BPCL's Petrol Pump Retail Revolution

Details

Themes : Retailing
Period : 1995-2001
Organization : BPCL, IOC
Pub Date : 2001
Countries : India
Industry : Energy & Utilities

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Case Code : MKTG016
Case Length : 6 Pages
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The Background Contd...

Retail sales accounted for around 60% of the company's sales volume, with the average sales per outlet being 223 kl per month. In 1999-00 its market share was 32% in petrol and 27% in diesel. The company was particularly strong in the western and southern regions. However, its share in lubricants, the most profitable product, was relatively low, partly because of its dependence on other oil companies for the base oil needed to make lubricants.

The Retail Initiatives - Phase I

The petroleum business can broadly be divided into three parts: the production of crude, the refining the crude into saleable products like petrol, diesel, kerosene etc., and retailing. Though margins were usually high in crude production, it was a high-risk, long-gestation business. As far as refining was concerned, there was excess capacity worldwide and margins were rather low.

It was only in marketing was that companies could get the maximum margins, and hence the rush to renovate the retail outlets. Also, add-on services were expected to help the oil companies increase the extent of non-fuel businesses around their outlets. (Globally, non-fuel business accounted for a substantial portion of petrol pump margins.) As part of the nationalization drive in the late 1970s, BPCL took over Shell's marketing network. This acquisition gave BPCL a strong marketing network and choice locations in cities.

In 1992, BPCL began its customer service improvement efforts with a market survey for identifying the needs of its customers at retail outlets. The survey revealed the need for a good and accurate air gauge and the facility to pay by credit cards. The survey also indicated that customers would like to be able to purchase soft drinks at these outlets.

In response to the above findings, BPCL tied up with Apollo Tyres and installed 'accurate' tyre gauges (provided by the tyre company) at most of its outlets. BPCL also signed an agreement with the soft drinks major Pepsi Co. and made the entire range of Pepsi soft drinks available at its outlets.

BPCL was the first oil company in India to issue a co-branded credit card in a tie up with Bob Card Limited in August, 1995. The card was launched in select cities to enable customers to purchase fuel on credit from any of its outlets in those cities. The vehicle owners could even authorize their drivers to purchase fuel using this card. This facility was particularly useful for fleet operators and truckers who would otherwise have to carry huge amounts of cash on their long-haul routes.

BPCL took special attention to avoid the problems an average petrol pump owner associated with the usage of such 'petrocards,' e.g. the long time taken by oil companies to collect the card slips and reimburse petrol pump owners. Also, the transaction fee (below 1%) offered to them was considered to be very low.

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