stations whose prices are easily observed and for whom undercutting would attract the largest market share from rival firms. An INC model would also predict whether a station being on a major road should affect the probability that the station matches the mode price; stations on major roads would be less likely to match because station locations on major roads should result in more intensive competition between stations. To control for this effect, the variable roadit is defined to equal one if the station is located on a major road and zero otherwise. A station is classified as being on a major road if the Vancouver Street Atlas, published by MapArt, indicates that the road is either a major artery or a highway. As with the distance variables, separate road variables are defined for whether the station is a major brand, ARCO or Tempo, or other brand.

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Degree of local market concentration and competition

The competitive market model predicts that neither the number of nearby competing stations nor the extent to which local competition is dominated by the majors will have any impact on the probability of matching. Under the tacit collusion hypothesis, one would expect the tacitly collusive price to be set more frequently in areas dominated by the majors and where there is a smaller number of local competitors. To determine whether the intensity of local competition or dominance by the majors matters, the variable stations it is defined to measure the number of other stations within a 2 km radius of station i. This variable could have either a positive or negative coefficient under the tacit collusion hypothesis depending on whether localized competition is dominated by major brand stations or not. An INC model would suggest a negative sign for this coefficient. The variable maj share it is defined to measure the fraction of stations in station is municipality that bears the brand name of one of the five major brands.12 An INC model yields the same positive sign prediction as the tacit collusion model for the coefficient of this variable.

Income

The competitive market model would predict that a demographic characteristic such as income will have no impact on a stores probability of matching the mode price. If, however, firms are engaged in tacit collusion or INC, the level of income of consumers located close to a particular station could have an impact on the price set by the station. Higher income households may face higher search costs or may have a higher willingness to pay. Therefore, one might expect that the mode price is more frequently set in neighborhoods with high incomes. To control for income, the average household income of the census tract in which each station is located is obtained from 1996 census data. In cases in which a station is located on the border of two census tracts, the average of the two census tract incomes is used. The variable inc dum it equals one if the station is in a tract with income higher than the average across all tracts in the sample and zero otherwise. This variable allows for a potential threshold effect as opposed to simply including income

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Changing the rules of fuel retailing


The article by Archana Chaudhary provides the factors that affect fuel retailing in India. It says that this RIL-owned petrol pump has been around for more than seven months, but the Reliance sign still takes the Indian driver by surprise. Ditto with the attention-grabbing deep crimson Essar Oil signage quietly lining interior roads along the West coast. Do these ROs (retail outlets) make any difference to customers? Mr Ketan Vakharia, a Navi Mumbai businessman,who has been buying fuel at RIL's flagship RO, for the past six months believes that the brand is new to retail business and hence away from the adulteration networks. Reliance has a computerised system for fuel delivery - complete with GPS-fitted trucks. The trucks carrying fuel from the company's Jamnagar refinery to the retail outlet and the underground fuel tanks are sealed with special Finnish Abloy locks worth Rs 2,500 each, says a senior Reliance official. Tanks and fuel dispensing units are all connected to a mother computer, which keeps a tab on fuel volumes. There is an obvious emphasis on standardisation at all outlets (almost all Reliance ROs are company-owned-company-operated) with uniformed attendants wielding computer-linked handheld devices, operating imported Japanese pumps.

Issues in the deregulation of the oil and gas sector This research paper by R.K Narang addresses the factors affecting fuel retailing. It says that Under the APM, all entities are assured a minimum return on their investments. While the ONGC (Oil and Natural Gas Corporation Limited) and OIL (Oil India Limited) are allowed a return of 15% on employed capital, the downstream companies get 12% (post tax) on their net worth. Though there are incentives for exceeding the norms laid down by the OCC (Oil Coordination Committee), it is widely accepted that the system neither fosters innovation nor offers any significant incentive for efficiency. Some of the criticisms of the system are enumerated below. It puts a low premium on innovation and efficiency. It leads to non-optimal investment decisions that are not in conformity with market dynamics. Since the government controls product prices, political forces exert pressure on price levels. In the electricity sector, this has led to non-viability of most state electricity boards and in the oil sector, the result was an oil pool account deficit of 150 billion rupees. With an oil gross
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domestic product elasticity of more than unity, India has been one of the worlds fastest growing oil markets

