forecourttech September 19

forecourttech
By analyzing each site’s performance against its present
and future potential, you can validate your decision-making
and acquire only the sites that you can improve.
Assessing the danger of cannibalisation
No retailer opens a new site with the intention of stealing
volume or revenue from its other sites, but it commonly
happens, usually as a result of poor planning or misguided
intuition.
Avoiding cannibalisation should always be a priority in your
network planning activity, because your long-term profitability
depends on it.
PROXIMITY
The most common cause of cannibalisation is the construction
of a new site in too close proximity to one or more of its
siblings.
For example, if a site is situated on an extremely busy,
multi-lane road that has a high speed limit, it may be inaccessible
(or almost) for consumers who are passing on the
opposite side of the road. Building another site 2km away
on the opposite side of the road might therefore be a wise
decision – because this should mean that the two sites
complement one another rather than competing.
However, the proximity itself does not automatically mean
that sibling sites will cannibalize. It depends how the two
sites relate to each other, and whether they are serving the
same consumers.
ACTIONS WITHIN YOUR SITES
Even changes that seem only positive and advantageous
– such as the addition of new and improved facilities – can
cause your sites to cannibalize, specifically where these
changes result in inconsistency across certain sites.
Another example. You add a convenience store to site
A but not to site B (its nearest sibling). As a result of that
change, site A would automatically become the more attractive
site of the two, and may start to appropriate volume
from site B, due to its enhanced facilities. The convenience
store will generate additional revenue for its location and
for your wider network, but this might not be enough to
counteract the loss in profitability at the smaller site.
difficult to identify what is really causing your fluctuations in
volume.
A 20% loss in volume following the addition of a new site
may be cannibalization in action, but it could also be
caused by competitor activity – such as new builds, closures,
and expansion.
IDENTIFYING POOR-PERFORMING SITES FOR CLOSURE
Rationalisation is another fundamental part of optimizing
your network and maximizing its overall profitability.This
process is all about identifying the low-potential, underperforming
sites that are poorly situated – the sites that have
bleak futures ahead of them. The cost to serve each of
these sites is draining profitability from the rest of your network,
and they should therefore be candidates for closure
or debranding.
As with acquisition, the high-potential underperformers
present opportunity for improvement – and your task is to
turn them around rather than close them. If you do sacrifice
these sites, it creates an opening for your smartest competitors
to acquire them, optimise their performance, seize
volume and revenue from your network, and increase their
own market share.
Using data and software to predict network optimisation
outcomes
The only way to accurately gauge every aspect that we’ve
talked about here is to harness the latest technology.
As a network planner today, you can make better decisions
through data insights and by using software to simulate
– with pinpoint accuracy – the effect that each proposed
change would have on your network and on the market as
a whole.
The result?
Validated decision-making. A sophisticated network planning
tool such as Kalibrate Planning can help you to:
- Evaluate the viability of locations for building new sites
- Identify lucrative acquisition targets with high potential
- Avoid cannibalising your existing network
- Select the right sites for rationalisation
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What sorts of data are you collecting about your customer
base? Advancements in technology mean that vehicles
(and therefore consumers) can now be tracked anonymously
through unique identifiers, enabling you to visualize
how your changes are affecting consumption patterns. This
includes site loyalty, giving you clear insight into whether
your sites are cannibalizing, and to what extent. To enhance
your offering at each site, you need to be gathering
and analyzing data on your customers and acting on your
findings.
OTHER RETAILERS’ ACTIONS
Ian Thompson, Managing Director of Kalibrate Planning
will be discussing ‘Fuel retail pricing and network
optimisation: From step change, to marginal gains’ at
forecourttech ’19.
For more information on Ian’s talk and other
presentations please visit www.forecourttech.com
Without the right market intelligence, it will always be
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