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Connected car and mobility innovations drive changes in consumer behavior

15 June 2020 IHS Markit Energy Expert

Technology increasingly helps consumers choose where and when to buy fuel, at a time when sales may be hard to come by for fuel retailers. As connected cars, mobile apps, and other innovations change the way we think about buying goods and services, many fuel retailers are starting to take action to ensure they are attracting as many of these potential customers as possible.

Advances in mobile technology are speeding up the world and creating a new breed of consumers thirsty for on-demand content. That thirst is quenched by instant access to fuel prices, traffic updates, movie times, restaurant reservations — almost anything they want.

And there's no denying that today's consumers want to make more informed purchasing decisions. Everyone wants a deal, and any merchant resistant to or late in adapting to this new buying culture may be left behind. This is even more critically important to fuel retailers facing the long-term trend of lower same-store fuel sales due to rising fuel efficiency, more teleworking, and the rise in car-share services.

Over 10% of all drivers shop before buying fuel

The migration to online shopping over the past decade has created more tech-savvy shoppers, including those who fuel up their cars. Although fuel traditionally requires a visit to a fuel station to obtain, a full 11% of consumers now are shopping for their fuel using mobile technology and online site aggregators before they purchase. That reflects a more than two-fold rise over the last seven years, according to the NACS 2019 Consumer Behavior at the Pump report.

The price of fuel and the location of the station are the two most important characteristics in a purchasing decision. NACS calculates that 81% of all customer visits to buy fuel are driven by one of those two factors. Consumers now have many options to shop around prior to purchase, and retailers must make sure their locations are visible to these customers. Otherwise, they risk losing out on both gallons and in-store purchases, costing them visits just as same-store fuel demand has been declining.

As an aggregator of real-time retail fuel-pricing data and station information, OPIS currently provides this data to a multitude of websites and mobile applications, satisfying growing consumer demand. Popular navigation applications like Google Maps, Waze, and many others populate their fuel point-of-interest information using OPIS data, making it convenient for consumers to add a stop for fuel on a trip or to determine the lowest-priced station along their daily commute. While many consumers rely on their smartphone or websites to provide them with this information, the real game-changer for fuel retailers is the connected car, where drivers have access to all this information directly in the onboard entertainment system.

Connected cars are no longer the future

By the year 2025, every new vehicle sold in the United States will be connected, according to the automotive division of OPIS parent company IHS Markit. Additionally, almost two-thirds of all vehicles owned and operated by American consumers will be connected by that point in time - an estimated 201 million cars.

In many vehicles, consumers already have an in-car experience built around making purchasing decisions for fuel. OPIS estimates that real-time retail fuel pricing data and location information is available in approximately 30 million vehicles currently on the road in the United States.

More and more models of cars are adding this type of data delivery service. Ford was one of the first manufacturers to display OPIS retail prices on its dashboard screens via SiriusXM Travel Link, and others have followed suit. OPIS retail pricing data can be found in Ford, Toyota, Audi, Mercedes-Benz, BMW, and many other brands of vehicles, with more coming online each year. If a fuel retailer's pricing data is out-of-date in the OPIS database, many of these automotive brands opt not to show the station as an option to the driver.

Even back in 2012, when connected cars had just started hitting the marketplace, many fuel retailers identified the trend and were proactive in making sure their locations were always an option to these potential customers.

In an interview with OPIS from early 2012, Norman Turiano, senior manager of fuel business development at Wawa at the time, said "Consumers are increasingly using mobile technology to make purchasing decisions. We provide real-time fuel prices to ensure our stores show up in all the apps and onboard car systems that utilize OPIS. This transparency ensures that we're a viable option when [consumers] fill up."

During COVID-19, where have all the gallons gone?

According to the OPIS Demand Report, a weekly publication on gasoline sales-volume performance, the last time gasoline demand saw an increase in fullmonth volumes compared to the same-month in the previous year was more than three years ago. March 2017 sales data saw a slight 0.1% increase from March 2016. Since then, every month-on-month comparison has been in the red when it comes to same-store gasoline sales. With demand consistently ticking lower, mostly due to an improvement in fuel economy in new vehicles, every customer visit is critical to the long-term viability of a fuel station's business.

The future of fuel demand has never been more questionable than it is now. In the midst of a global pandemic that has led to mandatory social distancing in a vast majority of U.S. states, most non-essential businesses have moved to a fully remote workforce. Others have simply shuttered their doors until the economy opens back up, causing a staggering drop in same-store sales. OPIS demand data indicates that gasoline volumes have been nearly cut in half for the last week of March and first week of April compared to prior-year numbers.

The lasting impacts of the coronavirus are yet to be determined, but some experts think that at least some of the demand destruction we are currently seeing will be permanent, with many questions still to be answered. "From 2016 through 2019, annual US gasoline demand was within a rounding error of 9.3-million barrels per day (b/d)," observes Tom Kloza, co-founder of OPIS. "I expect those numbers will stand as mountains never to be ascended again." He expects April 2020 consumption to be as low as it's been since March 1968.

Can the Car Become the Card?

Viewing station listings with current fuel prices is the most common experience in a connected car today, but innovations are changing that in a hurry.

Many companies are realizing the power connected vehicles hold and the impact it can make on their business. According to a September 2016 report titled "Monetizing car data," McKinsey & Company estimates that connected-car data and services could generate $750 billion in global revenue by 2030.

Many innovations in the connected car industry are focused on consumer experience, attempting to provide next-level convenience for drivers. Xevo by Lear offers the Xevo Market platform that enables consumers to interact with merchant brands directly through the touchscreens of their vehicles and companion smartphone applications. Through Xevo Market, a customer can make reservations, find locations, and even order and pre-pay for carryout from many merchants nationwide.

Chevrolet has partnered with Shell in an attempt to make paying for gas more convenient for their drivers. One can assume that Shell's investment in this technology with a partner like GM is spurred by consumer loyalty, hoping that Chevy drivers will consistently choose a Shell station because of this ease-of-purchase functionality.

OPIS also continues to innovate in the connected car space with the upcoming launch of a new service that predicts the direction of retail fuel on a county level and allows car manufacturers to alert consumers of the best time to buy.

While price and location will always be the most important factors in attracting business to gasoline retailers, today's economic environment and technological advancements are creating other new opportunities for smart retailers to grow their businesses. Early-adapting retailers that attract tech-savvy consumers can help offset the falling demand they might be experiencing — and maybe even drive higher in-store sales.

Read the OPIS Weekly Fuel Market News & Price Trends.

Brian Norris is an Executive Director of Retail Fuels for OPIS.

Posted 16 June 2020

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