FINDINGS
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CHAPTER -1

1. Background of Indian Petroleum Industry and current scenario of Indian retailing

1.1 INTRODUCTION
Primarily, the Indian oil sector has been a regulated sector dominated by Government undertakings. However, with the Government loosening its control, new private sector players are now gaining presence. Unlike the international oil majors; the Indian oil sector has companies operating in three distinct sub-segments: Oil & Gas Exploration and Production(E&P), Crude Refining, marketing of petroleum & petroleum products (R&M) and, their Distribution. The various players in each of these sub-sectors are listed in the figure below. ONGC is the leading player among the Indian exploration & production companies. Other players in the upstream sector include. 1.Oil India Ltd. 2. Gas Authority of India Ltd. 3. Indian Oil Corporation 4. Gujarat State Petroleum Corporation 5. Reliance Industries 6. Essar Oil 7. Videocon 8. Cairn Energy 9. Hindustan Oil Exploration Company 10. Niko Resources 11. Hardy Oil 12. Tata Petrodyne 13. Selan Exploration Technologies Ltd. 14. L&T, 15. Premier Oil 16.Geo Global Resources, and many more.

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1.2 Government Controlled Companies: OIL, ONGC, IOC, BPCL, HPCL and GAIL. CPCL, BRPL and IBP are now the subsidiaries of Indian Oil Corporation whereas,. KRL and NRL have become subsidiaries of Bharat Petroleum Corporation Ltd..

1.3 Joint Sector Companies: MRPL was the joint venture of Aditya Birla Group and Hindustan Petroleum. However, ONGC has bought the stake of the Aditya Birla Group making it a completely public sector company.

1.4 Private Sector Companies: Reliance Petroleum Ltd. (RPL), Gujarat Gas, Essar Oil Ltd., etc Retailing has been the most vigorous and eye-catching sector of last decade. Retailing industry has been present since ages in our country; it is only recently that it has witnessed so much vitality. The impetus to retailing in India has been due to the increased purchasing power of buyers (especially post-liberalization), increase in product variety and availability, and increase in economies of scale, with the aid of modern supply and distributions systems. The retail sales are at their peak and new technologies are enhancing retail productivity

CHAPTER 4 FACTORS LEADING TO SUCCESS OF A PETROL RETAIL OUTLET


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There are galaxies of factors that lead to the success of a retail outlet. There are different approaches followed by various retail outlets. Some follow the customer centric approach while others may follow the profit maximization approach. In case of a petrol retail outlet some of the major factors over which success of the retail outlet depends are: a) b) c) d) e) f) Quality Value added services Generating higher volumes Reaching the subserviced areas Convenience to reach the store(location factor) Availability of loyalty programmes

1. Quality
The customer, for whatever reasons, has little faith in the quality of product dispensed through petrol pumps. While his demands are high, his expectations remain low. Bereft of choice, he is satisfied as long as he gets an unadulterated product. Our oil companies interpret quality to mean no adulteration.

2. Value added services


Here, we will have a glimpse of some of the facilities which are expected by a customer and can be offered to them on an outlet: ATM (Automated Teller Machine or Any Time Money) An ATM is the most expected facility at an outlet. Almost every customer now has a debit/credit card and he/she expects an ATM at the outlet. Benefits from implementing an ATM:a) Customer will get an additional facility along will fuel and it will help to draw more customers. b) Increase in revenues due to the lease rent from the bank. Quick care point :A mechanic who can quickly give a service to the concern vehicle and also he can do the air check. In the quick care point, various lubricants and coolant can be displayed with the purpose of advertisements as well as enhancing customer awareness. The facility of tyre puncture should also be offered. This will further enhance the revenue of company. Windscreen cleaning facility

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A cleaning man can wipe the windscreen of four wheelers and front or body of the two-wheelers while customer is getting his/her vehicle fuelled. This will augment the customers perception of brand as well as organization. An extra attendant can serve for the role of cleaner. Free health check-up In the outlet some free health check up camps can be organized by the company doctor. This will illustrate the responsibility of the organization towards the society. Some of the camps which can be organized may include the Pulse-polio camp and AIDS awareness camps. INDE-PAY It is e- recharge machine which will provide a recharge of six different telecommunications companies along with the railway reservations The facilities offered by Inde - pay machine are as follows: Recharge Vouchers (mobile top-ups) Flight tickets Rail tickets Utility Bill-Pay Cinema tickets Budget Hotels Contests The benefits of Inde - pay machine to the end user are: Alternate revenue stream High ROI Major Value added services under one single terminal With the purchase of the terminal in addition to the value added services, PCO and POS the retailer gets the following IRCTC authorized e-ticketing agent certificate Airline ticketing (IATA sub-agent license) The end user will be able to accept payments in cash, credit card and cash card

3) generating higher sales volumes


A good petrol pump that aims to provide comfortable and convenient service to the customers requires as high an investment as Rs. 50 to 75 lakhs. Depending upon the location and the number and quality of services, the investment levels could go up to Rs. 1.5 crores. However, the per pump throughput has been declining and hovers around 160 180 KL/month. The profitability, may even the sustainability, of the retail business at such high investment and low volumes needs to be addressed. Paradoxically, even in such a scenario, the oil companies have launched a very ambitious, and at times reckless, programme of network expansion. Obviously the assessment of the market growth made by the oil companies indicates high potential in future. However, my view is that companies should target to generate higher volumes per retail outlet rather than concentrating only on increasing the numbers.

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4) reaching the subserviced areas


Rural agricultural market has a large untapped potential for diesel sales, and the oil companies should make efforts to develop these markets. It is not a correct position that social obligations of the PSUs adversely affect their commercial interests. If non essential consumer goods like soft drinks and cosmetics can penetrate the far flung rural markets, why cant the essential mass consumption petroleum products?

5) location factors
The location of the retail store plays a very important role in its success. It is an integral and crucial part of the retail strategy. It includes how easy or convenient it is for a customer to reach the retail outlet. A customer would generally prefer a petrol pump that is near to his residence or on his daily travelling route.

6) Availability of loyalty programs


Loyalty programs are structured marketing efforts that reward, and therefore encourage, loyal buying behavior -behavior which is potentially beneficial to the firm. In marketing generally and in retailing more specifically, a loyalty card, rewards card, points card, advantage card, or club card is a plastic or paper card, visually similar to a credit card or debit card that identifies the card holder as a member in a loyalty program. Petrol retail outlets offer a no. of loyalty programs to its customers. For example: The XTRAPOWER Fleet Card program by IOCL is a complete smart card-based fleet management solution for fleet operators and corporate for cashless purchase of fuel & lubricants from designated retail outlets (petrol pumps) of Indian Oil through flexible pre-paid and credit facilities. The fleet card also offers an exciting rewards programme and unique benefits like personal accident insurance cover and vehicle tracking facilities.

CHAPTER 4

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INDIA AS A NON FUEL RETAILING DESTINATION

1INTRODUCTION
Till a few years ago, petroleum retailing in India was a staid and dreary business. Cars, buses and two wheelers drove in, got the vehicles fuelled, paid cash, and drove out. The environment started changing when Shell did a makeover of some petrol pumps as part of the economic reform process. Improved signage, use of credit cards, and carwashes soon became an integral part of the petroleum retail outlets. Earlier petrol stations were merely used for selling fuel; now they are quickly getting converted into multi-facility joints. The idea, common enough in countries like Singapore and Malaysia is to buy fuel, and shop alongside. In last few years, opportunities in petro retailing have risen in two key areas: Sale of Value Added Fuels Branded Fuels Value added products and services Non Fuel products and services The Indian Petroleum retailing industry is today poised to make giant strides both in terms of new forecourt retailing opportunities and superior customer offerings at the retail outlet. With the onset of the post APM deregulated scenario, the spirit of competitiveness amongst the petroleum companies augurs well for the consumer with each of the companies adopting innovative ways to capture a larger part of the consumers mind share. With the emergence of organised retailing in the country and a growing demand from consumers for a superior shopping experience, Convenience Retailing has emerged as a key business area for petroleum companies given their wide retail presence, existing customer base and strategically located sites. Convenience need gaps have been felt in various fields and research has shown that the urban consumer today seeks convenience in shopping for their basic requirements so that their precious time is reserved for more fruitful pursuits. Petrol retail outlets provide the right framework for setting up convenience retail chains where the consumer has the opportunity of combining shopping with the fuelling occasion. Petrol stations are widely recognized to be one of the highest traffic aggregators and retail majors like hypermarkets such as Sainsbury, Tesco and Carrefour have added motor fuels in their basket of services for the convenience of their customers All of them have deployed best retail practices in their stores and offer a wide range of services including laundry, postal services, courier services, fast food etc. India as a Non Fuel Retailing Destination The Indian Petro retailing industry is now poised to make huge tread both in terms of new forecourt retailing opportunities and better offerings for the customer at the retail outlet. With the onset of the deregulated scenario, the character of competitiveness among the petroleum
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companies augur well for the consumer with each of the companies espousing innovative ways to capture larger part of the consumers mind.

The emergence of organized retailing and a growing demand from consumers for a superior shopping experience has made Convenience Retailing a key business area for petroleum companies due to their wider presence at strategically located sites and the existing mammoth customer base. Convenience need gaps have been felt in various fields and research shows that the urban consumer today seeks convenience in shopping for their basic requirements so that their precious time is reserved for more productive activities. Petrol retail outlets provide an excellent framework for setting up convenience retail chains. Here, the consumer enjoys dual occasion of, opportunity of combining shopping with the fuelling. Hence, along with the strategic locations, the number of footfall in the petrol retail outlets gives petroleum retail companies the competitive advantage. Worldwide, petrol station convenience stores have developed into a serious business in itself with companies like BP, Shell, Exxon running their convenience store chains profitably. All of them have deployed best retail practices in their stores and offer a wide range of services including laundry, postal services, courier services, fast food etc. Options for Non-Fuel Offerings To deliver the many conveniences and services, various oil marketing companies have associated with leading brands and companies like ICICI Bank, Coca Cola India, Fed Ex, Caf Coffee Day, Western Union Money Transfer, US Pizza, Barista, Dominos Pizza, Skypak, etc. The facilities on a particular outlet would depend upon the purchasing power of the people. The facilities like Caf Coffee Day, Barista, Dominos Pizza, US pizza, Crossword, Skypak, etc and other expensive outlets may not work everywhere. Apart from them there are many other facilities which can be offered to draw more and more customers, thereby increasing profitability and level of customer satisfaction.

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CHAPTER 5

COMPARISON OF 5 PETROL RETAIL OUTLETS

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R K Service Station Sector 41 DSC Road, Sector-41, Noida 01202575099 more..

Jain Packers and Movers Sector 12 Z-Block Market, Near 12-12 Red Light, Sector 12, Noida 01203104166 more..

A S Aircool Sector 22 Shop-1, Sector-22, Main Road, Noida 9711763486 more..

Bhardwaj Hospital Sector 29 Near Ganga Shopping Complex, Sector 29, Noida 01202450111 more..

Anjali Tours and Travels Pvt Ltd Sector 18

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307, P-3 Krishna Apra Plaza, Sector 18, Noida 01204332220 more..

During my visit I spoke to the owners of 5 petrol pumps in Noida and also interviewed a sample of 250 people (50 people per station) at each stations by preparing a questionnaire.

During this visit i drew a comparison between the two retail outlets and the customers visiting these outlets. There is a common trend that customers give more weightage to a few factors than others like: 1. 2. 3. 4. Convenience to reach the store Prompt services On daily travelling rout No adulteration in the fuel etc.

Based on this comparison I have prepared a set of pie charts that will explain the factors that lead to the success of a retail outlet which are given in the next chapter

CHAPTER 5 ANALYSIS THE FACTOR BEHIND THE SUCCESS OF RETAIL OUTLET

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DATA TABULATION

1: No. of consumers who prefer going to a particular petrol pump. Preferences No. of Respondents % of respondents

Yes No

145 105

58% 42%

1.No. of consumers who prefer going to a particular petrol pump.


2 42%

1 58%

During the survey, it was found that 58% people prefer going to a particular retail outlet due to several reasons like a particular retail outlet is near to their residence or they like the behavior of pump attendants or they have trust regarding Q&Q on a particular retail outlet, etc. Rest 42% prefers RO whichever is on their way.

2: Reasons for preferring particular petrol pump.

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Preferences Near to Residence Prompt Services Acceptance of fleet/ loyalty cards Good Ambience On daily travelling route No fuel adulteration Availability of Free Air Service No queing

No. of Respondents 24 30 16 50 40 60 20 10

2. Reasons for preferring a particular retail outlet


24 30 16 50 40 60 20 10

From the above graph we can see that maximum people prefer going to a particular retail outlet because they have trust that there is no fuel adulteration, rest go because they like the ambience there or they feel that services are good, etc.

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3: . Do you prefer any other services to be provided in the petrol station.

Preferences 1.Yes 2. No

No. of Respondents 147 113

% of Respondents 58.62% 41.38%

2 41.38%

1 58.62%

When customers were asked that are they guided as they enter the retail outlet, it was found that approx 59% of customers were guided rest 41% think they are not. Some people dont even notice that someone is guiding them in, they overlook the Marshal.

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4: Trust upon the Fuel Quality & Quantity purchased by you at Fuel Station

of your Choice

No. of Respondents Preferences Yes No Doesnt Matter Dont Notice 202 26 10 11

% of Respondents

81% 10.25% 4.37% 4.38%

Yes

No 4.37%

Doesnt Matter 4.38%

Dont Notice

10.25%

81%

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4.38% of customers are in hurry always so they never noticed the uniform of pump attendants. 4.37% of total customer doesnt mind whether pump attendants are in uniform or not, 10% of the customers say that pump attendants are sometimes in proper uniform sometimes not and the rest 81% of the customers say that yes, it does matter to them if the pump attendants are in uniform as their uniform separates them from the general crowd on retail outlets which helps them to understand with whom they have to talk.

5 Do you find any difference in the Quality of Fuel at different Fuel Stations? .

Preferences Yes No

No. of Respondents 214 35

% of Respondents 85.87% 14.13%

Yes

No

14.13%

85.87%

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14.13% of the customers are not satisfied with the attitude and services of the pump attendants and rest 86% of the customers are satisfied with the behavior and services of the pump attendants 6: Services that attract customers to a particular petrol pump. Preferences Air filling Wind Screen Cleaning ATM Pollution Check Drinking Water Toilets Departmental Store Free vehicle Check- up Puncture Repair No. of Respondents 40 41 38 45 43 26 6 8 2

Wheel Balancing and 1 Wheel Alignment

6: Services that attract customers to a particular retail outlet.


40 38 41 26 6 8 2 1 45 43

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QUESTIONNAIRE

Name: ___________________ Age: __________ Designation and company name: __________________ Date: __________

Q1. Do you prefer going to a particular petrol pump? 1. Yes 2. No 3. Sometimes Q2. What are your reasons for preferring a particular petrol pump? 1. Near to residence 2. Prompt services 33

3. 4. 5. 6. 7. 8.

Acceptance of fleet or loyalty cards Good ambience On daily travelling route No fuel adulteration Availability of Free Air Service No queuing

Q3. Do you prefer any other services to be provided in the petrol station? 1. Yes 2. No 3. Dont notice Q4. : Do you have trust upon the Fuel Quality & Quantity purchased by you at Fuel Station of

your Choice?
1. 2. 3. 4. Yes No Doesnt matter Dont notice

Q5. Do you find any difference in the Quality of Fuel at different Fuel Stations?
1. Yes 2. No Q6. What are the services that attract you to a particular petrol pump? 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Air filling Wind screen cleaning ATM Pollution check Drinking water Toilets Departmental store Free vehicle check up Puncture repair Wheel balancing and alignment

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CONCLUSION

Retailing is the most active and attractive sector of the last decade. While the retailing industry itself has been present through history in our country, it is only the recent past that has witnessed so much dynamism. It's the latest bandwagon that has witnessed hordes of players leaping onto it. While international retail store chains have caught the fancy of many travelers abroad, the action was missing from the Indian business scene, at least till recently. The emergence of retailing in India has more to do with the increasing purchasing power of buyers, specially postliberalization, increase in product variety, and the increasing economies of scale, with the aid of modern supply and distribution management solutions. A definition of retailing is essential in order to be in a position to assess the impact of retailing and its future potential. The current retailing revolution has been provided an impetus from multiple sources. These `revolutionaries' include many conventional stores upgrading themselves
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to modern retailing, companies in competitive environments entering the market directly to ensure exclusive visibility for their products and professional chain stores coming up to meet the need of the manufacturers who do not fall into either of the above categories. Attractiveness, accessibility and affordability seem to be the key offerings of the retailing chain. Retailing is a technology-intensive industry. Successful retailers today work closely with their vendors to predict consumer demand, shorten lead times, reduce inventory holding and thereby, save cost. Wal-Mart pioneered the concept of building a competitive advantage through distribution and information systems in the retailing industry. They introduced two innovative logistics techniques - cross-docking and electronic data interchange. Today, online systems link point-of-sales terminals to the main office where detailed analyses on sales by item, classification, stores or vendor are carried out online. Besides vendors, the focus of the retailing sector is to develop the link with the consumer. `Data Warehousing' is an established concept in the advanced nations. With the help of `database retailing', information on existing and potential customers is tracked. Besides knowing what was purchased and by whom, information on softer issues such as demographics and psychographics is captured. We are at a time when gaining a customers' trust is critical. It is a daily process, on purpose. It is a time to maximize potential, ethically and to deal with conflict and problems, with credibility. The petroleum retailers are also not left behind. Forecourt retailing is yet to emerge in a big way in India. But with renewed thrust from the oil companies, the concept is poised for the next stage of evolution. The concept of forecourt retailing at petrol stations is not new. It began in the 1980s when British Petroleum launched its first convenience store. In India, where consumer interface was recognized as a key factor, the concept was taken up in the late 1990s by Indian Oil Corporation, which started its multi-purpose distribution centers at petrol pumps in semi-urban and rural areas. The concept has been in vogue ever since. But recently it shot into limelight with oil companies trying to milk this revenue stream for more moolah. The oil marketing companies need to clearly identify customer needs and establish a strong corporate brand targeting select customer bases. The companies need to drive product and service offerings at retail outlets based on identified customer needs. They should develop costeffective retail outlets, upgrade existing assets for better throughput and customer service. They
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should orient their distribution pattern and logistics in tune with demand in target markets and develop superior franchisee selection and training systems along with appropriate risk-reward mechanisms to drive performance. In this respect, the oil companies have been coming up continuously with various initiatives to differentiate themselves from other competitors and attract customers. They have come up with various loyalty programs, cash card payment solutions, convenience stores, ancillary services, food outlets, various other value added service at the retail outlets to give the customers value for their money. Although the above matter to a large extent in bringing people to a retail outlet, the main drivers include convenient location, branded fuels and assurance of quality and quantity. Thus the companies should look for network expansion, supply chain optimization, steps towards anti adulteration measures and aggressive branding strategies,etc. to give the consumers the best they can.

Oil companies have made sporadic attempts at exploring non fuel retail(NFR) opportunities in India Car Wash, ATMs, Co Branded Credit Cards, Cyber Cafes, Convenience Stores, Food Outlets, etc. Though one-off success stories have been reported no cohesive strategy has emerged as yet on the NFR front. With the third largest distribution network (after post offices and FMCG outlets ) there is a lot of untapped potential left for exploring in this arena. The next few years should see all Oil Marketing Companies experimenting in this field. Moreover, Gas Retailers can take British Gas as an example of effective Gas retailing, the methods they have adopted, such as convenience to customer of paying bills online, the home care scheme; with one call customers can update each and every one of their British Gas accounts, from gas to burglar alarm support.

Ultimately,

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Its the customer who will emerge as the winner. The company who identifies its customers and his needs and provides satisfactory services will emerge as the leader

REFERENCES

Websites www.iocl.com, www.bharatpetroleum.com, www.hindustanpetroleum.com, www.ril.com, www.dgh.org, www.essar.com, www.shellindia.com, www.indiainfoline.com/businessschool/archives/marketingstrategiescurrentlyfollowed Address by Mr.S.C. Tripathi, Secretary, Ministry Of Petroleum & Natural Gas, Government of India at Petrotech 2005, January 17-18, 2005 , New Delhi. Presentation by Dr. C. Srinivasan, Chairman, A.T. Kearney India at Petrotech 2003, 10 th January. Business World issue dated February 15th, 2005. Petroleum Retail Stuck in Pipeline. The Hindu Business Line Reliance , Essar changing the rules of fuel retailing, Tuesday, July 20, 2004, Archana Chaudhary. The Hindu Business Line Strategy Report Indian Oil & Gas Industry 2004, Chemtech, December 31, 2003. TERI, Background paper issues in the deregulation of the Oil & Gas sector, New Delhi, R.K.Narang, Ardhendu Sen and Leena Srivastava.
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Presentation by Hemant D.P., Country Manager, Sales, FEDEX Express, India at Petrotech 2003, 10th January 2003. Petro Retailing book (basic reference material) Published by UPES, Dehradun , 2004 Research methodology (basic reference material), Published by UPES, Dehradun , 2004 www.businessline.com www.timesofindia.com www.economictimes.com www.hindustantimes.com www.infraline.com

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